While skilled nursing construction in many parts of the country has been stagnant over the last few years, one Arkansas operator has found a development strategy that attracts both lenders and residents.
Not only did census increase at Southern Administrative Services’ Green House communities during the pandemic; managing member John Ponthie carried on with a multi-year building plan that will bring two more cottages online in the weeks ahead.
Small-house living and private room concepts were bolstered by COVID-era research that showed they reduced the risk of infection and deaths. In February, the chorus calling for better support for operators in pursuit of infrastructure changes and alternative models of care grew again.
First, Harvard Medical School’s David Grabowski, Ph.D., well-known long-term care expert, and research colleague Brian McGarry, Ph.D., assistant professor of medicine at the University of Rochester, included alternative models of care in a list of 10 key strategies that could transform the skilled nursing sector.
“It is now clear that the congregate, hospital-like approach to caring for disabled older adults is not only inconsistent with residents’ preferences, it also may directly contribute to the spread of deadly infections and diseases,” Grabowski and McGarry wrote in a special issue of the Annals of the American Academy of Political and Social Science. “Nursing homes need new models. … Policy-makers should encourage the development of more small home, resident-centered models.”
That was followed a few days later by the announcement of the Biden administration’s new vision for nursing homes, which includes a focus on transitioning away from shared units toward private rooms.
For those who already work in the space, the idea that policy could soon begin to encourage alternative nursing home models was embraced as a “thrilling” development. The Green House Project is encouraging the administration to make private rooms a requirement of participation in Medicare and Medicaid, removing any financial incentive to maintain them.
But others have long said such alternatives work much better in theory than on the ground, citing obstacles such as low operating margins, construction and financing costs and regulatory roadblocks.
Susan Ryan, Green House Project’s senior director, pushes back against the idea that small homes aren’t financially viable. She points to operators like Ponthie who save money using smart design and less-opulent but still home-like settings. Still, she and other Green House devotees say a key piece of advancing alternative models will be cost-offsets.
“If there’s different financing and reimbursement that allows providers to invest in their homes and encourages them to do so, then I think you would see more providers start to gravitate toward Green House,” said Adam Berman, president and CEO of Massachusetts-based Legacy Lifecare. “I think that’s the No. 1 thing that needs to be solved for.”
Voting with their feet
While Green House is not the only small-house nursing home model in the U.S., its trademarked model makes it the easiest to track. The Green House Project says its homes are now in 32 states, with 83 organizations operating campuses that include 371 individual small homes.
They feature cottages of 10 to 12 residents who have private suites, share decentralized kitchens and common areas, and are cared for by CNAs trained as universal workers using a person-directed care approach.
Small house living started in rural areas, where developers could acquire, relatively inexpensively, existing nursing homes or acreage required to support multiple buildings. In many ways, it remains the province of rural and non-profit operators.
For-profit Southern Administrative operates five Green House campuses in Arkansas, along with about two dozen traditional facilities. A sixth Green House is scheduled to open in the next two weeks, with a seventh slated for Bentonville, AR.
“Since I’ve found Green House, I’ve done exclusively Green House. It’s the right, best model,” Ponthie said. “I can’t build it fast enough.”
Peers questioned his plans to put his second Green House campus in Rison, AR, population 1,350, a rural area with little wealth and few Medicare-backed rehab admissions. During COVID, demand pushed Southern Administrative Services to add a seventh cottage to that campus.
“People vote with their feet,” Ponthie said, adding that traditional rural providers are facing unprecedented closures. “During COVID, we grew our census. Everyone else had huge declines. Drop the mic. We’re done. The demand is there.”
Keeping beds full, and providing a workplace that discourages staff turnover, are key to the Green House model, both operationally and financially. The Green House Project reports a 29% turnover rate for CNAs, compared to the 129% found in a national Health Affairs study.
Reducing turnover — and limiting the need for ancillary staff such as housekeeping and dining services — is one of the ways Ponthie says he keeps his daily costs in check.
“The cost differential operationally between my Green House and my traditional homes is not much, less than 10%, maybe 5 to 8,” he said. “What you get for that is exponentially greater.”
One internal Green House study found costs of care could actually be lower, with Green Houses spending an average $261 per patient per day compared to the national average of $271 at traditional facilities.
Financing hurdles remain
Because he had a track record in the industry, Ponthie was able to secure private financing for each of his Green House projects. But he said some have struggled to get low-interest loans through HUD, making financing a major obstacle.
He recommended the federal government establish a lending program for construction of alternative models, provide incentive grants or pay higher differentials for private-bed care. Or the federal government could use civil monetary penalties and redistribute them to providers using alternative models.
“They’ve got untold ways they could do it,” Ponthie said.
Another option on the table: a $1.3 billion pilot program included in the stalled Nursing Home Accountability and Improvement Act. It would provide up to $39 million per facility to implement person-centered design features and workforce strategies.
Grabowski and McGarry said states also should get in the game, arguing that higher Medicaid payments would “encourage greater competition between facilities for new long-stay residents, leading to greater investments in private rooms, a more home-like setting, and high-quality staff.”
Finding ways to flourish
Ryan said operators should be mindful of creating a property that can attract a wide payer mix. Some have found success in designating certain cottages for rehab, memory care or even patients requiring ventilators.
For now, many nonprofit organizations offset their development costs by fundraising to cover large portions of the construction cost or using municipal bonds. Legacy raised most of its own capital when constructing its original Green House, the first in an urban setting, in 2010.
They faced another factor that has dampened interest in alternative models: certificate of need laws or nursing home moratoriums. To build, operators in many states need to acquire a license by buying an existing facility — adding millions of dollars — before renovations to private rooms even begin.
Legacy worked with legislators who were intrigued by the Green House concept; a bill later passed, clearing the way for a 10-story, 100-resident building in Chelsea, MA. The organization continues to bring elements of the Green House approach to its other five campuses, converting to private beds where possible.
Ryan hopes all the current attention will encourage others to take the first steps, anticipating that more support could be close on the horizon.
“If government will step up and say, ‘Yes, we can, and here are some of the incentives we’re going to provide,’ and the providers will step up and say ‘Our good enough wasn’t good enough’ … I think we can make achievable change and really make a lasting impact,” she said.