After more than two years of a devastating Covid-19 pandemic and a historic labor shortage, some players in the skilled nursing space have chosen to prune their portfolio or leave the industry all together — making room for a new batch of operators to step up and take their place.
Nursing home businesses like Illinois-based Pearl Healthcare and Indiana-based Envive Healthcare have had to balance both the existing industry challenges and the growing pains of being relative newcomers to the space.
Leaders of both Midwest operators remain optimistic about the future of the industry, and see now as the right time to be the new kid on the block.
“It’s fun being somebody that’s new because you can kind of challenge the status quo. We can try to be a little bit more nimble with some of the things that we might be able to do with our teams,” Envive COO Austin Steele told Skilled Nursing News.
Envive was started in July 2021, with Steele joining the team just a few months ago. The operator owns seven buildings in the state of Indiana as of May.
Although new to Envive, Steele is no stranger to senior care as he’s worked in the space since 2008. Most recently he spent more than a decade in leadership roles with American Senior Communities.
Pearl Healthcare has a few more years of experience under its belt, getting off the ground in 2018. Pearl now has six facilities across the Chicagoland area — most recently acquiring two facilities in May.
Pearl Founder and CEO Eitan Zeffren has served in various roles both at the administrator and regional leadership levels before going off on his own.
Zeffren wanted to get into the operating business when he was in the right place at the right time — and the first facility Pearl acquired accomplished just that.
“This was a particular facility that I felt was positioned really well in the market, had a lot of great staff longevity, people that were really committed to the building but just didn’t have that support from outside the facility that they needed to really take it to the next level,” Zeffren told SNN.
Pearl acquired a majority of its six facilities over the last year.
Overcoming the household name
One of the biggest challenges facing new operators is getting that foot in the door.
“We’re not as established in the market, we may not be a household name or a provider that someone has much brand recognition with,” Steele said. “The big opportunity there is really going in and communicating what our plan is and then following through to that.”
Greystone Managing Director Donika Schnell said during an SNN virtual panel in April on investor outlook that the new crop of owner-operators are having a harder time right now because investors are cautious coming out of the pandemic.
“I feel bad for the new operators, the guys who were in nursing, who are administrators, and then want to go out on their own and buy a handful of homes,” she added. “I’ve always been a big advocate of those guys, because they were the next generation of owner-operators.”
Zeffren agreed that investors or financial institutions want to see a track record, but that can sometimes be a difficult task when first starting out.
For his first acquisition Zeffren recalled sharing successes he had in his prior leadership roles as a way to provide examples of benchmarks being hit.
And after the first deal it got a lot easier, he added.
“I know that one facility may not be such a big deal to some but for a lot of these parties to be feeling comfortable and interested, I think that does go a long way,” Zeffren said. “Track record doesn’t necessarily need to be a tremendously long track record or with tons of facilities under under your management.”
Pearl Healthcare currently works with a group of private investors.
As Envive has continued to grow it’s looked to differentiate itself from other nursing home operators in the market by challenging the status quo — whether it’s finding niche markets like mental wellness or other opportunities to bring health care in-house.
Envive’s facilities are also undergoing “multifaceted” physical updates that include moving to private rooms, renovating gyms and focusing more closely on specialty units, according to Steele.
Pearl also has plans to increase the number of private suites at the two newly acquired facilities through a multimillion dollar renovation project that will include moving down in bed counts.
Another way Steele and the Envive leadership team has had to change the status quo is by breaking the mold of the previous owner-operator.
“That’s a big challenge because you’re new to some people that may be coming on board or that community may have really not liked the previous operator, they may have loved the previous operator,” he said.
Pearl Healthcare’s differentiator is its family oriented company culture where the benefits of a corporate structure exist, but it doesn’t feel like one.
Zeffren noted that Pearl does not take a “cookie cutter” approach to operations as every facility and market has different needs and functions differently.
“With the growth from one to two to three to six, we’ve really tried to stay true to that and maintain that level of expectation from our regional team, from our corporate staff, to continue to infuse the facilities and our leaders with that philosophy that we’re a family oriented company and we want our residents and our families and our staff to feel a part of that,” he said.
A reality check may be coming
The end of government support in the form of stimulus funds and Covid-related waivers may be another wakeup call for some operators.
It remains unlikely that future federal dollars are headed the nursing home industry’s way, but a slew of proposed reforms and regulations — including the idea of a federal staffing minimum — have been unveiled during the first half of the year.
“I think a lot of people who are in that recovery stage post-Covid are going to look at these next couple of years as an integral or pivotal time for them to see if they can kind of bounce back to historical performance, and if they see that they’re not I think they may look at that as the right time for them to to exit or move on,” Zeffren said.
While Pearl Healthcare doesn’t currently have an “aggressive growth strategy” Zeffren continues to look at value-add opportunities that are regionally based and provide mutual benefits.
More broadly he sees “a world of opportunities” for newer operators as nursing home organizations continue to change ownership or restructure.
He also expects the volume of new acquisitions and ownership changes to continue over the next few years “at a pretty rapid rate” as things shake out.
“I’m definitely seeing a lot of people jump into those first opportunities, which personally I think is great because I think that if it’s the right people who are willing to take on these projects and really put in their blood, sweat and tears, I think that’s a good thing for the industry,” he said.
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