PACS Group has been turning a lot of heads in the skilled care space lately. Few players have grown so quickly.
Founded in 2013, The Utah-based operator now manages more than 200 post-acute facilities. Of these, most (109) are located in California. But the company also has a presence in eight other states: Arizona, Colorado, Kentucky, Missouri, Nevada, Ohio, South Carolina and Texas. In all, PACS Group serves more than 20,000 patients each day.
Last week, the firm filed paperwork to become a public company. It’s no secret why: A huge cash infusion will ensure the needed capital for continued growth.
PACS Group appears to be more than ready for that to happen, a recent prospectus suggests.
“We believe our market density in key regions offers strategic advantages, such as brand recognition with referring providers, including hospitals and health systems, and consistency and continuity of referrals of patients. For example, our ability to accommodate a high volume of patients within our markets allows us to accept referrals without turning patients away to competitors, and can also further our reputation as a reliable, go-to provider of care for referring providers,” the document said. “We also believe our size and scale has provided us with the ability to negotiate favorable contracts with managed care and other payor sources, [and] the ability to navigate stringent regulatory compliance.”
Clearly, they feel more than up to the challenges of massive growth ahead. And perhaps they are. But even for a well-positioned firm, the fickle finger of fate can make a mockery of a long-term care provider’s best laid plans.
Our gentle readers of a certain age may recall there was once an even larger publicly-traded behemoth called Beverly Enterprises Inc. In its peak, Beverly had more than 1,350 facilities in its portfolio.
For a time, Beverly proved bigger could be better. Over five years during the 1980s, the company’s return on equity was 23% or higher. Not bad.
But over time, Beverly increasingly struggled to effectively manage such a huge network of facilities. Numerous reports of filthy living conditions, poor care and neglect increasingly hounded the firm. The state of Washington banned the company from opening any new homes. Other states also took punitive action, citing poor care.
In 1987, Beverly lost $60 million and began selling off facilities in an attempt to avoid a hostile takeover.
Hopelessly in debt, Beverly continued a downward spiral. Then Medicare funding was reduced. That’s not the whole story. But it’s enough.
Does Beverly’s tale of woe mean that PACS Group will be consigned to a similar fate? Hardly.
But if I were to offer its top leaders some unsolicited advice, it would be this: Proceed with caution.
John O’Connor is editorial director for McKnight’s. Opinions expressed in McKnight’s Long-Term Care News columns are not necessarily those of McKnight’s.
