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Skilled Nursing & Hospitals Hold Hands, a Win-Win Relationship

The Skilled Nursing and Rehabilitation market is in the midst of a transformation and faces a new world of accountability and readmission penalties.  There is a long overdue interest and awareness that nursing home providers provide the key that can reduce unnecessary hospitalizations which trigger financial penalties for both the Skilled Nursing provider and the Hospital.  With the realization that private and public payers are committed to VALUE BASED HEALTH CARE, the days are over when financial success was tied to the census of a hospital or a skilled nursing facility.  

THE HOLDING HANDS RELATIONSHIP is new and demands cooperation from both hospital and skilled nursing provider.  Both share the goal of avoiding unnecessary inpatient stays, but a hospital’s facility, protocols and standards are very different from those of a SNF.  Furthermore, the communication gap between the two providers is great.  Nursing homes frequently do not receive the information they need to properly care for patients discharged from the Hospital.  Although there are many programs that address the problems of the marriage of Hospital and Skilled Nursing Facilities, the financial incentive to change to valued based health in the short term view, is not as important to a skilled nursing provider as it is for the hospital.   Cut in reimbursement rates for readmission are significant for hospitals, not for all skilled nursing facilities yet, but the handwriting is on the wall.

THE GOOD NEWS IS the skilled nursing provider doesn’t get off the hook, which is a tribute to the fact that the healthcare industry is “growing up” and adjusting to the demands of the culture.  For example, a good many health systems are creating a network of SNF’s that agree to meet quality standards, share data, provide certain services and work with hospitals to reduce, avoidable hospitalizations.  Upon discharge from a hospital, a patient is given the list of approved skilled nursing facilities that have met the Hospitals requirements and are included in their network.  Of course the patient can choose any nursing facility, but hospitals can help patients make good choices.  If a skilled nursing facility becomes a preferred provider they enjoy increased census and increased revenue.  In the long term when unnecessary hospital readmission from nursing homes reduces their reimbursement rate, the skilled nursing will survive that has developed a value based health care plan.  The ones that do not meet the new higher standards will not survive or end up in the bankruptcy court.

AND SO THE BEAT GOES ON!  The result of all the effort by various organizations like the Medicare-Medicaid Coordination Office and the Center for Medicare and Medicaid Innovation is resulting in the   integration of hospital and acute care providers.  The result is lower costs and improvement in the quality of care.  The entire healthcare industry is becoming more sophisticated and in the big picture is making giant steps in achieving what is necessary to create a structure that will support the goals of Value based care as well as financial reward.

3 Main Reasons Why Skilled Nursing Homes File Chapter 11 Bankruptcy

When Nursing Homes File Chapter 11 Bankruptcy

There are three primary reasons a skilled nursing home ends up filing for Chapter 11 Bankruptcy. Although not the most ideal situation for the owners, the employees, and their patients, stringent federal and state requirements, fines, and lawsuits are hampering facilities’ ability to yield a profitable nursing home that can still afford skilled staffing needed for quality care.

Strict Federal and State Requirements

New guidelines enforced by the government are requiring skilled nursing homes to make mandatory regulation investments. These investments include updated training or new certifications for direct aides and staff. Direct aides are required to meet minimum educational hour regulations. Staff member requirements have been elevated as well. Failure to adhere to these regulations results in significant fines and fees.

Lawsuits and Claims

We recently reported on 19 skilled nursing facilities that filed Chapter 11 in California. Country Villa Service Corp’s claimed a need to file Chapter 11 on individual assets in order to seek protection from a number of class action lawsuits filed against them. The lawsuits range from poor quality care of their patients to medication misuse and missing wages and hours for employees.

Filing Chapter 11 on these specific locations freezes their assets, making them unavailable to the plaintiffs should they win their cases and staves off creditors temporarily. It does not, however, affect all of Country Villa Service Corp’s operational facilities. CEO Stephen Reissman claimed in his telephone interview that the bankruptcy won’t affect operations or treatment of patients at the company’s nursing homes in question, either.

Medicare Withholdings and Fines from CMS

Smaller nursing home corporations financially unable to separate their operational holdings from their business holdings are in a more precarious situation should lawsuits or fines arise. According to official reports, Medicare spent almost $32 billion on skilled nursing facilities in 2011 through their Nursing Home Quality Control Program. With the sequestration resulting from budget cuts in FY2013, many nursing homes are claiming they still haven’t received payments from the Centers for Medicare & Medicaid Services (CMS) as required. Coupling that with what some nursing home owners are claiming that they have received erroneous fines from CMS, and as a result they are forced to declare bankruptcy.

In Iowa, All-American Care owner, Jerry Rhoades, claims his locally-owned operation has to file bankruptcy in part because of all the fee injunctions CMS placed upon his business. CMS’s audits of the company yielded these results and fines nearing $100,000. Rhoades claims the fees have crippled their business and Chapter 11 was the only way out.

