July 5, 2018, Maggie Flynn, Skilled Nursing News - Recent deals by nonprofit health systems ProMedica and Sanford Health to acquire skilled nursing facility operations have put the sector on notice — and one CEO can understand why. Eric Mendelsohn, the President and CEO of National Health Investors (NYSE: NHI), said he hasn’t seen health systems coming to the table for senior living and care deals, “not in a way that moves the needle.”
But the idea behind such moves has potential.
“There is a continuum of care that can be assembled when you have a hospital and skilled nursing and assisted living group, that all work together to move residents and patients back and forth based on their level of need,” he told Skilled Nursing News’ sister site, Senior Housing News in a recent interview. ”
It’s a sentiment that the Evangelical Lutheran Good Samaritan Society would agree with. One of the largest nonprofit senior care providers in the U.S., Sioux Falls, S.D.-based Good Samaritan voted in late June to approve a merger with not-for-profit health system Sanford Health, also based in Sioux Falls.
By combining the organizations, Good Samaritan and Sanford could set up an integrated delivery system that will allow them to deliver a broader range of care, Good Samaritan CFO Grant Tribble told SNN at the time. An integrated system can add care in challenged rural locales, for instance, through such alignments as Good Samaritan’s institutional special needs plan (I-SNP).
“Things like I-SNP programs will be a great ability for an integrated system to be able to add provisions of care, and those are not hospital-specific,” Tribble told SNN on June 27. “We could be working in those I-SNP programs, and it could be in a locale where Sanford may or may not be.”
Skilled nursing’s place in the continuum of care has been buffeted by the new Bundled Payments for Care Improvement Advanced (BPCI Advanced), which no longer lets SNFs be episode initiators, and the spending patterns of accountable care organizations driving dollars away from SNFs.
But Mendelsohn thinks there’s some reason for hope in light of the health system mergers. For Sanford and Good Samaritan aren’t the only ones joining forces; in April, the Toledo, Ohio-based real estate investment trust (REIT) Welltower Inc. (NYSE: WELL) entered a deal to own the real estate of troubled skilled nursing giant HCR ManorCare in a joint venture with nonprofit health system ProMedica.
Welltower CEO Tom DeRosa stressed that the deal should be regarded as “a health system investment” where ProMedica can experiment with post-acute care delivery.
And Mendelson thinks there’s some room for skilled nursing in that area.
“I think that there are state-specific programs that are forcing hospitals to revisit that patient care,” he told SHN. “Skilled nursing could be the place where people recuperate after operations, after hip surgeries, and as they get better, they move to AL and get their rehab there. And all of that is much less expensive than being in a hospital.”
But NHI isn’t just looking toward the future of skilled nursing. The Murfreesboro, Tenn.-based REIT has a conservative approach to investing, but is also quite bullish on the skilled nursing sector. Though the challenges of skilled nursing include reimbursement rate woes and labor difficulties, to name a few, Mendelsohn thinks skilled nursing is doing well overall.
“I’m a contrarian investor,” he told SHN. “Our view of skilled nursing is skewed by the fact that we have NHC and Ensign as two of our largest tenants, and their stocks are trading at an all-time high. From where I sit, skilled nursing is doing great … We just bought two skilled nursing buildings two months ago and we’re thrilled, and I would buy more if I could find any that would fit in that narrow box.”