Senior Living News Wire

It used to be that residents requiring different levels of care could still dine together in continuing care retirement community (CCRC) Harbor’s Edge’s River Terrace dining room.

Whether residents occupied the community’s independent living units, assisted living apartments, or skilled nursing units, they could all join each other at the dinner table—until last spring, when the community’s managers began separating the healthy from the frail, writes the New York Times’ “The New Old Age” blog.

“[L]ast spring, managers declared the River Terrace and two other dining facilities at the community off limits to anyone but independent living residents. Assisted living residents were told to use their own small dining room; nursing residents were restricted to theirs.

Family members were instructed to join them there. But longtime friends—and several married couples—who lived in separate parts of the facility could no longer share meals in the main dining room. Those in assisted living or nursing care also were also barred from community events like the Fourth of July celebration.

[T]he new policy initially stemmed from overcrowding, said Neil Volder, a former real estate developer who built the complex and is its executive director.

Moreover, managers believed that the policy of letting residents of various degrees of disability dine together violated Virginia state regulations, Mr. Volder said, and left Harbor’s Edge vulnerable to lawsuits or revoked licenses.”

It wasn’t long before residents began fighting what they considered discrimination and trying to reverse the new rules, says the Times, although some residents agreed with the policy.

The community ultimately offered up a compromise, saying that those who originally entered independent living but had since transitioned to assisted living could undergo an assessment to determine whether or not they would be allowed to continue using the dining room.

Read the full “Tables Reserved for the Healthiest” article here.

Written by Alyssa Gerace

The past couple weeks in senior care technology news have been a mix of product development and partnerships. One company’s pilot program reflects a shift away from time-consuming paperwork to efficient, speedier electronic information transmitting. Two technology companies have entered into partnerships to improve care service and quality, while a software provider has combined the best features of three management programs into an integrated senior living platform. Read on:

1. RealPage: Integrative Senior Living Platform

RealPage, Inc. (NASDAQ:RP), a provider of on-demand software and software-enabled services to the rental housing industry, announced on Feb. 9 its product offering RealPage Senior Living, an “enterprise-wide, senior living solution that integrates Care Management, Community Management and Marketing Management.”

Care Management is designed to help senior living owners and managers improve quality of care and increase direct care revenue through an assessment tool that lets clinical staff measure changing acuity of senior residents, and also helps to plan staffing so as to accurately price the delivery of care and achieve maximum revenue. Community Management includes a system for accounting, census and billing, electronic payments, purchasing, and facilities for multiple senior living communities. The Marketing Management component is meant to provide cost-effective marketing solutions, such as lead tracking and contact center services.

2. Molina Healthcare and Sandata Technologies: Exclusive Implementation of Managed Senior Care Program

Molina Healthcare, Inc., a provider of Medicaid Managed Services, and Sandata Technologies, LLC, a provider of technology solutions to the home health care industry, have agreed to have Sandata exclusively provide Electronic Visit Verification services for Molina’s Home and Community based programs. The agreement is meant to increase Molina’s compliance to care plans, improve quality of service to members, and increase overall program efficiency within its network of home care providers. Sandata’s Electronic Visit Verification technologies, including its payor management solution, will be implemented, along with a speaker verification system and a telephonic visit verification.

3. WellAWARE: Senior Care Technology Developer Partners with Installation Services Provider

WellAWARE Systems, a developer of senior care technology, has partnered with Zigmo, a technology services provider that will now provide installation, on-site support, and installation training services for WellAWARE customers across the U.S. WellAWARE has a “smart sensor” solution that gathers data about resident wellness and overall health. Senior care providers can use this data to spot trends, which in turn can help reduce rehospitalizations and preventable emergency room visits.

4. Omnicare: E-Prescribing Application for Skilled Nursing & Assisted Living Providers

Omnicare, Inc. has launched an e-prescribing application pilot for its OmniviewDr platform, which allows prescribers to electronically transmit orders for controlled substance prescriptions as well as other medications in real-time directly to Omnicare pharmacies. This technology shortens the wait for elderly patients to receive their medication and also streamlines the manual, paper-based process. OmniviewDr was developed to address the growing needs of physicians and residents in skilled nursing facilities and assisted and independent living communities, and is expected to be released to the full market by the end of the year.

The average price-per-bed for assisted living rose more than 45% in 2011 to $156,900 per unit, compared to the previous year, reports Irving Levin Associates, Inc.

Prices came “extremely close” to 2007′s peak, and showed the value of the seniors housing market despite economic uncertainty.

“The seniors housing market was so resilient during the Great Recession that investors were willing to pay higher prices for the higher quality assisted living communities that came on the market in the past year,” says Irving Levin.

While assisted living saw the greatest increase in per-unit pricing, independent living came in with the “most valuable beds,” increasing 17% to an average price of $171,000 per unit, also close to the record set in 2007, says Irving Levin.

