Monthly Archives: March 2019

March 18, 2019
Jeff Binder

Are You Ready for PDPM?

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SLIB Holds Summit on PDPM

At our (SLIB) recent team summit in Chicago we held a break-out session on PDPM which was moderated by Sterling Short, the Executive Vice President of Sante, a provider of various healthcare options including transitional rehabilitation centers, hospice and home health. A noted expert on Medicare reimbursement, whose knowledge was developed as a partner with the valuation firm Tellatin & Short (since merged with IRR), Sterling provided his insight into the transition to PDPM. To supplement Sterling’s presentation we also utilized various other sources, such as guidance provided by the Centers for Medicare and Medicaid Services (“CMS”). It is also important to note that I am far from an expert on PDPM but am intrigued by the disruption it will cause in the sector and interested in the feedback we are receiving from operators as they prepare. Some of the key takeaways:

  • Coding accuracy can determine success or failure in PDPM. Particular focus will be required to ensure diagnosis coding is accurate (ICD-10). Additionally, operators will need to ensure accuracy of MDS by capturing clinical conditions precisely. It will also be important to improve clinical documentation with timely identification of conditions, skilled documentation, and continuing education of the care team.
  • Since certified nursing assistants (“CNAs”) are typically on the “front lines” of appropriately documenting care it is vitally important to have CNAs/nursing staff who are knowledgeable of the coding process and are collaborative with other members of the care team. Operator’s will need to come to the realization that sufficiently paying nursing staff with strong coding capabilities is more important, and cost effective, than constantly paying lower wages and battling turnover. In most cases the cost of lost reimbursement supersedes the incremental savings in staffing.
  • CMS has stated that facilities that dramatically reduce the use of therapies after implementation will be at greater risk of audits.
  • The rehab business model will change substantially – PDPM eliminates therapy minutes as the driver of reimbursement. As providers renew contracts with their therapy providers it is important to realize how the therapy provided impacts their bottom line. In addition, it is recommended that providers have the ability to cancel with appropriate notice and also have flexibility on the pricing model. It will be important to have the ability to re-assess and adapt to PDPM.

While the exact impact of PDPM is difficult to estimate, what is known is that those who are taking the steps to prepare for the transition will most likely put themselves in a more formidable position to succeed. If you are considering a sale of your skilled nursing facility or seniors housing community our confidential, non-binding evaluation can be an important tool in your decision making process. If interested, please contact Managing Director Jeff Binder at 314-961-0070, or binder@slibinc.com.

March 18, 2019
Jason Punzel

Who are the most active buyers in the Senior Housing Market

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Who are the most active buyers in the Senior Housing Market – by Jason Punzel

Many sellers want to know who are the most active buyers in the Senior Housing Market.  While it is great to get a high-price offer, if the buyer doesn’t have the ability to close, it doesn’t matter how good the offer is.

There are four main types of buyers:

  1. Real Estate Investment Trusts (REITs) – REITs are publicly or privately traded real estate companies that typically have ample cash available to acquire properties. Most of the time REITs buy a community and at closing, sign a long term NNN lease with a local or regional operator to operate the community.  REITs typically buy with cash.  In the past 24 months, most REITs have been net sellers due to lower stock prices.
  2. Private Equity Companies –  PE companies range in size from multi-billion dollar companies to much smaller companies. Private Equity companies typically buy properties and use a management company to operate them.   Private Equity companies typically buy with cash or with a large line of credit and don’t require financing.  In the past 24 months Private Equity companies have been some of the most active buyers in the marketplace.
  3. Local and Regional Operators – Local and Regional operators may own/lease 5-50+ communities. They may use a REIT or Private Equity company as a partner or may buy a community on their own.  If they are buying a community on their own, they typically use bank debt and raise equity internally with high net worth individuals, and through friends and family.
  4. “Mom and Pop” Operators – Typically they own from 0-5 properties. Most REITs and Private Equity companies will not partner with Mom and Pop operators because they have too few assets and the communities they operate are often not large enough.  They typically buy with personal equity or friends and family’s equity, and bank debt.

As a seller, it is important to understand what type of buyer is making an offer to buy your community and how they plan to finance the purchase.  Far too many buyers try to put communities under contract to buy, and THEN try to find the equity and debt.   This often leads to delays in closing, cancelling the offer to purchase, or re-trading at a lower price.

Conclusion:

At Senior Living Investment Brokerage, Inc. we have relationships with over 1,000 different types of buyers.  We can help you understand what type of buyer is making an offer, their track record in closing deals and how they plan to finance it.

For more information on selling your community, contact Jason Punzel at 630-858-2501 x 233 or punzel@slibinc.com.