Since Diversicare named Steve Nee as CEO in February 2023, the provider has eliminated agency staff across its portfolio of 44 nursing homes and now is reentering growth mode, with a focus on adding new service lines, particularly in behavioral health.
Nee took the helm at the Brentwood, Tennessee-based company at a time of difficult changes – both for the organization and himself. His mother, who was a skilled nursing facility (SNF) nurse and introduced Nee to the sector, passed away in September 2022. A chain of events then unfolded that led to his taking the CEO job at Diversicare.
“God works in mysterious ways,” Nee told Skilled Nursing News, describing his reaction to these circumstances.
As for the company, Diversicare had transitioned in late 2021 from being publicly traded to privately held, after a period of tumult that included a Department of Justice investigation into therapy practices and facility divestitures. In August 2022, CEO Jay McKnight exited the company.
While the hunt for a new CEO played out, the Covid-19 public health emergency also was nearing an end. So, Nee took the reins at a major inflection point.
“We were gearing up for what the world is going to look like, post-pandemic,” Nee explained, speaking to SNN at the recent American Health Care Association/National Center for Assisted Living (AHCA/NCAL) annual conference in Denver.
Today, the sector continues to face enormous challenges, including the potential federal staffing mandate, which Nee described as “inherently flawed.” However, he is optimistic and focused on positioning Diversicare for the future.
“I believe that now that we’re out of the pandemic, we’re able to separate the chaff from the wheat,” he said. “ … Really, the best operators are those that are going to win. And the question is, what is it going to take to win?”
‘Enough is enough’ on agency use
In contemplating what it will take to win in the future, having a sustainable staffing model is of course essential. So, this was the company’s major focus “from day one” of his time as CEO, Nee said.
Workforce-related efforts included attracting and hiring top talent and eliminating agency usage.
“We just said, enough is enough,” Nee explained.
The company established a timeframe for eliminating agency use and committed to not sacrificing staffing ratios to meet that goal. Then, several steps were undertaken to increase hiring and improve retention, including adjusting wages in certain markets, as well as revamping processes and undertaking a culture shift to support new practices.
For example, staff development coordinators were re-trained, so that when call-outs occurred, they were making phone calls to permanent staff for coverage prior to calling an agency — which Nee said can seem like the easy route in the moment, but increases costs and leads to quality deterioration over the longer-term by compromising consistent assignment of staff.
“Over the last eight months, the number of folks that we have hired company-wide versus those that have turned over, there’s been an increasingly positive number … so, we’ve hired more people than we’ve turned,” he said.
While Nee is proud that Diversicare has eliminated agency and increased hiring, he pointed out that the sector is still well below its pre-pandemic staffing levels, and labor markets remain extremely tight, particularly in rural areas.
“The people just aren’t there,” he said. “You have a couple of options. You can either grow your own [talent], you can steal from the competition, or you can bring them in from other areas, and logistically speaking, that’s difficult to do.”
In light of this situation, Nee said, CMS seems to have “completely ignored” reality in proposing the federal staffing mandate. Not only are the workers not available, but with most nursing homes operating on “razor-thin margins,” there is no way for providers to meet the mandate from a financial perspective. Compliance would cost the sector about $6.8 billion, according to the recent estimate from CliftonLarsonAllen (CLA).
And Nee takes particular, personal offense at the fact that CMS did not include licensed practical nurse (LPN) hours in the proposal, considering that his mother was a nursing home LPN.
“It just completely ignores their contribution to the space, and others, too — med techs, therapists and some other direct caregivers that work daily with our residents, our patients, and improve their quality of life,” he said.
Despite all these qualms, Nee is hopeful that through the comment process, a policy can be crafted that meets the laudable goals that CMS is pursuing while also addressing the concerns that providers have raised. For instance, perhaps telemedicine could be harnessed in certain situations to help providers meet the requirement for 24/7 registered nurse staffing.
“I think the intention is good, we need to work toward a more reasonable rule,” he said.
Growth strategy
As Diversicare went private and hit the reset button during the last few years, the company divested of more than 20 nursing centers, reducing the size of the portfolio by about one-third while tightening its footprint to strategic markets.
Now, with staffing on a more stable footing, the company is ready to grow again by pursuing a three-pronged approach, Nee said. The company could expand through third-party management of nursing centers; operating leased communities; and outright acquisition of buildings.
The tough operating environment, coupled with rising interest rates and other financial headwinds, mean that Diversicare is seeing a lot of deals involving distressed properties, including some “really tough situations,” according to Nee.
“Some of them may or may not make sense to us; we have to proceed with caution,” he said.
With that in mind, the strategy is gradual, deliberate growth, with a focus on markets where the company can leverage economies of scale.
There is not a target number in terms of portfolio size, with Diversicare most focused on growing revenue, Nee said. To that end, diversification of business lines is another strategic imperative.
Behavioral health in particular is a “huge opportunity” that Diversicare is actively pursuing, Nee said, as he sees most markets with growing needs that are underserved. The company is in conversations with organizations that specialize in creating the infrastructure and licensure needed to allocate certain beds within SNFs for geri-psych patients. And Diversicare is also open to serving a more general behavioral health population in standalone sites.
Such facilities are regulated differently from state to state, adding one more reason why Diversicare needs to be “very careful and selective” in growing its footprint, Nee observed. However, he sees “huge demand” in Tennessee, where the company is based. In addition, reimbursement levels in the state are attractive and regulations are not overly restrictive, with barriers to entry being reasonable.
“So that’s a prime market,” he said.
From the front line to the C-suite
As Nee approaches his one-year anniversary as CEO, he reflected on how his professional journey has informed his leadership style and philosophy.
“I was actually on a path to go the med school route, and then did an about-face,” he said.
That change in direction came about after his mother introduced Nee to the administrator of the nursing home where she worked, which stoked his interest in the sector. While in graduate school, he took a job as a housekeeper in a facility as an entry point into the industry, then was accepted into an administrator-in-training program.
Through his time as an administrator, he gained a reputation for turning around troubled facilities, and then rose to corporate leadership as vice president of operations for Providence Health. Over his five years with Providence, the organization expanded from two centers to 12, and he ascended to the COO role.
Nee’s initial conversations with the Diversicare team revolved around possibly launching a startup under the Diversicare umbrella, as part of the strategy to diversify business lines. But his operations experience opened the door to consideration as CEO.
“Now I’m here, and it’s been wonderful,” he said.
While his ascent to the highest leadership post at a nursing home provider has been relatively swift, he came up through the industry ranks and brings first-hand knowledge of what it takes to work at the frontlines.
“There have been some folks that I have worked with previously that thought they could lead from an office, behind the desk, and never interact with residents, patients, team members. That never works,” Nee said. “So my approach has always been, roll your sleeves up and get out and be part of it, lead from the front.”
He also prioritizes optimism and empathy, considering how difficult the work can be, and how disheartening the policies, regulations, and public rhetoric around nursing homes can be.
“It’s so easy in this business to let all the challenges that come our way manifest and cast a dark cloud,” he said. “And as a leader, you need to be able to see the silver linings and communicate those effectively to your team, motivate them, encourage them.”
In addition to encouragement, empowerment of team members throughout the organization is another top priority for Nee. As he put it:
“My whole goal is to help remove barriers for our operators, so that they can more successfully run their businesses.”
Companies featured in this article:
