Odds Are Against Texas Operator Growth As Federal Reforms, Chronic Underfunding Compound

Federal reforms — on top of chronic underfunding in the state — has Texas-based Cascade Health Services fearing that certain facilities will be left at a disadvantage as the operator looks to grow regionally.

Permanent Medicaid rate increases could be a start, Cascade CEO Ron Haney told Skilled Nursing News, but facilities in Texas will need far more financial support from all government entities to meet the moment.

Cascade has been in the skilled nursing space since 1999, operating a half dozen properties at one point before realizing their footprint was not ideal – facilities were spread too far away from each other in the state.

The operator now has two in the San Antonio area, Haney said, with plans to build more in Texas Hill Country.

Haney wants to get to a geographic footprint where Cascade can have all of its key people in the buildings on a daily basis and still “sleep in their own beds at night.”

Prior to downsizing, Cascade staff were driving five hours to get to their handful of facilities.

“We had a base in the San Antonio area, but then we had buildings in Corpus Christi, Abilene, Arlington, and I had a home office in East Texas. There was a reason it grew that way a decade ago, but it didn’t make sense anymore,” said Haney.

The industry has seen Cascade’s regional growth plan before, with nursing home giants like the Ensign Group (Nasdaq: ENSG) and Genesis HealthCare opting to decentralize their national chains in favor of building out vertically integrated, community-based facility networks in each market and supported by centralized resources.

Double whammy in Texas

While Haney has previously seen increased scrutiny similar to what the sector is seeing now with the Biden administration reform initiatives and five-star rating system updates, he said he’s hoping federal entities “come to their senses” on staffing mandates.

The Texas operator has seen such initiatives affect the state more deeply – state leadership is so behind on nursing home reform and has neglected the sector for so long, according to Haney.

The sector’s underfunding could be cured with less than 10% of its budget surplus, Haney said, but he has no confidence state leadership will put funding toward its SNFs.

“We’re 10 years since our last meager Medicaid increase and it was about that long before the previous one. We hover at usually 49th or 50th in the nation,” Haney said, in terms of state Medicaid rates. “What really concerns us is when we have new regulations, new staffing requirements and no funding to help offset it.”

Even with the temporary 12% bump in Medicaid, which industry leaders hope will be made permanent, Haney believes facilities in Texas need funding support well beyond the Covid-era increase to reimbursement.

“I think [government entities are] eager to end the PHE add-ons,” he added. “We’re very nervous about that. It’s a little different mentality; anything that involves Medicaid in Texas is immediately looked at negatively.”

The Texas legislature, which only meets every other year, is set to convene in January 2023.

Inspiration for SNFs, agency woes and staffing innovation

Nursing homes typically haven’t looked toward their competitors to imitate, Haney said, rather looking outside of the industry for inspiration.

The hospitality industry, notably the Union Square Hospitality Group in New York, has been a longtime inspiration for Haney.

Now Haney looks to operators within the sector like Trilogy Health Services, Ignite Medical Resorts and Majestic Care to access valuable information and model their small company after what works for these regional and national players.

Ignite’s in-house staffing pool, for one, is something Cascade may bring to their facilities.

It gives staff the flexibility they need in their shifts, he said, while offering a path toward a more permanent position in the company.

“Over time, the better agency staff don’t want to continue on that path and [Ignite is] giving them a method to go into the building and stay permanent. If we can create something like that, I would like it,” said Haney.

He shares a perception of independent staffing agencies with most of the sector – that their business model takes advantage of government payers, staff and ultimately harms nursing homes.

“Every little bit hurts,” he added, but said they’ve had to use agency when Covid cases spiked among Cascade staff.