Lenders and operators agree the skilled nursing market continues to largely be a regional affair when it comes to prospective transactions – buildings are often considered within the context of others in a 15- to 20-mile radius, with national statistics oftentimes secondary.
State or regional specific operators understand what’s happening with labor in those markets, staffing challenges and regulatory issues, as well as competition on a state or county level.
Industry experts say they understand a market better using local, real-time data and make more informed decisions in an increasingly complex, region-specific industry.
For MONTICELLOAM co-founder Alan Litt, “boots on the ground” is one of its core factors when collecting data on an operator, along with its character, competence, technology and tactics.
That’s before wider state context is added.
“The idea is you know your markets, you’re able to pivot when something happens or you’re able to know what’s coming so that you’re able to react,” said Litt. MONTICELLOAM is a New York-based health care lender and asset management firm. “Guys that are outside of the state looking in, I think they’re the ones that are going to struggle the most in these ever changing waters.”
Litt spoke about the skilled nursing market during a panel at the eCAP health care conference earlier this month, alongside Brickyard Healthcare CEO Wesley Rogers and Marc Zimmet, president and CEO of Zimmet Healthcare Services Group who served as as moderator.
Region specific operators hit ‘sweet spot’
Brickyard Healthcare, formerly Golden LivingCenters, spent years centralizing its operations to Indiana after being known as a multi-state operator in the industry for almost 60 years.
Rogers said a building with 80 to 120 beds is the “sweet spot” to take over operations and turn it into what future patients want.
“I think that’s the difference today in this market. You can’t operate these things from New York City,” Litt said during the panel discussion.
He used staffing agencies as an example of how crucial local data is to lenders, operators and consultants in the industry, with one market having no agency use, but if a lender looks 20 miles to the east, there’s “tons” of agency use.
Twenty miles can mark a “totally different business,” Litt said – labor, a huge factor in lending and operations right now, tells a different story by mere miles.
Region-specific data enables the lender to think about how it would lend against that particular asset, Litt added.
If someone is making their first foray into a state, lenders like MONTICELLOAM look at past performance, how they’re going to run a facility better than the previous operator or existing operators in the area and what their commitment is to having on-site leadership and staff.
A representative “flying in once a week” won’t cut it, Litt said.
Trusted local data and a holistic approach
Lenders are receiving data from multiple sources, according to Litt, then establishing benchmarking tools by ZIP code – MONTICELLOAM is able to see the operating costs using an internal dashboard and data from its core portfolio.
“That’s what we’re doing to look into and verify the numbers, not so much trusting someone else,” Litt said.
The “next generation” of operators will have that data readily available, Litt said, and are already bringing in consultants to track whether or not they’ve executed on efforts to improve certain metrics.
“Everybody is running this business from their iPhone. They have instant data, they have tracking software,” Litt said of this new crop of operators.
Brickyard Healthcare builds its own data internally, but certain clinical outcomes like rehospitalizations are challenging to get data points on, Rogers added.
Instead of fixating on how a building will fare in the next 24 months, MONTICELLOAM draws data from what’s happening in the immediate market.
Litt said his team looks at local hospital discharges, how many doctors are discharging and where the flow of patients is headed. If a medical director starts practicing in a new facility, for example, MONTICELLOAM can see how that clinician is able to attract census from relationships with doctors at a neighboring hospital.
Companies featured in this article:
Brickyard Healthcare, Golden LivingCenters, MONTICELLOAM, Zimmet Healthcare Services Group