“Even though the housing market has not improved much to help seniors sell their homes at reasonable prices, high quality seniors communities were in demand in the market, especially those with an assisted living or memory care component,” said Stephen Monroe, editor of the Irving Levin M&A report.

Skilled nursing didn’t fare so well in 2011, with the average price per bed dropping about 18% to $51,100, according to Irving Levin’s The Senior Care Acquisition Report.

“While this decline looks significant, it is very much in line with the average prices paid in the four years from 2006 through 2009,” said Monroe. “Last year was an unusual year for the skilled nursing industry because it had to deal with a short-term period of higher Medicare rates that were then drastically cut effective October 1, 2011. No one likes uncertainty, but skilled nursing providers are adapting well to the changes and there is no shortage of buyers or M&A activity.”

Written by Alyssa Gerace

The Ensign Group, Inc. (NASDAQ:ENSG) announced on Feb. 13 that an Ensign subsidiary had acquired Connected Home Health, a small home health agency based in Portland, Oregon, effective as of Feb. 10, 2012.

“We are pleased with the growth and development of our home health businesses thus far, and this lateral diversification broadens Ensign’s reach into that business,” said Christopher Christensen, Ensign’s president and CEO. “More importantly, this acquisition is an important first step in our desire to offer a wide range of healthcare services to the vibrant Oregon healthcare community.”

A subsidiary of Cornerstone Healthcare, Inc., Ensign’s home health and hospice-based portfolio subsidiary, will operate Connected Home Health.

The new acquisition joints Horizon Home Health and Hospice, the company’s existing home health and hospice operation in Idaho; Custom Care Hospice, Ensign’s hospice operation in the Dallas, Tex. market; Symbil Home Health and Hospice, Ensign’s home health and hospice operation in the Salt Lake City, Utah, market; Homecare Solutions, Ensign’s home health agency in Denver, Colo. an Careage Home Care, Ensign’s home health agency in Cherokee, Iowa.

Ensign purchased Connected Home Health, formerly known as Portland Home Health, with cash and expects the transaction to be midly accretive to earnings in 2012.

Written by Alyssa Gerace

This is a follow-up to Part 2 of a multi-part series exploring the question, “Will the Nation Go Broke Paying for Senior Housing & Long-Term Care?” Check out parts one and three.

While some states are making use of Medicaid waivers to create “affordable” assisted living models, there’s industry consensus that the concept of affordability probably isn’t viable in assisted living facilities.

“It’s a very difficult thing to accomplish, to make a meaningful difference in the cost of assisted living without compromising the service,” says Tom Grape, chairman and CEO of New England-based Benchmark Senior Living.

The only real way to provide truly affordable assisted living is with a reimbursement or grant of some form from the government, he says.

“There’s no way to offer it without some payment from an outside source, and I don’t think that’s going to happen in the near term,” Grape told SHN.

He broke down the economics of an assisted living community: Roughly 70 cents of every dollar goes toward operating costs, another 20 cents goes to mortgage or debt services, and the remaining 10 cents is left for cashflow.

“Someone could give you the building for free, and it would reduce costs by 20%. But once you start chipping away at 70% of operating expenses… you can chip away at the margin, but you still have to provide three meals a day, and all the other basic services,” he said.

And until there’s some sort of government waiver program set in place, residents often end up relying on their families to “chip in,” Grape said.

“The long-term solution that is best for the country is an expanded long-term care insurance product, whether publicly or privately sponsored, but I don’t think a new large-scale reimbursement program from the government’s likely, so I think the situation will likely remain as is for most of [the next 10 years].

Andrew Carle, a former senior living administrator and the founder and executive in residence of George Mason University’s seniors housing administration program, agrees wholeheartedly with Grape. He’s done extensive research on the topic of technology and its role in senior care, including how it can help senior living facilities reduce costs and become more efficient.

Despite the possibility of using technology to cut costs, it’s not enough to constitute affordability.

“There are fixed costs that you can’t do anything about,” he says. “There’s an opportunity to make things more affordable, but not actually affordable with technology.”

He says that some of those currently using various technological developments in their senior housing communities are actually the county-run, low-income senior housing organizations.

This is because they don’t have a business interest in ancillary revenue, says Carle.

In general, while it’s possible to make facilities “more” affordable and efficient, he says, there will probably never be a truly affordable model because at a certain point, it’s just not possible to trim costs any further.

Written by Alyssa Gerace

Lawmakers recently voted to extend the payroll tax cut through 2012, which includes a measure to prevent a 27.1% cut in Medicare payments to doctors for the rest of this year through a ‘doc fix’ that would be funded by reducing federal healthcare spending. But while doctors’ reimbursements might be saved, it could come at the expense of skilled nursing facilities.

