Doing well, doing good

BOSTON – There's a quiet, shady garden patio outside Presentation Rehabilitation and Skilled Care Center, a nursing home tucked into a hilly section of the Brighton neighborhood.

Try to find an errant weed amid the flower beds and blades of grass. It's not easy.

The management and staff at Presentation like to talk about details, whether it's the landscaping, the number of empty beds or a preference for permanent staff over contractors. That's because owner Ascentria Care Alliance of Worcester and manager Sheehan Health Group of Southboro believe that controlling details makes it possible to run a financially viable nursing home at a time when some facilities are struggling.

It also explains why nonprofit Ascentria, which once considered getting out of the nursing home business altogether, has instead doubled down and acquired three facilities at a cost of nearly $75 million over the past five years. The deals bring Ascentria's nursing home roster to four facilities, including one in Connecticut.

The organization, which has a long history of offering elder care services, found a partner -- in this case, Sheehan Health Managing Partner Patrick Sheehan -- who could run the businesses better than Ascentria could, according to Ascentria President and Chief Executive Angela Bovill.

"For us, it was either we come up with a new business model, or we get out," Ms. Bovill said. "And what we noticed was his business model was better than ours, and it worked."

Formerly known as Lutheran Social Services of New England, Ascentria is a human services agency with operations in every New England state except Rhode Island. Its programs range from adoption services to refugee assistance to the Good News Garage, which places donated cars with needy families.

In the fiscal year that ended in June 2018, Ascentria posted $85 million in revenue and lost about $292,470. Annual revenue was expected to exceed $100 million in the 2019 fiscal year. The organization employs about 1,800 workers.

Nursing homes had historically been part of the agency's work. Yet in 2012, Ascentria sold its Lutheran Home of Worcester to Sheehan Health at a loss, according to audited statements, and considered divesting its 120-bed Connecticut facility, the Lutheran Home of Southbury.

The Worcester facility, in particular, was a challenge. Renovations at the aging 101-bed facility had been planned since 2003, but expenses ballooned from an initial $4.1 million to $9.6 million in 2010, according filings with the state public health department.

Ascentria's problem was that it wasn't as sophisticated as it needed to be on the business side of nursing homes, said David P. Forsberg, the former Worcester Business Development Corp. president who ran Lutheran Social Services of New England on an interim basis in 2012. He remains involved with Ascentria.

"We're faith-based, so we gravitate to some things that aren't always profitable but are very well-needed," Mr. Forsberg said. "But at the end of the day, you need a margin."

A critical part of attaining profits is something called the payment mix.

Nursing homes typically collect payment from Medicaid, Medicare and private insurers or families. Medicaid, the state-federal program for the poor, covers people who have run out of resources, but nursing homes consider Medcaid's reimbursements in Massachusetts too low to cover the actual costs of caring for people. The rates are pegged to 2007 cost estimates.

Medicare generally covers seniors for short stays in nursing facilities, perhaps to regain strength after an illness or operation. Private payers typically pay the highest rates.

The Massachusetts Senior Care Association, a trade group, calculates that Medicaid represents 69% of payment revenue for Massachusetts nursing homes. Medicare represents 13%, private payment brings in another 13%. About 5% of payment revenue comes from other sources.

A facility loses about $38 a day per Medicaid resident, according to the MSCA, and Massachusetts nursing homes are losing $362 million a year. Many operate at a loss.

In short, if too many residents in a nursing home are paying by way of Medicaid, a nursing home can struggle financially.

"There's no viable business model when the majority of your patients are Medicaid. There just is not," Ms. Bovill said. "And the only way that works is if you have a reasonable mix of private pay, Medicaid, Medicare and insurance."

Nursing homes also must maintain high occupancy rates to bring in the maximum amount of revenue, and to stay full, they need to be appealing, all of which requires investment.

After Sheehan Health took over the Lutheran Home of Worcester, it changed the facility's name to the Lutheran Rehabilitation and Skilled Care Center. It also sought to increase renovation spending to $12 million and added beds, according to a state public health filing. It reported occupancy rates of 94% to 97%.

Ascentria, meanwhile, noticed the changes at the Worcester nursing home and asked Patrick Sheehan if he could help the nonprofit with its Connecticut nursing home. He did, under an agreement for 5% of revenue and a share of profits, according Ascentria audited reports.

Since 2015, Ascentria has purchased other Sheehan Health nursing homes, starting with a $26.1 million investment in the 147-bed Quaboag Rehabilitation & Skilled Care Center in West Brookfield. In 2017, Ascentria bought 120-bed Laurel Ridge Rehabilitation and Skilled Care Center in Boston's Jamaica Plain neighborhood for $24.5 million. In 2018, it bought 122-bed Presentation for $24 million.

All were financed with tax-exempt bonds issued by the Massachusetts Development Finance Agency, or MassDevelopment. All are managed by Sheehan Health Group.

All have five-star ratings from Medicare for overall quality, the highest ranking Medicare gives to measure compliance with regulations.

Ascentria paid Sheehan Health management fees of $2.2 million and rent of nearly $377,000 in fiscal 2018, according to Ascentria's most recent audited statements.

Ascentria does not break out individual nursing home results in its audited statements, but Ms. Bovill said all four facilities are profitable. And full. Ascentria nursing homes are always 96% to 97% occupied, she said.

On a warm summer day, Mr. Sheehan and Ms. Bovill are guiding a group of visiting nursing home executives from Wisconsin through the Presentation facility. It's a property that has undergone extensive renovations in recent years. Records filed with the state show Presentation planned about $14 million in improvements as of 2017.

Stephanie Chedid, president and chief executive of Luther Manor in Wauwatosa, which lies outside Milwaukee, said the group wanted to know if they could replicate what Ascentria is doing to expand, even as other nursing homes in Wisconsin consider downsizing.

"There's something magical here," Ms. Chedid said. "It's hard work and attention to detail and managing the care with diligence."

Magical might be a word Mr. Sheehan and Ms. Bovill would downplay. Both said payments to nursing homes for care are too low. Results depend on managing small details, according to Mr. Sheehan, who visits the nursing homes he manages daily.

"This business -- if you think you're going to do it and it isn't going to own you -- you're making a mistake," Mr. Sheehan said.

Ms. Bovill stressed that managing the payment mix and keeping facilities full is crucial.

"I don't want to get over-assured," Ms. Bovill said. "You have to pay attention. I know we're two or three or five decisions away, or two or three or five policies away at the state level, from that (profit margin) turning into zero or negative."

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