Mainstreet retools, says old strategy ‘broke down’
For more than a decade,
His company, Mainstreet, which he founded in
But in the past year, Mainstreet has been reeling from an unexpected slowdown in sales for its properties-a reflection, at least in part, on rising vacancies in nursing facilities and a trend toward home-based care. Meanwhile, a moratorium on building nursing homes in
In response, Turner has been quietly cutting dozens of jobs in
The company has spent more than
But as it makes the transition, Mainstreet has watched revenue fall and employees depart.
The setback is a blow for Turner, 40, who built one of the fastest-growing companies in
"No question, 2017 was a tough year for us," he said.
The downturn is humbling for a company accustomed to turbo-charged growth. From 2011 to 2013, Mainstreet's revenue grew 480 percent, to
In 2014, revenue hit
By 2015, Mainstreet's headquarters was packed with workers. The company pulled down top honors in 2016 from the
The picture is much different now. Several former employees say head count at the
"I don't think it's relevant," he said.
In recent weeks, the company handed out its latest round of pink slips, many of them in
Righting the ship
The downturn raises questions about whether Turner can turn things around during a tough time in the industry- and how much of the company will remain in
Nationally, occupancy in skilled-nursing facilities reached a new low in the third quarter of 2017, at 81.6 percent, according to the
An analysis released last month by
"There's all sorts of pressure to innovate and do something new," Gordon said. "Maybe these guys [at Mainstreet] have found an answer. If so, kudos to them."
To meet the changing landscape, Turner is overhauling the company's central mission. For years, the company's business model was to build nursing homes and lease them to outside management companies, then act as landlord and collect the rent. Mainstreet would sell the properties a few years later for sizable profits, plowing the proceeds back into new developments.
It was a model that required a relatively modest workforce and lots of outside partners.
Now, Mainstreet is itself staffing and operating the "rapid recovery centers" it has started building, instead of leasing out those functions. That move is a big bet because each facility is manned by dozens of nurses, therapists, coaches and support staff, requiring a large payroll.
As a result, company employment has actually doubled in the past year, Turner said, from about 130 last April to "just shy of 300."
To help finance the growth, the company raised
The moratorium
So while Mainstreet's head count is shrinking in
He puts much of the blame on the Legislature's moratorium on new licenses for nursing homes and transitional-care facilities. The nursing home industry said
Mainstreet and its affiliated entities had nine nursing home projects across the state in various planning stages when the moratorium took effect. Mainstreet had executed land-purchase agreements for sites in
Along the way, the Legislature's actions caught Turner's father in an ethics scandal.
After the disclosure, Turner was removed from his House leadership position in
After the moratorium bill passed, Mainstreet sued the state in 2016, trying to get the law declared unconstitutional. A trial court dismissed Mainstreet's complaint, and last month, an
Now, Turner said he is looking elsewhere to grow his company and is winding down much of its presence here.
"There's not a compelling reason for us to have a full staff in
Turner doesn't even refer to
Meanwhile, to help administer the expanding
"The core of our company is shifting," Turner said.
'It was a good model'
When Turner founded Mainstreet 16 years ago, he saw it mainly as a buyer of health care real estate. Then, in 2007, he set up the building division, which has built about 50 projects.
To help provide a source of funding, Turner in 2012 launched HealthLease Properties REIT, a public real estate investment trust that traded on the
"It was a good model," Turner said.
In
A year later, Turner engineered a similar REIT deal, buying a Canadian longterm-care company,
Turner set up the REIT in the same building as Mainstreet,
But before long, the new REIT began to go its own way. It announced in
"The entire senior management team will become employees of the company," the REIT announced. It also said it planned to buy seven senior-care and health properties worth
The parting
Over the next 18 months, the REIT's newly independent management showed relatively little interest in Mainstreet properties. To date, it has bought fewer than 10, representing a small fraction of its portfolio of 103 properties.
In
Two months later, the REIT changed its name to
"Today, we have zero relationship with Mainstreet," said
The parting seems to suggest a fallingout between the companies, but Turner said he stepped away from the REIT to focus his time and effort on Mainstreet.
"I do not have insight to
Even so, the split threw cold water on Turner's plans.
"In early 2017, our model broke down," he admitted. "
That forced Mainstreet to start from scratch in selling its properties, rather than having a steady buyer down the hall. Selling the properties one or two at a time was no easy task, with each carrying a price tag of
"Those don't sell overnight," Turner said.
Of the more than 50 properties Mainstreet has built since its founding, it has found buyers for 42. The company has nine properties up for sale.
New direction
Turner said his team began working on its new focus-rapid-recovery centers- in 2014. The concept fills the bridge between hospital and home, he said, with a hotel-like setting that provides full-time skilled-nursing care without the high price of an inpatient room, and with less Orisk of a relapse.
The need for such a bridge comes from insurers' pressure on hospitals to release patients sooner than in the past, he said.
The Mainstreet centers feature large patient rooms with contemporary decor, an on-site chef, a coffee-shop-style cafe, social gathering spaces and entertainment. The average length of stay would be 10 to 14 days.
"Many patients no longer feel like they're stuck in a hospital, anxious to be discharged, because at RRC they're able to enjoy many of the same experiences they would have during a hotel stay," Mainstreet said in a promotional flier.
It took Mainstreet three years to develop the concept, raise money and break ground. The first opened last year in
Average cost ranges from
It remains unclear whether the concept will catch on. A few years ago, as Turner was rolling out his concept, some industry experts took a decidedly skeptical view.
"I don't know what they're smoking, but maybe they know something I don't know,"
Now, four years later, Mor is still not convinced the idea can work. He said rapid-recovery centers are today's version of what the industry tried a decade or two ago without success, under a different name.
"These were 'continuing care centers' where patients could co-habit with the spouses while waiting for or recovering from surgery," Mor said. "Many of these places on the campus of hospital systems were converted into ambulatory care offices or ambulatory surgery, which was far more profitable as same-day surgery expanded. To my knowledge, no one is doing this for post-acute-care rehab and recovery since payment models are quite limited."
Fierce competition
"It sounds like Mainstreet is marketing themselves like a boutique hotel setting," said Perez, an assistant professor at
Some observers say the rapid-recovery centers might catch on if Mainstreet can get insurers to see that the centers could save money, compared with high-cost hospital stays.
Medicare has been paying for postacute rehabilitation care for decades. But the
Nursing homes and skilled-nursing facilities are competing fiercely for those patients.
"Succeeding in the changing Medicare environment is something that all providers are working on, as utilization is not growing as some expected," said
But even as it rushes into this area, Mainstreet already has stumbled. Last fall, the company announced it would open four rapid-recovery centers in
Mainstreet hired scores of workers in
But last month, Turner stunned employees with the news that the company was aborting the
Turner blamed higher-than-expected startup costs and a "challenging reimbursement environment." He said he regretted the pain to workers, but in the end, didn't have enough money to develop and staff
"I think we're trying to be very cautious about where we're spending dollars and making sure we have the money in the right place," he said.
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