The ‘doc fix’ will be funded by reducing spending by about $21.1 billion, which includes a $6.9 billion reduction in federal payments to skilled nursing facilities and hospitals that collect “bad debt”—the amount facilities can get reimbursed by Medicare to cover expenses (debt) incurred by those dually eligible for Medicaid and Medicare that’s uncollectable by federal law.

Currently, skilled nursing providers can collect 70% of beneficiary cost-sharing, or “bad debt,” expenses from Medicare, and 100% of bad debt stemming from the treatment of “dual eligibles”—patients eligible for both Medicaid and Medicare.

Unfortunately for providers, the ‘doc fix’ includes cutting reimbursements for bad debt to 65% beginning in 2013 for those who are currently getting a 70% reimbursement, and phasing those getting complete reimbursements down to 65% in the next three years. President Obama recommends that bad debt reimbursements be reduced to just 25%.

With this turn of events, the already-slim margins in skilled nursing could get dangerously smaller, according to the American Health Care Association.

“It’s unclear how much of that $6.9 billion is ours [as opposed to affecting hospitals],” says Greg Crist, vice president of public affairs at AHCA.  “The [three-year] phase-in helps, but we have a lot of facilities who have Medicaid patients and therefore have a lot of bad debt, and this is going to be another financial strain.”

He says the cut will impact 20 to 25 states disproportionately to other states, naming Florida, Pennsylvania, and Illinois among those that will be particularly hard-hit.

AHCA had previously offered an alternative to the bad debt proposal, for facilities to absorb all private-pay bad debt with no federal responsibility, and has also introduced other “substantive policy alternatives and solutions” such as penalizing nursing homes with higher-than-average hospital readmissions.

Previous analyses have shown that nursing homes’ profits will flatline or even turn negative with further cuts beyond the average 11.1% Medicare reimbursement reductions to nursing homes that went into effect last October.

“Many may not want to mention margins when it relates to healthcare providers, but the fact of the matter is without a margin, it’s just not possible to keep operating,” AHCA President and CEO Mark Parkinson has previously stated.

The doc fix was included in the payroll tax extension deal, which passed in the Senate on Friday with a 60-36 vote shortly after clearing the House, 293-132.

Click here for a summary of the health-related provisions contained in the deal.

Written by Alyssa Gerace

It’s possible that the Centers for Medicare & Medicaid Services (CMS) will soon be implementing a common pay system for post-acute care providers, including skilled nursing facilities, home health agencies, long-term care hospitals and inpatient rehabilitation facilities.

Because similar patients can be treated in more than one provider setting, having a common evaluation and payment model and being able to “consistently measure patient acuity, resource use, and outcomes across settings will help to guide appropriate policies for these patient populations,” says the CMS report to Congress on the Post Acute Care Payment Reform Demonstration.

Currently, there are three mandated assessments for skilled nursing facilities, inpatient rehabilitation facilities, and home health agencies, but although they measure similar concepts, they use different clinical terms and assessment timeframes, and disparate measurement scales to assess health, physical function, and cognitive status, according to the report.

“The current Medicare payment methods for PAC providers are designed largely as independent systems that measure within-setting variation but they do not recognize the potential overlap in case mix or complementary service options available in other settings,” says CMS.

In trying to reform the current system, CMS developed a uniform assessment instrument called the Continuity Assessment Record and Evaluation (CARE) tool. The dataset for CARE includes Administrative Items; Pre-Morbidity Patient Information; Current Medical Information; Interview Items: Cognitive Status, Mood and Pain; Impairments; Functional Status; and Discharge Information.

Implementing this assessment within CMS’ demonstration was successful, the Center said, as all five settings were able to use CARE items “to collect information in a consistent and comprehensive manner for their Medicare populations.”

“Overall, the inter-rater reliability results showed very good agreement on most items,” the report says. “These results suggest that most of the standardized versions of the assessment items have strong reliability within and across settings.”

The report to Congress includes CMS’ demonstration results across the different post-acute care settings and lists recommendations for going forward with the payment system reform.

“Given the promise of the CARE tool and the importance of standardizing the collection of information between settings about patient acuity and outcomes, CMS believes that it should pursue its development efforts towards integrating CARE into the reporting requirements for acute care hospitals, SNFs, HHAs, IRFs, and LTCHs,” the report concludes.

View the full report here.

Written by Alyssa Gerace

The state of Tennessee’s Medicaid managed care program, TennCare, is looking to save millions of dollars by restricting what qualifies people for long-term nursing care, reports WCYB.

At least $15 million could be saved in the state institutes “tougher new standards” for who’s eligible to enter a nursing home. Currently, an individual with one activity of daily living deficiency (ADL) can be admitted into a facility through the TennCare program.

The new proposal, however, changes that requirement to four ADLs by next year.

