Eduro, Care Initiatives, HDG Execs: Punitive Regulatory Climate Hurts Nursing Home Providers as Staffing Mandate Looms

In light of the upcoming nursing home staffing mandate, industry leaders are concerned about how the measure will be enforced. And, they’re still trying to cope with what they describe as a punitive approach to surveys.

On the plus side, labor pressures have started to ease, and workforce initiatives are bearing fruit.

“It’s just hard to know how [the mandate] will ultimately be enforced,” Sam Bechtold, Chief Investment Officer at Eduro Healthcare, said last week during the Capital and Strategy conference in Washington, D.C. “Is it funding? Is it some other mechanism to get there? I’m not against the staffing mandate, and our company’s not against staffing mandates. But you’ve got to look at it on a case-by-case basis, on a state-by-state basis.”


Bechtold was joined by Paul Branin, VP of Business Development at Health Dimensions Group, and Michael Beal, CEO of Care Initiatives, in a discussion about staffing, regulatory pressures, and growth strategies. The leaders noted some of the positive aspects of staffing developments, like the planned two- to three-year rollout period for the mandate and the substantial industry response.

Yet Beal said his company is already drawing on past lessons to prepare for the future; in the staffing crisis of 2022, Care Initiatives, which is one of the largest skilled nursing operators in Iowa, established its own recruitment department and implemented an applicant tracking system (ATS) to manage basic tracking functions. Additionally, the company launched an internal staffing agency from scratch, eventually managing around 1,200 hours daily at its peak.

“We’re actually seeing some of those people transitioning to regular staff in the buildings,” he said. “I would say those things are probably going to have the biggest impact.”

Michael Beal, CEO of Care Initiatives.

Staffing mandates and recruitment strategies

Utah-based Eduro, which operates over 40 facilities across the U.S., recently launched an administrator-in-training program and ramped up efforts to attract young talent through channels like career fairs.

The training program includes online learning modules with pre-recorded content and tests at the end. The goal is to have five participants in the program at any given time to ensure readiness for roles in their buildings, Bechtold said.

“Our best administrators right now are administrators who have come through our AIT program … two out of our five best buildings right now [are administered by] folks that have come through that program, are brand new in the industry,” he said.

The administrator pipeline is fed in part by recent college graduates who also have taken part in Mormon missions, which equipped them with the skills and results-based mentality to be successful administrators, according to Bechtold.

“They’re not afraid to knock on doors, they’re not afraid to get in front of people,” he said. “That’s the philosophy behind this program, as we need our administrators to be better marketers, we need our administrators to be in the communities.”

Health Dimensions Group’s recruitment and retention strategies involve leveraging their consulting arm to provide targeted support for each facility’s staffing needs, Branin said.

“On that consulting side, one of the services we offer is recruiting,” he said. “So if you have an interim administrator, interim DON or even permanent placement, you can employ HDG to go out and find those folks for you.”

That approach enables HDG to have a specific recruiter assigned to each of the buildings they oversee, so that recruiter is continuing to fill the pipeline for hourly associates and leadership positions.

He added that engagement surveys and one-on-one interactions foster a positive work environment.

“Some of our communities that have been in our portfolio for a while are closer to 90% or 100% [participation in engagement surveys], which I think is an indication to us that we’re listening to what our associates are saying and making changes,” he said.

Sam Bechtold, Chief Investment Officer at Eduro Healthcare.

Regulatory environment and growth strategies

Regulatory pressures are cutting into leadership time and financial resources, with increased fines and sanctions being significant challenges, Beal said. 

“We’re facing more fines and sanctions, creating a very punitive environment,” he said, adding that the pressure is coming from the White House down through CMS. “They conduct surveys over the phone and instruct them to identify issues. There’s no room for ambiguity; it’s all very black and white. So, it creates a very punitive atmosphere. Not only does it cost money from a financial perspective, but it also consumes an enormous amount of time for leadership in the buildings. Unfortunately, there are no positive outcomes because it’s so consuming.”

Banin said that he’s noticed increasing tags related to infection control.

“Our guidance is always to have a plan, but then make sure you have a backup plan,” he said, referring specifically to avoiding the 880 tag for infection control.

“That’s the ‘easy one,’ right – that’s the F Tag you just hate taking because the regulators don’t even have to come into your building to tag you with the reporting on NHSN,” he said.

Continual training on hand washing and gloves is needed as well, he advised. And he flagged tags related to food service, quality of care as being on the rise, as well as the 612 “free of hazards” tag.

The regulatory challenges in certain states have affected Eduro’s portfolio strategy, Bechtold noted. The company had small footprints in Colorado and California but opted to exit those states, in part because of a sense that the operator could not “get ahead” of the regulatory stresses.

Even states where the atmosphere has typically been better are now becoming more punitive, he said, with Texas being one example. The punitive regulatory environment and increased fines are counteracting some of the benefits of increased reimbursement.

“I think it’s not a horrible thing to have a survey to make sure that care is provided and it’s adequate, but at the same time when you’re just heaping these fines on when it’s already tight and margins are low, feels feels like it’s not in the best spirit of the industry,” Bechtold said.

Despite challenges, Eduro is focusing on acquisitions and real estate diversification.

Eduro has historically grown through triple-net leases with landlords and will continue to look for those arrangements. Additionally, Eduro is exploring options like financing and acquiring buildings in receivership to balance its real estate portfolio.

Deals involving buildings with positive EBITDA are also starting to reappear, although the bidding on those becomes quickly competitive, with the resulting prices difficult to support in the current financing environment.

Bechtold is curious about whether REITs adopt a more flexible approach than in the past, given that coverage has become tighter than historical norms and there’s a ramp-up period needed on assets that aren’t performing to landlords’ typical expectations.

HDG also is in growth mode and believes that expansion is possible in the skilled nursing market. The company recently added two managed communities to its portfolio as turnarounds – the issues with one were primarily related to accounting, the other faced issues with regulatory issues.

“If we get assets like that, in turn-around or a value-add, we can put them in consulting for a period of time where we have a lot more resources and a lot more expertise on specific issues, deal with those and then transition them over to an operations team,” Branin said.

While Eduro and HDG are seeking to add to their skilled nursing portfolios, Beal said that non-profit Care Initiatives won’t be making any acquisitions in the skilled nursing space in the foreseeable future, citing tough margins. Increasing Medicare Advantage penetration – which comes with lower rates than Medicare Part A – is contributing to these margin challenges, he and the other speakers emphasized.

In terms of growth, Care Initiatives has been focused on diversifying into other business lines and expanding those offerings.

“We’ve done pharmacy, we’ve done an ISNP [institutional special needs plan], we’re adding additional hospice,” he said. “So we’re focusing more on the ancillary side and not on the bricks and sticks as our strategy.”

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