​The Investment Solutions Program, held during the 72nd American Health Care Association/National Center for Assisted Living (AHCA/NCAL) Convention & Expo, was designed to connect providers with leaders in the funding and investment world, and it exceeded expectations.

Not only did participants hear about capital solutions and financing strategies for providers plus news, insights, and forecasts from the Department of Housing and Urban Development (HUD), they were able to interact, get answers to their questions, and share their challenges, concerns, and needs.

Overall, the program painted a clear picture of current conditions and opportunities, as well as a path for the future.

Looking Ahead

AHCA/NCAL President and Chief Executive Officer (CEO) Mark Parkinson started the program out on a positive note, saying, “There is a light at the end of the tunnel. If you look at where COVID is, nursing homes have had success keeping the Delta variant out of buildings.”

Nonetheless, recovery is slow. Fred Bentley, managing director of Avalere Health, explained, “Skilled nursing facility volumes plummeted at the outset of the pandemic and never really rebounded.” However, he noted that occupancy is up, currently at about 72 to 75 percent, from the 60s. This is impressive, he said, especially since “we’re not back to normal and we’ve had to deal with Delta.”

Bentley predicted that occupancy will be up to about 80 percent by next summer, although he admitted, “That’s the best-case scenario.” At the worst, he suggested, the rebound will take until the following March.
Parkinson and Bentley identified five factors that could speed up or delay recovery: future virus surges, states’ commitment to de-institutionalizing Medicaid long term care supports and services, Medicare Advantage growth, declines in available workforce, and the impact of the “silver tsunami.”

While baby boomers may not really hit long term care facilities for several years, Parkinson said, “The demand is still there. The numbers are unmistakable.” Among specific areas of growth opportunity, Bentley said, are Institutional Special Needs Plans (I-SNPs).

“We’ve seen a steady growth in this area,” he said, adding, “We’re also seeing an increase in long term care accountable care organizations [ACOs]” and a growing trend toward risk-sharing. Home health also is attractive from a growth perspective, he said, but there are a whole range of economic challenges in this sector.

Capital Solutions

Telya Nevo-HacohenA panel on Financing Strategies for Providers of All Sizes featured Greg Stapley, chairman and CEO of CareTrust; Telya Nevo-Hacohen, chief investment officer, Sabra; Vikas Gupta, vice president, acquisitions and development, Omega; Bradley Clousing, managing director, Senior Living Investment Brokerage; and Doug Korey, executive vice president, LTC REIT.
Among the highlights of the panel discussion:

  • Senior living/long term care has been hit harder than most real estate sectors, but properties are generally selling at 2019 prices. Skilled nursing prices are steady. Private equity is paying full values, and interest rates remain at historic lows.
  • It is possible for good operators to expand without spending a lot of money. Investors/lenders are looking at the cash flow of buildings and seeking operators with some equity.
  • Operators’ experience and history with their properties is important to investors/lenders. It is not necessary to be a large company if the company has a strong, consistent track record. For new operators, investors/lenders will look at issues such as staffing, leadership, partners, and vendors. For all operators, they also will look at clinical capabilities and how the organization managed COVID-19.
  • The market is a moving target. It is possible to have an asset with different demands in different states.

The good news is that operators may still qualify for financing even if they have been or are struggling. Many lenders are willing to talk to committed, hard-working operators who are going through a tough time, particularly in light of COVID. They see providers as partners. “If you take a hit, we all take a hit,” said one panelist.

A HUD Official And a Lender Walk Into a Room

In a HUD panel, Roger Lukoff, deputy assistant secretary of the Federal Housing Administration (FHA) Office of Healthcare Programs at HUD, was joined by Chris Boesen, founder and president, Tiber Creek Associates of Capitol Hill; Tim Eberhardt, co-lead healthcare real estate finance, Capital Funding Group; and Sarah Schumann, vice president of operations, Brookside Inn and at-large AHCA board member.

“It is important to find ways we can all succeed. We’re looking for ways to help distressed providers,” Lukoff said. “We believe it’s a win-win proposition. Our program’s focus is to ensure the vulnerable population is cared for and that financial obligations are controlled.”

Addressing COVID, he said, “We wanted to make sure all of our facilities had maximum flexibility to make it through financially.”

For instance, in the first months of the pandemic, facilities were allowed to use reserves for mortgage payments. Looking ahead, Lukoff said, “HUD is emphasizing the crucial role health care plays in the marketplace and, in particular, the role of long term care.”

Valuing Provider

HUD, Lukoff said, is “really proud of the quality of providers who come into the program.” For those who are interested in HUD funding, he explained, “We factor quality assessments into our financing program. At the same time, we’re looking at how your facility plans to improve and operate in the next 10 years.”

Bradley ClousingThe panel addressed FHA’s Negative Credit Subsidy Program, noting that it brings in more premiums than it pays out in claims. The premiums, Boesen noted, support other programs within HUD.

Schulmann said that there are many requirements for providers to participate in HUD programs, but the programs may be appealing and accessible. She pointed out that AHCA has many HUD resources for providers, including a useful mortgage calculator. “It’s a one-stop shop for everything HUD and enables providers to be fully aware of what will be expected of them.”

Staffing, Staffing, and More

No discussion in long term care, including financing, is complete without addressing staffing challenges. Scott Thurman, senior managing director at Greystone, one of the program’s sponsors, told Provider, “Staffing was always a bit of a pain point, but the pandemic exacerbated that. Reimbursement will never match up with staffing requirements, and staffing shortages are limiting the growth and rebound of occupancy levels.”

While there are no easy answers, he suggested starting by “getting out there with more positive stories about provider successes, the good things happening in their facilities, and how staff contribute to quality care and good outcomes.” He also suggested looking at out-of-the-box quality-of-life benefits for staff.

For instance, he said, “Negotiate with apartment operators to give people breaks on rent. That is how you incentivize people to show up, and they don’t want to leave when you create that kind of family.”

Reimbursement presents another challenge. “We need to match reimbursement with costs,” Thurman said. “We are expected to provide concierge-level services but we’re not reimbursed for them.” He added that there also needs to be a focus on affordable housing for the “forgotten middle” market.

Speaking of HUD, Thurman said, “The department’s focus will remain on quality of care through Five-Star ratings. They will focus on asset management for the long haul.” He added that HUD has done a great job of managing risk, although they have become more risk averse. “That’s been challenging for the lending community,” he said.

It is important for all providers who expect to be in this industry for the long term to keep their finger on the pulse of financing issues. “I’m concerned about the huge demand coming for long term care. We need to address all of these issues now if we are to be prepared,” Thurman said. “I’m excited to have a presence here and talk to providers about these challenges and possible solutions.”