Most patients admitted into Tennessee facilities have at least three deficiencies, according to WCYB. “That means those on the threshold may not be allowed into a nursing home,” the article says.

This could leave some seniors at a disadvantage, but those who don’t “quite meet the long-term criteria might receive TennCare coverage for in-home and community based services,” WCYB reports. “If passed, local home care businesses said they would expect an influx of clients.”

Read more at WCYB.com.

Written by Alyssa Gerace

This is the third in a multi-part series following “Will the Nation Go Broke Paying for Senior Housing & Long-Term Care?” Read the first and second installments here, talking about the decrease in nursing home census as states seek to distribute Medicaid dollars in less expensive settings, including assisted living.

With healthcare costs rising and the Great Recession still putting a crunch on many peoples’ wallets, senior housing options such as “transitional housing” or so-called “Granny pods” may emerge as a viable alternative to entering a senior care facility, or at the very least, could serve to delay an eventual move-in.

Select housing manufacturers throughout the country are producing small dwellings that can be constructed on another home’s property, most often in the backyard. Some of these structures are designed specifically for seniors with the idea that instead of going to some sort of facility, or moving into an adult child’s home, the senior can maintain some independence while still being close to family.

Granny Pods

In tough economic times, family-managed care can be the answer, says Kenneth Tupin, CEO of N2Care and creator of the MedCottage.

“We do not think that the MedCottage is a replacement or in lieu of nursing homes,” he says. “There will forever be that need; this is just an alternative for that. It’s for the people that want to participate in family-managed care, [although] we think that most people will still need home health care of a similar service to supplement the responsibility.”

MedCottages are small (288-square-feet), modular buildings that can easily be placed on a homeowner’s property and hooked up to the main house’s water and electric utilities. They’re designed with seniors in mind and include technology that incorporates motion detection and interactive monitoring.

The prototype for these structures was created about a year and a half ago, with the first model created nine months ago. N2Care recently had its first purchase, and the placement will take place in the next couple of weeks in Virgina, in the Washington, D.C., area, Tupin says.

The MedCottage costs about $85,000, and can be sold back to the distributor once its occupant passes away or moves out. “It’s a value proposition, because nursing home care is much more expensive,” says Tupin. “In Virginia, distributors have to purchase them back. It’s an asset you can sell, and if you’ve had it for two years, you can sell it back for about $36,000.”

It’s a “great tool for wealth preservation,” Tupin says, because it allows families to define and control the cost.

“With nursing homes or even assisted living, it is almost financial consumption, meaning that it isn’t satisfied until it has consumed almost all of your wealth,” he says.

Transitional Senior Housing

Another company that offers a similar product is Pacific Modern Homes, which has been in business for more than 42 years designing home plans and kit/packaged homes, but most recently began offering senior-specific models.

The company has been seeing a need for a “backyard home-type approach” as the population ages, says Ken Rader, vice president of marketing for Pacific Modern Homes.

What they’re after is a “transitional home environment” that includes accessible design features, such as wider doorways and hallways and stepless entries. They work with occupational therapists and in-home care professionals to identify the types of care individuals need, and how that fits into a home’s design.

The idea is to produce housing that enables aging in place, removing the necessity to move if mobility becomes an issue, and allowing individuals to transition within their homes.

“Because Boomers and their parents are downsizing, they’re looking to be able to have a couple different options: to live close by loved ones, and have the option to move around and still be functional,” Rader says.

The company recently introduced a new model with seniors in mind called “Sonoma,” a 682-square-foot structure that has a kitchen, living room, laundry room, bathroom, and bedroom.

Consumers can purchase a model home kit (think model airplane kit, but on a much larger scale) and either assemble it themselves or hire a contractor to do so. The pieces of the house are numbered and come with assembly diagrams. The Sonoma “kit” costs $17,000, but hiring a contractor to put it together could cost roughly $60,000.

“If [the consumer] wants to be involved with building it, they could save a lot depending on their abilities,” says Rader, adding that pricing also varies depending on how the inside is finished.

Will Aging in an Adult Child’s Backyard Catch On?

At this point, there’s little data for both N2Care’s MedCottage, and Pacific Modern Home’s “Sonoma” model, Tupin and Rader say. However, both business expect demand for their product to grow as the population continues to age, and seniors (and their adult children) explore long-term care options.

Pacific Modern Homes plans to take their senior-home designing another step forward with a smaller model that will be 400-square-feet, to get around zoning and coding laws to make it easier for someone to build a second home on their property.

County and state regulations are the biggest barrier to these backyard domiciles, Rader told SHN. His company is based in California, where it does the most business, and Rader says zoning and coding issues are the biggest obstacles for people looking at transitional housing.

In Virginia, where the first MedCottage will be located, the structure is considered an additional bedroom, Tupin says, but that could differ from state to state.

He points to cultural attitude as the biggest barrier to these “granny pods” catching on, but thinks there will be a culture shift.

