By Steve Moran
In spite of the title, this is a positive article.
Three Kinds of Operators
There appear to be three broad categories of operators:
- The New Turks -- Senior Housing Forum’s partner Mainstreet is the most prominent of this group of owner/operators. They are in a smart or lucky position of starting with a clean sheet of paper. They are in the perfect position to take full advantage of the emerging outcome-based payment system. They have the ability to focus on high revenue, short-term rehab residents (old and young).
They also have the huge advantage of not having a bunch of Medicaid beds that produce little net revenue (or in some cases a negative return).
I will confess to worrying a bit about this group of providers. They are generating really healthy returns from government payments and -- as they grow in number of residents served -- it would seem to me that they are prime candidates for a payment haircut.
- The Ostriches -- I honestly don’t see these people very much. They go to conferences to collect their CE hours and hope things won’t get worse. They complain about the cost of everything, reimbursement levels are never enough.
- The Disruption Opportunists -- These are my favorite people to chat with. They look at the changing payment system and have real concerns about what it will mean to their Medicaid business. They wonder what the new transitional care communities will mean to their rehab business. Yet, rather than just crossing their fingers and hoping for the best, they are being extremely proactive.
They are figuring out how to buttress their rehabilitation business, adding vertically integrated business lines, creating relationships with healthcare systems and a bunch of other things.
There continues to be a lot of discussion about how many nursing home beds we really need. But we know today we have too many beds in almost every market. I believe the demand is never going to be there. I think it will get worse for two reasons. The first is that the changing payment system will punish severely terrible operators.
The second reason is that we Boomers are not going to want anything to do with keeping our physical bodies pumping when quality of life is gone. Today, a big number of those nursing home beds are occupied by folks who have tubes pumping nourishment in and and taking waste out, but in reality no one is at home. Mostly this will become not acceptable.
4 Big Wins
There will be four wins from this shift:
- Residents will come much closer to having the perfect quality of life. They will end up in the right community setting for the right amount of time.
- The government -- which is ultimately us -- will save boatloads of money.
- Operators that are crummy will go out of business.
- Great operators will not just survive, but will thrive with higher occupancies, higher and higher revenue.
What is happening in the nursing home industry is good for us and good for society. It represents great opportunities for those who love riding the disruption wave.