Insights from turnaround world highlighted part of Tuesday’s LTC 100 Conference in Scottsdale, Ariz., lifting the veil somewhat on what some providers see as opportunities in acquiring distressed buildings.

One of the panelists, Steve LaForte, CEO and principal for Cascadia Healthcare based in Idaho (49 facilities and 4,007 beds in five states), said at the end of the day, when it comes to turning buildings around, it is about people.

“It’s about residents. It's about families, employees, and communities,” he said. “The super-majority of facilities we have in our 49 SNFs were turnarounds, and some of them were really deep turnarounds, some of them were taken off the SFF list.”

The two main factors to consider when taking over a distressed building for Cascadia is that the purchase will have a positive impact on the community, and number two is having the talent to put into the buildings to make the changes that the company wants to affect.

The focus on having the right staff to run the turnarounds is even more paramount to Cascadia because the company is hiring CEOs as administrators for each facility to work in regional cohesion with its other buildings. LaForte said Cascadia is not even necessarily looking for healthcare experience when tapping CEO talent, but rather entrepreneurs who want to run their own business.

“We have no hierarchy. We have a very flat model organization, and it is field-driven. We give our facilities the opportunity to run themselves as their own smart businesses with support from a service center and creating support amongst the cohort of facilities within a region,” he said. “So, for us, investing in those people and when we do transitions, having the right people to move into the acquisitions that we're going to do is crucial.”

Stick to Basics

LaForte did tell a cautionary tale on sticking to foundational principles when acquiring turnaround facilities.

For example, he said the only time Cascadia in its 11-year history has sold a building it acquired happened with a property in Las Cruces, N.M. Not close to any of its other buildings, which is a general rule with the company, Cascadia sold it a few years back after finding there was no chance it could make it work in conjunction with its other SNFs.

“Our next closest buildings were here in Phoenix, which is not all that close. So, creating a cohort is a little bit more difficult, but we had the opportunity to lock down the building in receivership and get it at a very advantageous first price, which we got. And so up until that point, it was the right transaction,” LaForte said.

But having a one-off building where there was no other opportunity to grow in the Las Cruces market was not good for the long-term status of the facility.

“There was another operator in the market, and I'm not going to name names, but they controlled the rest of the market. And so there wasn't an opportunity to grow, there wasn't an opportunity to create effective cohorts, marrying that building with the two buildings in Phoenix, did not fit exactly. And so, a few years back, we sold that building, but that was the right ultimate decision and in my understanding under a different operator that has a cohort of buildings in New Mexico, that building is thriving, and doing really well,” he said.

Room for More Operators?

When asked if there is room for new operators in the skilled nursing space, the second panelist, Auston Clanton, COO of Creative Solutions in Healthcare in Texas (162 facilities, 17,790 beds all in Texas), said there is always room for operators focused on quality.

“I think if you go into long-term care with the main thought of quality for those residents, for every single day making their lives better, and then empowering your employees to be part of that then there is more room,” he said.

“You take care of those two things and that has always made everything else downstream fall into place. And so, I definitely think there's opportunities when people come into the market for the right reasons.”

LaForte concurred, pointing to the demographics in play as well.

“I think we are at an inflection point of an amazing opportunity to grow, an amazing opportunity for good operators, dedicated to quality. You know, I think we all know our buildings are filling up because the demand curve is in a steep increase. It's going to continue to be in a steep increase for the next 20 years, and America is under-bedded.”

Questions or comments? Contact Patrick Connole at pconnole@parkplacelive.com.