“There has to be some overwhelming economic incentive, and that is the case here,” he says. “When you think of the number of baby boomers—the onus of showing the benefits of these cottages will get easier.”

Written by Alyssa Gerace

GE Capital, Healthcare Financial Services announced in late January that it had financed more than $7 billion to customers in 2011 in more than 200 transactions, with a significant portion of that going toward financing senior housing and care.

Last year was a good year for the company, according to senior managing director and head of healthcare real estate lending Jim Seymour. He said they did around 50 financing transactions with total commitments of about $1.6 billion; out of that, about a quarter went toward medical properties, and about three-quarters into seniors housing and care.

Despite so much activity in 2011, Seymour says there’s a certain level of uncertainty in the industry.

“We’re a little big cautious about the market right now,” he says. “On the senior housing side, with independent and assisted living, you’re impacted more by general economic conditions. While the economy’s getting better, it’s still a little bit choppy, and financial institutions are still concerned about Europe.”

However, he emphasized that “conditions are improving,” albeit slowly, and that GE is “generally cautiously optimistic that the space will continue to grow and provide opportunities.”

When it comes to skilled nursing, though, Seymour says the sector is a “different animal” after the Medicare cuts that went into effect last October and with state budgets under pressure on the Medicaid side.

“In the short term, there’s not a lot of activity in that space,” he says. “Most buyers and lenders are taking a little bit of a time-out to see how the cuts are going to manifest themselves in the financials of operating.”

He says that by late spring or early summer, there will be a better picture of how the cuts will play out and affect margins. And while skilled nursing is a “little quiet” in the short term, he says GE Capital’s long-term view is positive.

“The long-term demographics are compelling, and we expect activity to pick up in the second half of the year,” Seymour says. On the senior housing side, he says they “hope to do at least as much volume this year as we did last year in terms of financing for our customers.”

Written by Alyssa Gerace

Lancaster Pollard Structures Financings for Four Ohio Senior Living Communities

Lancaster Pollard recently facilitated $36 million of financing for four Ohio nonprofit senior living communities, led by senior vice president Kass Matt out of the firm’s Columbus, Ohio office.

“We were successful in providing historically low interest rates while utilizing flexible and efficient financing vehicles for their capital projects and refinancing needs,” said Matt.

The firm structured a $7.7 million, 25-year, tax-exempt, bank-qualified bond issue that was privately placed with a local bank at a 10-year fixed rate for Mennonite Home Communities of Ohio in Blufton. The financing will be used to fund renovations of the Mennonite Memorial Home, refund existing indebtedness of about $2 million, and build two 10-unit, ”Green House” model facilities.

Another transaction was for Methodist Eldercare Services, which Lancaster Pollard helped fund $9 million in bank-qualified variable-rate bonds to construct a new community center featuring a 19-unit, 25-bed skilled nursing facility, at its Wesley Ridge location in Reynoldsburg. Along with the new bonds, the senior living provider also financed a $500,000 acquisition of new land for future expansion of the community.

Lancaster Pollard assisted Mason Christian Village, located in Mason, in refinancing two first mortgages through the FHA’s Section 223(a)(7) program for $11 million. This refinancing will save the property $41,691 in annual debt service, for $837,289 during the remaining term of the loan, and will also fund $537,307 in repairs.

The last financing transaction was for Quaker Heights Care Community, in Waynesville, which refinanced the property’s outstanding FHA/GNMA bonds for $8.2 million through the FHA’s Section 223(a)(7) program. This produced more than $90,000 in annual debt-service savings, and the community also financed about $47,000 for roof repairs.

Cambridge Realty Provides $7.2 Million Refinancing Loan to Kansas ALF

Cambridge Realty Capital Companies provided a $7.2 million HUD Lean loan to refinance Rose Estates, an 80-bed Kansas assisted living facility located in Overland Park. The transaction was a fully-amortized, 35-year term loan arranged by Cambridge Realty Capital Ltd. of Illinois for the facility’s owner, a limited liability company based in Kansas. The property was refinanced through HUD’s Section 232 program, pursuant to the Section 223(f) funding program, with an undisclosed interest rate.

