For one long-term care provider in Massachusetts, operating standalone skilled nursing facilities no longer fits into its long-term plans.
And the challenges that led SALMON Health and Retirement to pursue recent skilled nursing transactions expand beyond Massachusetts, suggesting that other SNF operators — particularly companies running standalone facilities — face a host of issues that threaten their businesses.
The recent deals from SALMON, a company providing a robust continuum of services for older adults, including six senior living communities throughout the Bay State, highlight the provider’s desire to both cap exposure to skilled nursing and ensure it remains part of its care continuum long-term.
“If I was to own a freestanding nursing home … I would be very concerned with what my future looks like,” Andrew Salmon, chief future officer at SALMON Health, told Skilled Nursing News. “We’ve been blessed, we do not own or operate any freestanding nursing homes. The one that we did operate … was barely breaking even most times.”
The state’s “chronic underfunding of long-term care” combined with the “inflationary environment for staffing and costs,” according to Salmon, have made it increasingly difficult for the operator to make up the difference between what Medicaid pays nursing homes and what it costs to run one.
Issues with reimbursement and staffing aren’t limited to Massachusetts and SALMON’s downsizing strategy highlights just how difficult it is to run a nursing home in today’s environment.
Indeed, 44.5% of life plan communities (LPCs) or continuing care retirement communities (CCRCs) have plans to downsize their nursing component in the future, according to a report published by CliftonLarsonAllen (CLA); however, 75% also believe having a skilled nursing unit on campus will be important in the future.
Finding a way to better adapt and enhance nursing to better fit residents will be the key for many operators.
For SALMON Health, becoming sellers became their best path forward.
SALMON’s strategy
Rather than moving away from skilled nursing entirely, Salmon described the recent deals as an “intelligent decompression” for the company.
In one deal, SALMON sold its Northridge facility for $3.7 million to AdviniaCare, a nursing home operator with facilities in Massachusetts and Florida, the Worcester Business Journal reported.
In another, announced in August, UMass Memorial Health purchased a former SALMON nursing home adjacent to its campus for $23.5 million.
While neither asset was easy to move, selling to respected and prolific quality care providers served as a silver lining for Salmon.
“We went from 600 skilled beds to approximately 300 and we’re very comfortable with that number,” Salmon said. “Our goal is to continue to have our full continuum of care which offers independent living, assisted living, skilled care, home care, hospice, and private duty home health. We believe in long-term care and in the value proposition that it has to our continuum.”
SALMON Health operates six senior living communities throughout central Massachusetts that offer multiple service levels, such as assisted living and independent living, for a total of 600 AL/IL beds. The organization also offers services through SALMON Homecare and more business lines.
“In the end, you’re going to see, I personally believe this, there’s going to be a consolidation of beds, particularly in the northeast,” Salmon said. “Our strategy is to cap exposure to long-term care and grow our portfolio in independent living, assisted living and home care in community services. The reason we’re doing that is to have a full continuum of care.”
SALMON Health’s homecare service covers 58 towns and cities throughout MA and the client population is spread out among three different service lines: 705 VNA clients, 110 hospice clients, and 85 private care clients – for a total of 900.
“The decision to sell Northbridge and close Beaumont, which our REIT sold to UMass Memorial Health, were heavily weighed for my brother, myself and our family,” said the third generation long-term care provider. “Having the VNA and hospice didn’t make that decision easier. What it did was it codified that we have to meet people where they are, and we saw the waning demand of nursing home care.”
What to do with struggling nursing homes
Salmon worries that if the Medicaid rates are not improved for SNFs soon, more regional consolidation will occur and, in turn, gaps in quality care will develop.
“The gray area that I personally envision that needs to be addressed is how do you take care of the truly indigent population, the folks that can’t afford to pay their own way,” he said. “Regulators have to begin to understand how to properly compensate long-term care providers. My overall concern is that if this continues to go the way it’s going with Medicaid funding, you’re going to have a situation where you have ‘the haves’ and the ‘have nots’.”
His concern extends to owners and operators who are trying to run a business on current reimbursement-based margins.
“Personally, I would not want to own or operate a freestanding nursing home because the continuum of care model allows for a more diverse payer mix,” Salmon said.
With more care migrating toward the home, Salmon thinks there’s an opportunity for struggling nursing homes to be used more for behavioral health services going forward.
“I think that behavioral health will play a key role in the repositioning of homes that are going under,” he said. “I see an opportunity as behavioral health becomes a bigger component of the overall health and wellness programs within the Medicaid budget that we can partner to transition struggling nursing homes over to behavioral health companies that want to use those assets to drive their care.”
He thinks collaboration between the public and private sector could make that happen.
“We have a very complex situation to deal with in the regulatory environment and we’re going to need creative solutions from our public officials to make sure that happens,” Salmon said.
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