For nursing home operators with rapidly expanding portfolios, there are a lot of challenges and rewards to consider. Joseph Lee, Senior VP of Support Services at PACS, knows this first-hand.
“We’re looking at where we can have a footprint where four or five facilities that can support one another and we can absorb them into the existing footprint, since we’ve already got great clinical leaders in the area that have the tools to support [them],” Lee said recently at the Skilled Nursing News CLINICAL Executive Conference.
PACS, which is the administrative support service arm of Providence Group, operates 177 facilities, making it the fourth largest skilled nursing operator in the United States — and the portfolio is continuing to grow quickly.
“We grew by 30 [facilities] in the last two months across different states,” Lee said. “And these are all from mom and pops to groups of maybe 10 or so.”
Creative Solutions in Healthcare likewise has been in growth mode. The company operates 120 nursing homes in Texas and doubled in size in the last four years, SVP of Clinical Services Chuck Moody said at CLINICAL.
Growth at this pace is not easy, but Moody and Lee agree that scale is becoming increasingly important to success in the nursing home business, not only creating more financial resiliency but opening up opportunities to drive clinical strength.
Scale to absorb loss, drive efficiency
Lee said that “mom and pop”’ skilled nursing operators who have accumulated physician and community trust can likely continue to survive in today’s market. But scale, he said, is helpful to absorb loss.
“Most facilities we acquire are distressed financially and clinically,” he said. “In most cases, it’s simply that they are financially distressed.”
Lee noted that since the company has a large footprint in California and a growing footprint in South Carolina, Ohio, Kentucky, continuing to acquire in those markets will be a strategy going forward.
“If we keep acquiring in those states, there is enough bandwidth to absorb losses and give buildings a chance to get financially viable,” he said.
The company entered the pandemic with 16 facilities and consists of 177 facilities now, so to grow by 110, Lee said, PACS had to focus on creating minimum quality standards.
“That was a challenge, taking over distressed assets that are special focus or one-star buildings,” he said. He continued that PACs focused on quickly turning around quality measures, and his team was able to create higher standards.
“So … focusing hard and trying to get everybody on the right consistent electronic platform and the right MDS,” he said, adding that working with facilities to turn around survey results was also key. “The challenge is taking whatever [discrepancy] exists and assimilating it into the barrel.”
Moody concurred “100%” about scale enabling a company to absorb short-term losses until facilities are turned around, and also noted that larger companies have the benefits of other efficiencies, including more favorable group purchasing pricing.
And the rise in managed care — and concerns around the adequacy of managed care rates — is another trend making scale more valuable than ever in the skilled nursing space. Creative Solutions in Healthcare has a vice president of managed care who works with managed care organizations in the markets where the company is acquiring facilities.
“It’s been really beneficial,” Moody said.
PACS recently began working with Providence-owned buildings in the state of Colorado, which did not have active UnitedHealthcare contracts. The insurer fast-tracked the contracting process for that portfolio thanks in part to the organizations’ existing relationship in South Carolina, Lee said.
Another example is in California, where Providence already had a large footprint when it acquired Plum Healthcare in 2021. Having the larger, combined portfolio is an advantage when it comes to negotiating rates with Kaiser Permanente in the Golden State, Lee noted.
Supporting new facilities
With regard to the challenges in adding scale, Creative Solutions in Healthcare most often experiences strains when the company acquires multiple facilities in the span of two or three months, Moody said.
When Creative Solutions acquires new facilities, the company tries to keep as many department heads in place as possible, unless leadership deems them a detriment to the facility.
“We don’t want to disrupt the facility too much, because they either just heard the best news in their life or the worst,” he said, referring to the news of the change in ownership.
PACS more frequently does bring in new leadership for buildings that have been recent additions to the portfolio, Lee said. The operator values having entrepreneurial administrators, and emphasizes marketing and outreach to attract ambitious employees to its leadership positions and programs.
“Last year, I think we had 30 AITs [administrators-in-training] processing to take over buildings,” he said. “We have the ability right now to train. And you’d think, where do we find all of these people who want to come into this industry? Friends refer friends, and so our administrators have often referred friends to say, ‘Come and see what I do.’”
PACS, working with Providence Group, also offers profit-sharing to administrators, giving them “ownership-like opportunities” that incentivize creativity and innovation to deliver results — both financially and from a quality perspective, Lee said. The company has a goal of having the entire portfolio of Providence buildings at 4 stars or better in Care Compare; the current average is just under 2.97 stars, he said, due largely to more recently acquired buildings that are still in the turnaround process.
Creative Solutions in Healthcare also measures its clinical quality primarily through its star ratings, Moody said, although he noted that slowdowns in the survey process and the long time period it can take to improve survey star rating makes it important to take a close look at quality measures and how those are being improved on shorter timelines.
And for both PACS and Creative Solutions in Healthcare, having the right organizational structures and technological infrastructure are also keys to achieving these clinical and quality goals amid rapid growth.
PACS does have regional leaders in place across its portfolio but strives to ensure that “health care stays local,” Lee said, observing that there are vast differences in market dynamics among different states or within various regions within a single state.
“We do not want anyone at a central office or state to try and dictate things nationally,” he said. “We are standardized in only a few areas.”
Even though it operates only in one state, Creative Solutions takes a similar approach to dividing up its portfolio by region — a necessity in a state the size of Texas, Moody said.
“If you come in from East Texas and go to Amarillo or Lubbock, you’re an outsider,” he said.
Creative Solutions has East and West divisional vice presidents, and regional leaders with about six facilities under their purview, on average. This enables them to be attuned to their particular markets and cuts down on windshield time.
From a tech perspective, integrating systems can be among the biggest challenges presented when taking on operations of newly acquired facilities, Moody and Lee agreed.
They both cautioned about the importance of having a single care plan library for the entire enterprise. PACS currently is in the midst of a “massive project” to create a single dedicated care plan library rather than having diverse libraries that are legacies of when buildings were under previous ownership and operators, Lee said.
But there are also valuable lessons to be learned from the different operating practices and platforms that facilities have been using, and a strong operator will be able to identify and integrate these lessons to gain clinical strength while growing.
For example, PACS took over operations of some buildings on a different electronic health record (EHR) solution than the one utilized by the operator. But PACS identified some capabilities in that legacy solution that worked well, and was able to approach its own EHR provider to enhance the platform to the benefit of the entire PACS operation, Lee said.
And scaling up also helps an operator drive clinical performance by creating a larger pool of data to draw from, to inform best practices.
“We’re very analytics-driven now,” Moody said.
Looking ahead, Lee noted that many of the new recruits brought into the company — and the industry — during PACS’ recent growth push have only known how to operate on a pandemic footing. With the public health emergency (PHE) ending on May 11, the now-larger organization will be transitioning into a new era, which will also come with a learning curve but will be a time for strong performers to shine.
“We have to be able to evolve quickly, but I think it’s a great time to be in our industry,” Lee said.