Lancaster Pollard Arranges More than $22 Million of Financing for Non-Profit Facilities

• The firm refinanced Heartland Christian Village’s outstanding FHA-insured bonds for $4 million through the FHA Section 223(a)(7) program, reducing the interest rate by nearly 200 basis points and producing about $50,000 in annual debt-service savings. The loan was for a senior living community located in Neoga, Ill. which is comprised of a 71-bed skilled nursing facility and eight independent living units.
• For Plaza Apartments, a New Jersey Section 8 multifamily apartment building for seniors, Lancaster Pollard obtained a $4.5 million refinance insured by the FHA Section 223(f) program, which will save the property nearly $57,000 in annual debt service, fund necessary $1.3 million repairs, and provide about $44,000 in reserves.
• Lancaster Pollard helped Cheney Care Community, a CCRC located in Cheney, Wash., to refinance the property’s outstanding FHA-insured bonds through the FHA 223(a)(7) program, which reduced the interest rate and generated more than $67,000 in annual debt-service savings. Cheney Care Center Association, a non-profit community organization, owns and operates the community and was able to complete more than $30,300 in repairs and improvements.
• Aston Park Healthcare Center, located in Asheville, N.C., obtained capital to renovate and expand its lobby and therapy spaces with an assist by Lancaster Pollard, who structured a transaction that used a taxable 30-year fully-amortizing, fixed-rate note insured by the FHA Section 232/223(f) program to replace a variable-rate bond issue, enhanced by a short-term bank letter-of-credit. The transaction helped the 143-bed senior living facility to fund a $1.7 million renovation and added $289,601 to its replacement reserves.
• Lancaster Pollard closed an FHA-insured financing through the Section 232 LEAN program for Lakeview Lutheran Manor, a 163-bed skilled nursing facility located in Cadillac, Mich. The transaction will allow the facility, which is operated by Lutheran Social Services of Michigan, to undergo a $3.9 million renovation that will demolish two wings and completely renovate two wings while updating another two wings with minor renovations. Lancaster Pollard assisted in negotiating the release of the property as collateral from a letter-of-credit related to a 2007 bond issue, and then secured HUD mortgage insurance at a long-term rate, which will save the operator $3,000 a month over its budget. The planned renovations will allow Lakeview to operate at 133 beds, with an expected improved payor mix and occupancy rate.

Lancaster Pollard Obtains $24.5 Million of Loan Refinancing for Two Ohio Senior Living Facilities

Lancaster Pollard recently arranged $24.5 million of loan refinancing for two Ohio senior living facilities using the FHA’s Section 232/223(f) program. Both facilities are owned and operated by Sprenger Health Care Systems, which worked with Lancaster Pollard to develop a strategy to refinance several facilities using the FHA 232 LEAN program to free up capital from the operator’s existing bank group syndicate.

The outcome of the first transaction, a $8.9 million refinance for Heather Knoll Retirement Village, a 115-bed skilled nursing facility, was a loan with an interest rate below 4% for 30 years and a large deposit into the operator’s replacement reserve. The second refinance, for $15.6 million for the Towne Center Community, a 130-bed skilled nursing and assisted living facility, resulted in a below-4% interest rate for 30 years and another “significant” deposit into the replacement reserve.

“Working with such a high-quality operator with first-class facilities really made this a smooth transaction,” said Kass Matt, who led the refinancings out of Lancaster Pollard’s Columbus, Ohio headquarters.

Cambridge Secures $4.5 Million HUD Refinancing Loan for Illinois SNF

Cambridge Realty Capital recently closed on a $4.5 million HUD Lean loan for Bethany Healthcare and Rehabilitation Center, a 90-bed skilled nursing home facility in DeKalb, Ill. Cambridge Realty Capital Ltd. of Illinois underwrote the loan, which was arranged using HUD’s Section 232/223(a)(7) program.

Cambridge Arranges $11.3 Million Refinance for Illinois Nursing & Rehab Center

Cambridge Realty Capital recently closed on a $11.3 million HUD Lean loan to refinancing Columbus Park Nursing and Rehabilitation Center, a 216-bed skilled nursing home located in Chicago, Ill. The facility is owned by an Illinois limited liability company, which was able to obtain a fully-amortized, 30-year term loan with an undisclosed interest rate, underwritten by Cambridge Realty Capital Ltd. of Illinois.

Health Care REIT, Inc. (NYSE:HCN) announced on Feb. 15 that it will use a RIDEA structure to partner with Chartwell Seniors Housing REIT (TSX:CSH.UN) to own and operate a 42-property portfolio of high-quality seniors housing and care communities located in “attractive” Canadian markets.

The portfolio, which has approximately 8,200 units, is primarily made up of independent living residences, many of which offer a continuum of care that includes assisted living and memory care.

“The investment with Chartwell provides Health Care REIT with the opportunity to partner with a premier seniors housing operator in Canada and to invest in high-quality real estate in attractive markets,” said George L. Chapman, chairman, CEO, and president of Health Care REIT in a statement. “This investment takes our successful U.S. investment strategy and applies it to the Canadian market. HCN will gain a meaningful foothold in Canada’s largest and most attractive markets with a portfolio of high-quality private pay facilities, and benefit from a relationship with Canada’s leading seniors housing operator.”

The two REITs are acquiring the portfolio from Maestro Retirement Residences Fund L.P., Maestro Retirement Residences Fund II, L.P., Maestro Retirement Residences Fund III, L.P., Maestro Retirement Residences Fund IV, L.P., and Maestro Retirement Residences Fund V, L.P., for $952.2 million (U.S. dollars).

