Six weeks after going public, long-term care provider PACS Group announced Thursday it was expanding by nearly 25%, adding 53 skilled nursing and assisted living facilities in the Northwest.
The agreement covers operations in eight states, including five new ones for the Utah-based PACS. The buildings, now being operated by family-owned Prestige Care, add 2,511 skilled nursing beds and 1,334 assisted living and independent living units to the PACS portfolio. After the closing expected later this year, PACS will own or operate 271 facilities nationwide.
While CEO Jason Murray didn’t draw a direct connection between the April 11 IPO and the deal announced Thursday, he told McKnight’s Long-Term Care News that strengthening the company’s balance sheet has made leaders even more excited about acquisition opportunities.
“We’re looking forward to assimilating those facilities, and there may be others along the way, some fold-ins and tuck-ins, in states where we currently operate,” Murray said in an interview Thursday.
“We’re excited about the prospects of M&A. We like to think that we are the provider of choice in the markets where we operate, and we like to think that because we perform well clinically,” he added. “We have a strong balance sheet, and the IPO has allowed us to further strengthen that balance sheet to provide us the capacity to continue to grow.”
Founded just over 10 years ago, PACS became a major player on the skilled nursing scene in 2021, when it acquired more than 50 nursing homes from Plum Healthcare. The company continued to ramp up with a series of smaller deals, and PACS was operating just over 200 facilities when it filed to become a public company this spring.
It is now believed to be among the nation’s top three skilled nursing providers by bed size. That growth — and leaders’ belief that their model better served post-acute patients than some competitors — was one of the reasons the company pursued public status and opened its doors to investors.
“We were getting to a point, where as a company, if we really wanted to execute on our mission of improving peoples’ lives and striving to improve the healthcare systems within different markets, we needed additional capital to do that and we’d really outgrown the specialty lenders in our market,” Murray said. “As you grow and you contemplate doing larger deals and expanding influence on the sector, we really had to take a hard look at that. The public markets, we felt, were a great opportunity for us to have access to institutional capital, to continue to execute on our mission.”
Co-founders Murray and Mark Hancock, the company’s executive chairman, retained managerial control of the company even after selling more than 21 million shares for some $450 million in revenue.
“We’ve been approached over the years from private equity and other types of capital that wanted to invest in our company. We were very careful not to take the wrong capital because we didn’t want that to change the DNA of who we are,” Murray told McKnight’s. “We truly felt like we’d built a legacy company, and we wanted that to endure well beyond just ourselves and be impactful in the healthcare sector for years to come and to maintain our identity, and hopefully even to enhance our identity.”
Proceeding with local leadership model
To be sure, Murray said, PACS is moving forward with the same intense focus on local leadership and clinical results that it has staked its reputation on.
During its first-ever earnings call last week, PACS leaders noted that 158 of its facilities received 4- or 5-star quality measure ratings from the Centers for Medicare & Medicaid Services.
Many of the others, including some operations in the Prestige deal, are acquired with lower ratings with the intent that PACS will pour leaders an resources into the facility and drive clinical improvement.
At any one time, the company has 30 to 40 administrators in training, and they agree to travel as needed to their first administrative assignment — possibly as far as a Prestige nursing home in Anchorage, AK, when that deal be finalized.
Those local leaders are the ones responsible for determining clinical programming and initiatives, developing relationships with payers and hospital partners and responding as needed to regulatory demands.
In new facilities, especially those below census, they try to shift the culture to make it more attractive for local clinical and frontline staff to stay — and to bring on more of their peers.
“We don’t have an army of clinicians to parachute in,” Murray said. “So we lean heavily on the staff that’s already in the facility but where we feel like we do get a lot of traction is at that administrator and director of nursing levels.”
Their job is to start a “virtuous” cycle that attracts more patients, allows the facility to staff for higher census, then attracts patients whose care is more highly reimbursed, and, finally, to reinvest in the facility and its programs.
PACS reported first quarter occupancy of 91.1%, exceeding the national average. It grew by 1.8% in “ramping” or new facilities, and 1.4% in mature facilities over the prior year quarter, the company said.
Staffing strategies
Building clinical capacity and adopting programming that attracts licensed nurses is another key to PACS growth model.
Murray said the “majority” of PACS skilled nursing facilities already exceed the 3.48 hourly daily requirement that underpins the Centers for Medicare & Medicaid Services’ new staffing rule. Pressed, however, he declined to give a specific percentage, noting that buildings can fluctuate day-to-day.
He said PACS has always worked to understand specific acuity and needs of its patients, and that an updated facility assessment requirement that kicks in this summer should not be a challenge for his building leaders to meet.
The 24/7 RN coverage requirement, however, is concerning to Murray — especially without a reimbursement incentive or any real place to draw new RNs from, given a national shortage.
PACS has more than 100 buildings in California and has been able to meet that state’s staffing minimums and its wage requirements, thanks to fairly generous, if nuanced, Medicaid rates, Murray said.
“We are always in favor of improving care across our sector and our federal government has made the assumption that more staff will equal better care and better outcomes, and I don’t know if we necessarily share that same belief,” he said. “We’re constantly working on improving our clinical processes and we’re constantly measuring our clinical outcomes as well, and it requires the right type of staff.”
Murray said the company is prepared to meet all aspects of the minimum requirements by making key changes should the mandate be allowed to roll out fully. But he sees the battle for RNs driving more facilities out of business if they can’t comply or get an exemption and they are routinely penalized.
“It’s extremely challenging,” he said. “I don’t think it’s improving the post-acute care sector within our healthcare continuum. We are in favor of improving care in our sector, but it needs to be in a well thought out, reasonable way out where there’s an appropriate amount of workforce resource.”
