Construction of retirement homes, overdue transactions on backlogs

The future of skilled nursing facility construction and transactions is tied to state licensing procedures such as Certificate of Need (CON) approvals, with some operators on hold due to the backlog demands during the first months of the pandemic.

A backup of the apps, which are needed in several states to build a healthcare building or transfer ownership, has caused “a lot of anxiety” among skilled nursing traders trying to close a deal, the said. lawyer Paul Mourning at Skilled Nursing News.

Mourning is a partner at the Crowell & Moring New York law firm and co-chair of the firm’s healthcare group.

“Since March 2020, the [Public Health and Health Planning Council, PHHPC] did not review any applications, no CON applications for qualified nursing facilities [in New York]Deuil said.

Deuil said he hasn’t had the same problems entering into transactions in states that don’t require a certificate of need.

According to the National Conference of State Legislatures (NCSL) and the National Academy for State Health Policy (NASHP), New York is one of 35 states that still require a CON. Approvals from the New York State Department of Health (DOH) and the Board of Public Health and Health Planning (PHHPC) are required to sign a CON, Mourning said.

Mourning has finally started to see “light at the end of the tunnel” however, with a movement from the health ministry on certificate requests recently indicated by applicants receiving questions from the state entity.

Mourning added a caveat to its cautious optimism: A backlog on a process that typically takes six to 12 months in a single state will likely be even longer even if applications are finally reviewed.

“I know there has not been any request for CON on the Public Health and Health Planning Council’s agenda, but we are seeing some movement,” Deuil noted. “While hoping that the process will prepare again, there is also a concern that they have a backlog in the pipeline.”

Origin of CON laws and state variations

The Certificate of Need (CON) program rolled out in the 1970s, according to Jason Lundy, a shareholder in Kansas City, Missouri-based law firm Polsinelli, as a way to control over-building of healthcare facilities, which would in turn drive up the price of healthcare as providers pass on construction costs to patients.

Lundy focuses on long-term care regulatory environments at the company’s Chicago, Illinois office.

“All states are different – Illinois is currently very, very slow… the whole CON process has stopped,” Lundy said, adding that requests are processed on a first come, first served basis and reviewed on an individual basis. .

By comparison, Florida, another CON state, is doing a comparative review of applications. Local CON agencies will bid for the construction of a nursing home in a given geographic area, and any interested architectural firms, operators or owners can submit their CON applications which are then reviewed in batches.

“[CON Boards are] controlling the number of new buildings and expansions, it can brake when it thinks there has been overbuilding of facilities, or it can grant permits when it sees a forecast of need, ”Lundy said. “A somewhat cynical view is that this is a kind of granting of monopoly power to existing suppliers, and any newcomer to the region or any competitor of an existing supplier has to take extra steps to get approval to operate. government agency to enter the market.

Echoing Mourning’s experience in New York City, Lundy said building in a CON state is often “long and expensive,” sometimes taking more than a year. Opposition to construction is generally seen by market competitors rather than the public, Lundy said.

Not all CON requirements are the same

There are a lot of discrepancies regarding CON applications, Lundy said – the time a company has to complete an application, oppose a decision, or appeal can be “vastly different” from state to state. .

It remains to be seen how the stagnant occupation of skilled nurses, compounded by staff shortages, will affect CON procedures, and in turn the construction of new skilled nursing facilities.

“There should be a lot of discretion with the CON boards to take into consideration the unique situation with COVID and how that might influence the number of occupations,” Lundy said. “A board might say, we’re going to take that into account and approve a new building, even though occupancy rates are below the historic standard, because we know why.”

Lundy added: “Or they can say, we know why occupancy rates are below normal and it’s an unfortunate time to look to build a new building, but we’re not going to deviate from our historical percentages. “

Although obtaining a CON takes a lot of time and resources, existing operators can increase their bed count by adding a small amount of square footage while staying below the CON threshold, Lundy said.

There were 15,600 nursing homes in the United States in 2016, according to data collected by the CDC. More than 550 nursing homes closed from 2016 to 2020, before the pandemic intensified in the United States, according to a Forbes article.

CON states and SNF beds

Rick Marshall, president and CEO of Genacross Lutheran Services (CCRC) Genacross Lutheran Services in Toledo, Ohio, said operators looking to build in the state will struggle to secure CON for more qualified care beds .

“If you see new construction, someone bought a license from someone else and built a new building to put it in,” Marshall said, adding that more SNFs are being bought by big suppliers.

Future builds, at least for CCRCs, should be light on the side of trained nurses to allow more room for independent living, assisted living and memory care, Marshall said.

“If I were to build a skilled nursing facility, it would focus on short-term rehabilitation, those who really need to go through and receive that care, and then maybe more on the type of end-of-life care – a high level of needs what you see at times in long-term care that you may not experience in assisted living, ”Marshall said, calling it a“ downsizing ”of long-term care. “It would be a much smaller portion of the overall continuum.”

Even in robust markets like San Diego County, in a state that does not require CON, constructions that add skilled nursing beds to the community have stalled.

“There’s the two that I know of in the greater San Diego area, two new buildings. Most of the time you will see a lot of acquisitions – the same facilities will change owners and hands, ”said Preet Kambo, vice president of facilities operations for skilled nursing operator Beecan Health, based in Glendale, Calif.

Kambo said the two buildings have opened in the past two years, after about a decade of infrequent construction by SNF.

“It’s a big market, but at the same time… if you compare pre-pandemic and post-pandemic occupations for skilled nursing facilities, [it has] nationally declined, ”Kambo added. “So, is there really a need to build more, looking at this? “