Thirty-nine of the 42 properties will be owned 50% each by Health Care REIT and Chartwell Seniors Housing, with HCN owning the remaining three properties outright.

Following closing, the Canadian REIT will manage the communities under an incentive-based management contract.

Health Care REIT’s investment has a projected first year net operating income yield of approximately 7.4% after management feeds, and is expected to be immediately accretive to FFO with future NOI growth of 4%-5% in the long-term.

The portfolio’s occupancy is currently at 88%, but has potential to increase through enhanced operational strategies and efficiencies, and newly developed communities that are still in lease up.

Written by Alyssa Gerace

The Ensign Group, Inc. (NASDAQ:ENSG) saw its net income drop 11.3% to $10.4 million, or $0.48 per diluted share, compared to the previous year’s $11.7 million for the quarter ended Dec. 31, 2011. The decrease was attributed to the 11.1% reduction in Medicare rates to skilled nursing facilities that went into effect on Oct. 1, 2011.

However, for the full year, net income climbed 17.6% to $47.7 million, and the company reported increased consolidated revenues of $758.3 million for the total year. Revenue rose 16.7% from the previous year, with $192.7 million coming in the fourth quarter.

“The fourth quarter marked the most daunting challenge to Ensign’s facility-centric leadership structure and operating model to date, and perhaps the best test of our flexibility, responsiveness and resilience that we will ever experience,” said Ensign’s President and CEO, Christopher Christensen, in a statement.

Medicare daily revenue rates dropped 14.4% in the quarter, although they increased 7.5% in 2011. For the full year, 35.3% of Ensign’s skilled nursing revenue came from Medicare, an increase from 2010′s 33%. The company’s private pay census paid just 8.8% of its yearly revenue.

The Medicare rate cuts were more heavily weighted toward the highest-acuity patients, said Ensign, but the company’s facilities were able to make it up through increasing residents’ time receiving skilled nursing.

“As a result of a thousand little things [Ensign's facility leadership] collectively did, even with the rate cuts our overall skilled revenue was only off 4.4% on a same-store basis, and net income only declined 11.3% in the quarter,” Christensen said.

In 2011, Ensign announced the acquisition of six long-term care facilities and two home health business in eight separate transactions, all purchased with cash and located in California, Idaho, Nevada, Arizona, Utah, Colorado, and Oregon.

These acquisitions brought the company’s portfolio to 103 facilities, 78 of which are owned by Ensign, with Ensign affiliates holding purchase options on five of the company’s 25 leased facilities; three hospice companies; and five home health business, spread over 11 states.

The company also announced the formation of Immediate Clinic, a joint venture to develop and operate urgent care facilities and related business.

Looking ahead, Ensign’s 2012 guidance projects revenues of $830 million to $846 million, an net income of $2.36 to $2.42 per diluted share for the year.

View The Ensign Group’s fourth quarter and year-end earnings report here.

Written by Alyssa Gerace

As assisted living regulations evolve and tighten, Medicare and Medicaid reimbursements fluctuate, and healthcare reform begins to take effect, many states are facing their own challenges as they continue to develop, operate, and implement new rules. Here is a collection of long-term care related stories from across the nation.

From The Des Moines Register: Nursing Home Warning Bill Taken Up by Subcommittee

“Legislation aimed at informing and protecting residents of nursing homes and residential care facilities from sex offenders living among them got its first hearing in a House subcommittee Wednesday [Feb. 1],” reports The Des Moines Register. “The proposal would require nursing homes, residential care facilities and assisted-living programs to check newly admitted residents against the state’s sex-offender registry and to notify facility residents, residents’ families, employees, visitors and the county sheriff if a registered offender was moving in.” Read more…

From the Miami Herald: Scott Wants to Renew Effort to Reform ALFs

“As Florida lawmakers debate the biggest overhaul of assisted living facilities in a generation, Gov. Rick Scott has sent a clear signal: He wants the reform movement to stay alive,” reports the Herald. “In a brief statement Tuesday [Jan. 31], Scott said he’ll ask members of his Assisted Living Work Group to convene again this year to come up with more ways to improve conditions in the state’s 2,850 assisted living facilities, where someone dies nearly once a month from abuse or neglect.” Read more…

From the Providence Journal: Governor Seeks to Overturn Court Ruling Preventing Medicare Enrollment

“Governor Chafee is filing a legal brief with the state Supreme Court in support of Providence’s efforts to overturn a lower court’s ruling preventing the city from moving its retirees into Medicare,” reports the Providence Journal. “The city had hoped to save $8 million this fiscal year from the move but in a ruling last week Superior Court Judge Sarah Taft-Carter prohibited the city from breaking its contractual arrangement with the retirees.” Read more…

