The developers of a major nursing home project are pulling the plug for now, another victim of inflationary and regulatory pressures plaguing the sector.
The $25 million project was set to add 120 skilled nursing beds to the operational portfolio of RCA Management, which already runs buildings in the McGuire Group, Absolut and VestraCare chains. Once opened in 2025, the facility would have been the first new nursing home in the region in nearly 15 years.
But RCA owner Edward Farbenblum told local media this week that the replacement project was “no longer viable.”
“We will not be moving forward with it at this time,” he said, noting regulatory, financing and reimbursement challenges.
RCA is still moving forward with plans to purchase the operations of five Absolut buildings, including a 120-bed Westfield, NY, facility. The new project would have replaced that facility. Instead, RCA will continue to operate Absolut Care of Westfield.
The challenges for RCA are being felt across the country as providers that want to update or replace skilled nursing properties struggle to find the capital to do so. In addition to facing inflation, many have had to sink any reserves they have into delayed maintenance or cycle-based replacement projects they put off during the pandemic.
More than one-third of providers surveyed by McKnight’s Long-Term Care News last year said their construction costs were among the most affected by inflation. Nearly half had put
off a building or capital improvement project.
The concerns aren’t limited to specific regions of the US.
Cascadia last fall announced that it had canceled plans to build a new skilled nursing facility in Washington state when inflation drove its projected costs too high to “pencil out” on the right side of the equation.
Such pressures are all too common in the skilled nursing sector, where reliance on public payers provides no pathway or incentive for replacing aging infrastructure. And that will increasingly put providers with aging assets in a bind as demand from aging baby boomers increases.
The complicated interplay between payers, regulators and patients makes skilled nursing innovation and investment challenging, Irving Stackpole, president Stackpole & Associates said during a webinar last week.
“The usual hydraulics, the usual dimensions of supply and demand, even in service-based economic environments, are twisted and changed in long-term care,” he said. “The built infrastructure, this is where we can really see the segmentation because the built infrastructure serving individuals who are market-rate consumers of assisted living, for example, is quite different from the built environment for people who are far more dependent and are in lower socio-econmoic strata.”
Those newer shinier buildings, financed by developers and operators who can (and have) raised their rates, may be more appealing to status-conscious adult children who are trying to place their parents. But Stackpole said it’s important that facilities hampered by aging infrastructure not give up their market share.
Instead, Stackpole said, they need to sink what resources they can into innovations that catch the eye of referral partners.
“You are not constrained by your physical environment,” he said. “You’re constrained by the history, by the legacy of always doing the same thing over and over again.”
In the case of RCA, the company’s plans to buy the business operations of all five Absolut facilities are still moving ahead. Buffalo Business First reported that RCA is paying $750,000 to buy the five sites, which range in size from 37 beds to 320 beds and include one, 80-bed assisted living site. A third-party landlord will continue to own the real estate.
The state’s Public Health and Health Planning Council could approve the deal as early as Thursday.
