Luring private pay prospects

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Although Brian Nealon has a 98% occupancy rate for his 356 skilled nursing beds at Wesley Community in Saratoga Springs, NY, the chief executive is concertedly trying to increase his private pay census, which currently stands at 14%. He said he's had about a 1% up tick in the past year, but he's shooting for 20% private pay. Why is Nealon putting so much emphasis on private pay?

Not only because the Medicaid program in New York is facing severe cuts, but also because private pay beds can boost his bottom line significantly.
"We probably earn about $25,000 a year above our cost on a private pay resident," says Nealon, who was the chief financial officer at Wesley for 18 years and is number savvy. "That would be, as opposed to probably losing about $15,000 a year if we were taking a Medicaid resident in the same bed. With four private pay residents, that's $100,000 to your bottom line. That's real money."
The real money is what many nursing homes are after to cover the gap not received from Medicare and Medicaid. So they are employing various creative techniques--such as throwing fundraisers, presenting at country clubs, throwing roaring 40s dances for the outside community, and holding financial seminars--to bring in private pay residents.
Nursing homes' marketing departments need to be aggressive and creative, says Irving Stackpole, president of consulting firm Stackpole & Associates, Boston, MA, because the basic economics are against them.
"You can't change the basic laws of supply and demand and you can't change the basic economic formula for private pay, because the nursing home has a labor cost, property plant and equipment cost, food, dietary, administration overhead. Many of those costs are fixed," said Stackpole. "There are several things that can be done, but you can't change the basic laws."

Finding the market

The first step is finding the affluent seniors who can afford private pay.
"The hardest part is to identify who they are," says Chip Zimmer, general partner with the Zimmer Marketing Group, Hagerstown, MD. "Look at census, net income, home owners, zip codes. Once you identify these people, then you can begin to figure out things socially those people like to do. Have your facility sponsor activities. Get in front of them and do a presentation on your community and what it has to offer."
Country clubs are an area seniors may hang out, for example.
Wesley's Nealon set up seminars on complicated topics such as estate planning and long-term care insurance to bring in the wealthier retired community to his 36-acre campus. He says it's been successful on occasion.
The Teresian House in Albany, NY, has a cocktail party fundraiser in Saratoga Springs with a celebrity speaker on the first Thursday after the horse tracks open. Last year, Frank McCourt, the Pulitzer Prize winning author of Angela's Ashes, spoke, and the event attracted 820 people and glitzy media. The home made a $140,000 profit. The Teresian House has 99.9% occupancy for its 302 skilled nursing beds and a three- to four-month waiting list.
"Mary Lou Whitney (Grande Dame of Saratoga, horse owner, socialite) lives in Saratoga and she attends our party every year, which is a draw," says Janet Hans, the director of community affairs, who has put on this event for 14 years. "She loves the nuns."
Referral sources
Another way to take pulse of your market reach is to find out how sources -- otherwise known as referrals -- appraise your home.
"It's pivotal to know what referral sources think of you," says Stackpole.
Professional referral sources include: hospital discharge planners, home health agencies, assisted living facilities, meals on wheels, and religious leaders.
"Nobody is going to sign up Mom to live in a nice nursing home because of a nice ad," agrees Zimmer. "They'll sign up because of a relationship they develop, whatever it is. That relationship is the key."
When asked what her secret to success is, the Teresian House's Hans said, "I think it's mainly word of mouth, referrals. We're to a point where hospitals will say to an elderly resident 'Don't even apply to Teresian House, you'll never get in.'" Hans says it's a false conclusion to draw.
George McCullough, the chief financial officer of Homewood Retirement Centers, Williamsport, MD, says his centers talk with the area hospitals daily. He oversees finances of four CCRCs operating