From the Rome News-Tribune: Administrator Offers Tales of Nursing Home Deficiencies in Houser Trial

“Another administrator of a nursing home formerly owned by George House was on the stand all day Monday, Feb. 6, testifying on deficiencies cited by state regulators and bills for food and other items that were not being paid,” reports the Rome News-Tribune. “According to the federal indictment, residents of Housers’ nursing homes lived in substandard conditions, with broken air-conditions and leaky roofs, while the couple raked in millions of dollars, purchasing homes, property and expensive cars.” Read more…

From the Philadelphia Inquirer: Pa. Nursing Homes Brace for Another Round of State Cuts

“Pennsylvania nursing-home operators, already hit hard by last year’s cuts in federal and state funding, face another revenue loss in Gov. Corbett’s proposed budget for the fiscal year starting July 1,” reports Philly.com. “The budget proposal, released Tuesday, calls for a 4 percent cut in the Medicaid reimbursement rate for nursing homes. The total revenue loss for nursing homes is projected by the Pennsylvania Health Care Association to be $46.5 million.” Read more…

From Aberdeen News: Nursing Home Beds Moratorium Could be Relaxed

“Nursing homes should be able to seek additional beds despite the state’s moratorium against increasing the total number of beds in South Dakota, the state Senate decided Friday,” reports Aberdeen News. “Sen. Jean Hunhoff, R-Yankton, said the moratorium has worked well in spurring the availability of other types of long-term care. Enough nursing beds remain statewide, but additional beds are needed in some parts of South Dakota, Hunhoff said.” Read more…

President Obama’s 2013 Federal Budget was released just in time for Valentine’s Day, in which the Department of Housing and Urban Development (HUD) revealed its plans to raise mortgage insurance premiums on many of its loan programs, including its healthcare facility lending, in a bid to mitigate future loan risks and woo the private market back into the lending space.

The Health Care and Nursing Homes, and Health Care Refinances loan programs performed relatively well in 2011 with negative subsidy rates that are projected to improve still further in both 2012 and 2013. The total guaranteed loan subsidy is an estimated -4.01% for 2013, with an estimated guaranteed loan subsidy budget authority of -$661 million.

“Credit subsidy rates for 2013 reflect mortgage insurance premium increases for newly insured market rate multifamily housing and healthcare facility loans. The Budget proposes increases of 20 basis points for 221(d)(4) loans, 5 basis points on 223(a)(7) refinances of current FHA loans, and 15 basis points on all other types of healthcare and multifamily loans,” the budget says.

Despite good performance on healthcare facility loans in the recent past, HUD plans on raising premiums.

“Clearly, there is [a need to raise the premiums],” HUD Secretary Shaun Donovan told SHN during HUD’s 2013 Budget Overview press briefing. “Given the crisis we’ve been through and the performance we’ve seen, we have re-benchmarked all of our programs to look at the long-term risk that’s being taken on the balance sheet, not only to protect the [Mutual Mortgage Insurance] Fund, but also to make sure that each of the programs individually fully pays for themselves.”

He says that as that risk is “re-benchmarked in the wake of the [economic] crisis,” the long-term levels of insurance premiums need to be higher.

“We certainly want to encourage the private sector to return to funding,” he continued. “It’s not just in single-family ad multifamily, but also in healthcare where our market share has grown substantially. And we do want to make sure the private market returns.”

However, increasing the price of these loans won’t necessarily have a chain-reaction effect of encouraging private lenders to re-enter the healthcare lending market, says Bill Kauffman, managing director of Seniors Housing at Oak Grove Capital, a privately held company which specializes in financing senior housing, healthcare, affordable housing, and multifamily housing.

“I don’t see that [move] happening immediately, because the bulk of the [healthcare loan] program is still used for skilled nursing facilities, and the bulk [of lenders] still don’t want to finance skilled nursing facilities,” he says.

Others think that the bid to allow greater room for the private sector is “nonsense.”

“I still believe that FHA could do much more to stimulate the economy,” says Paul Dribin, President of Dribin Consulting, a firm that coordinates financing and refinancing of senior living facilities, among other real estate sectors.

“Raising insurance premiums will hurt the overall ability of senior care developers to get their projects funded,” he says, adding that each program fund already has its own risk factors, and that senior living hasn’t been detrimental to FHA’s portfolio.

Besides FHA-insured healthcare facility loans, the GSEs’ senior housing portfolios are also performing well, according to Kauffman.

“In my conversations with Fannie and Freddie, and looking at Oak Grove Capital’s portfolio, there’s very limited default issues in the senior housing space, and that’s expected to continue,” he says.

During the press briefing, Donovan also stated HUD’s intention to implement “additional premium increases beyond those contained in the budget” in the coming days.

Written by Alyssa Gerace