Long term care providers know times have changed. They know that boomers, even more so than their parents, will demand health care environments that look and feel like real homes, from private bedrooms to full control of their daily routines.

 

So, why do most nursing homes still look like they did 20 or 30 years ago? Why aren’t providers building what they know consumers want?

As it turns out, the buck is stopping at the bank. It can be difficult for providers to find low-cost, flexible financing sources, and that alone is a major reason why even the most forward-looking providers have not pursued major new construction.

 

Even when providers have some of their own seed capital and can get additional financing from their local bank, they often lack the bridge financing necessary to complete a project.

 

Obtaining flexible financing is a major barrier to progress.

 

In 2011, the Robert Wood Johnson Foundation (RWJF), the nation’s leading health foundation, made a $10 million Program-Related Investment (PRI) in NCB Capital Impact and The Green House Project to make it easier for more providers to obtain flexible financing and build Green House homes.

 

In making this investment, the foundation saw a unique potential for The Green House model to address the nation’s growing shortage of affordable, high-quality long term care options for low-income elders.

 

For that reason, the foundation’s investment focuses on financing homes that will serve a population that is 40 percent Medicaid, at a minimum. RWJF has focused on The Green House model because of its track record for delivering high-quality care at roughly the same cost as a traditional nursing home. The foundation’s investment creates a pool of low-cost capital meant to fill an important void: the need for both subordinate debt and flexibly structured gap financing at below-market rates.

 

RWJF and NCB Capital Impact also made sure that this new financing is flexible enough to help providers that want to take advantage of the New Markets Tax Credit.

 

Because NCB Capital Impact is enlisting additional investors—like the Harry and Jeanette Weinberg Foundation and AARP Foundation—to leverage RWJF funding in any individual project by a ratio of four to one, the total financing opportunity is actually substantially larger than the foundation’s initial investment.

 

Later this year, the first-ever Green House homes to use financing from the RWJF PRI will open in Mankato, Minn.

 

They will also be the first Green House homes in that state, bringing the total number of states with Green House projects to 33. And even in states where Green House homes exist, untapped markets remain, full of consumers eager for the unique kind of nursing care the model offers.

RWJF’s bold investment is backed by consumer demand. In fact, the foundation surveyed 1,000 informal caregivers of all incomes to understand their long term care challenges better. When asked about their greatest fears for loved ones needing long term care, loss of dignity and loss of independence ranked highest on the list of concerns.

 

When they learned about The Green House model and its central features—small size, private bedrooms and bathrooms, and the independence that elders retain—they were wildly enthusiastic.

 

More than half of caregivers said they would pay more and drive further for a Green House option. Those with loved ones already under in-home care said they liked the Green House option “a lot better.” Nearly everyone wanted to see their local providers build more Green House homes.

 

The Green House model comes with impressive clinical data that sets it apart in a crowded marketplace.

 

According to a study published in 2007 in the Journal of the American Geriatrics Society, Green House caregivers have less turnover and more consistent assignments, leading to deeper relationships and better health outcomes for elders. Early research by Susan Horn and David Grabowski suggests that hospitalization rates for long-stay Green House residents are, on average, 7 percent lower than for traditional nursing home residents. The empowered, self-managed work teams in the homes are an important factor in preventing avoidable rehospitalizations as they can identify subtle changes in elders.

 

Today, most nursing homes are still struggling with a 20 percent rehospitalization rate with their short-term-stay residents. The Leonard Florence Center for Living in Chelsea, Mass., with its three busy short-term rehabilitation Green House homes, has a rehospitalization rate under 10 percent. They are learning that the small size and personalized experience of the Green House model contributes to better outcomes. Private rooms and bathrooms contribute to less chance of getting an infection, plus better sleep. And the home-cooked meals lead to better appetites and more energy for therapy.

 

The new financing opportunities available for Green House projects help to minimize the barrier of the upfront investment. The Green House Project also offers extensive technical assistance and can help providers identify other financing sources.

 

Because the RWJF and NCB Capital Impact loan pool needs to be entirely distributed by 2014, interested providers should begin exploring the option as soon as possible. To find out more about tapping into RWJF and NCB Capital Impact financing for Green House projects, contact Maura Porcelli at (703) 647-2311 or mporcelli@ncbcapitalimpact.org.