Tightening margins and dried up Provider Relief Funds have made renovations and new builds next to impossible for many skilled nursing operators.

The Diakonos Group, however, recently opened its second new SNF in Oklahoma in the past year — this one costing $17 million — as the long-time operator in the state is tired of waiting for Medicaid rates to catch up to operational costs.

CEO Scott Pilgrim has taken matters into his own hands by bringing a new model of care to the Oklahoma City-area and adjusting his payor mix accordingly.

“We do have one other building that has significant [short-term post-hospital stay patients], but most of our buildings, like most buildings in Oklahoma, are primarily Medicaid,” he said. “Typically if we can get our quality mix up to 25 to 30% we’d be really happy. With these new buildings, our quality mix should be 100%.”

The Diakonos Group opened Parc Place Medical Resort this year, intended to be primarily post-acute and designed to be more of a “resort environment” where patients come in on a short-term basis. The new building adds 73 beds to the Oklahoma City market, and Pilgrim expects the average length of stay to be 20 days compared to 18 months in a typical long-term care setting.

“We are prepared for that churn,” he said. “In Oklahoma, you can count the number of new buildings that have been built in the last 20 years on one hand, so people are longing for a better post-acute environment and for specialists in that practice space.”

Parc Place received its Medicare certification on Feb. 24, Pilgrim said.

It is the latest development from the Diakonos Group following the completion of a $15 million 102-unit skilled nursing facility in Tulsa, Okla. which features several medical resort-like touches. 

While the nursing home industry has long been funded through Medicaid reimbursement, Pilgrim will be taking a different approach with the new facility as he steers more towards private pay and Medicare.

“I’ve rubbed a lot of pencils to the nub, trying to figure out how to build new buildings and take Medicaid and I can’t do it, in Oklahoma anyway,” he admitted. “I think that the Medicaid programs are going to have to start paying a rate that equals what the government expects the level of care to be and what the public expects the level of care to be.”

As many as 40% of nursing home residents could be “at risk” of displacement as the sector’s median operating margin is projected to be -4.8% for 2022, according to a recently report by professional services firm CliftonLarsonAllen (CLA).

“We can’t continue to provide congregate living to the extent that we have in the past,” Pilgrim said.

Susan Ryan, senior director of the Green House Project , previously told SNN that removing financial barriers like access to capital and Medicaid underfunding would be a step toward nursing home innovation like the shift to private rooms and the small home model.

Pilgrim plans to build for the future with Parc Place and additional new facilities the operator has in the works, incorporating enhanced infection control capabilities, private rooms, private bath and square footage that tends to be significantly larger than most legacy 50-year-old facilities.

“I think when you look at demographics, we have too many nursing homes, especially in the state of Oklahoma right now and far too many beds,” Pilgrim said. “But in 10 to 15 years from now, we won’t have enough.”

From a market perspective, in order to sell nursing facility rooms into the future, Pilgrim believes the industry has to move away from any ward type rooms.