If you are considering filing Chapter 11 Bankruptcy, there may be other options available to you. Talk to a knowledgeable skilled nursing brokerage about these options. A reputable brokerage will have a large pool of qualified buyers and participants either in a 1031 Exchange, straight sale or sale and leaseback transaction. Check back frequently for more information on this, and related, subjects.

CMS Ups Nursing Home Quality Control Program

Quality Control Program Gets a Boost

Starting May 1, 2014, the Centers for Medicare & Medicaid Services (CMS)  are increasing funding for their Nursing Home Quality Control Program and adjusting the number of designated slots and facility candidates to reflect the gradual increase in Special Focus Facility (SFF) designated nursing homes. Pursuant to the budget constraints in FY2013’s sequestration, CMS was forced to reduce the number of SFF slots. These slots can now be gradually rebuilt during FY2014.

States May Opt for a Phase-In Period

Additionally, “States have the option of designating SFF facilities immediately or phasing in the designation by July 31, 2014,” CMS states in their memo. This is in effect until the number of designations meets the required number as appointed by the CMS before August 1, 2014.

Focusing on SFF Initiative Identified Nursing Homes First

The SFF Initiative is funneling much-needed funds to nursing homes that have thus far been unable to provide quality care to their patients. The nursing homes surveyed by CMS inspection teams will generally have “some deficiencies, with the average being 6-7 at each, but most do not get slated for the SFF Initiative program.

Significant Improvements for Nursing Home in the SFF Initiative Program

Nursing homes that have a history of “serious quality issues” or those that have been listed for more than 12 months on SSF’s list will be visited in person by survey teams twice as frequently as other nursing homes (approximately twice per year). New funds in the Quality Control Program should help alleviate chronic issues.

The CMS postulates one of three outcomes will arise within 18-24 months of a facility being recognized as an SFF nursing home:

  • Graduation

Significant improvements over the quality of care offered have been made and will continue on the same trajectory.

  • Termination

No significant improvements have been made and the nursing home will be terminated from Medicare and Medicaid programs.

  • Extension

Some improvements have been made, with significant improvements planned.

Those facilities granted an extension must show due course diligence. Significant planned improvements would include a recent sale, whereby the nursing home facility is transitioning under new ownership. Approximately half of all nursing home facilities in the SFF Initiative program significantly improve their quality of care within the first 2.5 years. Less than 16 percent are terminated from the program.

The important aspect is that nursing home facilities that have been erstwhile unable to provide quality care due to lack of Medicare and Medicaid funding will see changes first. If you are looking to buy a nursing home, confer with your broker. It is important to see if the nursing home has been recognized as an SFF eligible facility and what requirements you will need to fulfill and how long it will take before it graduates as a safe institute. Check back frequently for more information on this, and related, subjects.

JCH Sells Bay Area Skilled Nursing Bankruptcy Assets in 363 Sale

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Shep Roylance of the Premier Housing and Senior Housing & Skilled Nursing Brokerage Firm, JCH Consulting Group announces his representation of both the Debtor and Seller in the 363 sale of A&C Healthcare Service’s two skilled nursing assets.  The successful sale consisted of 60 Bed Camden Convalescent Hospital and the 140 bed A&C Convalescent Hospital of Millbrae.

Shep Roylance was employed by the Federal Bankruptcy Court to market and sell A&C Healthcare Services’ three senior housing assets.    At the auction conducted by Alan Stomel, Javed Ellahie and Shep Roylance, three bids were made from Roylance’s pool of qualified nursing home buyers.  The highest bids were made by a two groups of investors highly experienced in the operation of skilled nursing facilities. The Camden Convalescent Hospital transaction was structured by the sale of the business and the assumption of a 15 year lease NNN lease.   The A&C Convalescent Hospital of Millbrae transaction was structured by the sale of the business and the assumption of a 5 year lease.  Landlord and Tenant are negotiating a new 20 year NNN lease for Millbrae.

In his capacity as Senior Vice President of JCH and with unparalleled knowledge of the healthcare industry, Roylance specializes in the acquisition and disposition of skilled nursing facilities and healthcare facilities across the entire spectrum of the senior housing market.  Additionally Roylance’s knowledge and experience in the intricacies of the Bankruptcy court is invaluable in the execution of transactions of facilities in Bankruptcy.  The successful close of A&C’s transaction marks Roylance’s second closing of facilities in Bankruptcy since the beginning of the year.

For more than a decade Shep’s main goal has continued to be the improvement of the quality of care of the senior population, providing world-class nursing home brokerage and assisted living brokerage service to both buyers and sellers of long term care facilities.  Although Roylance services individual owner/operators, regional and national healthcare providers, he specifically targets the representation of institutional investor’s healthcare portfolios in part or in entirety.   As a problem solver in troubled facilities in bankruptcy, Roylance contributes to the continuing growth of a stable healthcare industry.  His judicious representation of the entire spectrum of the senior housing market has earned him an outstanding nationwide reputation.