After being stripped of leases for 24 facilities in partnership with Sabra, North American Health Services is regrouping around a dozen core operations and returning to its quality roots to fuel a potential rebound.
The operator, in business since 1986, is now running eight buildings in Southern California and four in Northern California, each privately owned. The remaining client relationships leave North American free from the particularly onerous rent burdens it faced in partnership with a real estate investment trust.
“The transition was heartbreaking, it was heavy, obviously, in a lot of different ways, but I think where we are now is in a better position to reset,” CEO Michael Moore told McKnight’s Long-Term Care News. “We’re much more flexible, and we can really respond to just the typical industry challenges, the COVID-related challenges, in a much better way now. There’s also a really emphasized focus on improving employee culture and doing those kinds of things are easier when you’re a little bit smaller and there are less hurdles.”
The employee-owned company is also down to about 1,700 staff members.
While North American has implemented wage increases and other benefit changes, Moore said he is leaning heavily into an existing Employee Stock Ownership Plan (ESOP) to help the company stand out as an employer of choice. Every employee who is older than 21 and works at least 1,000 hours annually becomes eligible for the plan after one year of service; workers are vested after six years.
They don’t have to contribute to stock purchases but are awarded shares over time automatically.
North American is the only employee-owned skilled nursing operator in California, Moore said. Across the US, the National Center for Employee Ownership reports there are about 6,500 companies with ESOPs. Just 2% are in the healthcare and social services space.
Retirement benefits haven’t always been a strong appeal to entry-level workers who need extra dollars in their pockets. Moore’s goal is to encourage prospective hires to see that they can help build the company from the inside up, and earn long-range financial security at the same time,
“The emphasis is if the company performs, so does the value of the ESOP share,” Moore explained. “The thing that I really like about this is that the employees at each one of our facilities really have a direct impact on that valuation process. Our strength is dependent upon those at each individual facility. It’s really a neat way to create a genuine and sincere environment of inclusion and involvement.”
Investing for quality
Since Moore joined the company amid the separation from Sabra, inclusion and involvement have become more a part of routine operations too. The CEO holds monthly meetings with his administrators to surface building-level issues that might inspire innovation. In the last two months, each facility also added an advisory committee in which non-managers meet to share their observations and filter insights to their building leadership.
“We’re trying to avoid the ‘right-idea syndrome,’ where Michael Moore thinks he has the best idea ever and doesn’t talk to anybody about how that’s going to land,” he said.
Building a culture that is attractive to new hires and helps retain staff is a key component of meeting an aim “in the spirit of quality care,” he added.
North American once boasted that each of the 32 buildings it operated had a 5-star rating from the Centers for Medicare & Medicaid Services. Today, while all still have 4 or 5 stars for quality efforts, overall ratings have dipped due to staffing concerns and lower star ratings on that metric.
“The biggest difficulty and challenge we have right now and into the pursuit of actually trying to be a 5-star facility is the emphasis on staffing,” Moore said. “Staffing is one of those things that is extremely difficult to control and manage, especially in this current environment. … We’ve seen very real challenges combined with the current economy in California, especially in relation to inflation and the massive spike in registry staff as well.”
The ability to stay staffed and afford to pay agency workers cuts into revenues, as did the need to slow down admissions and limit census regrowth. Pace and volume of admissions is still being impacted by 5% to 15% because of staffing limitations, Moore estimated.
Rebounding toward new partners
It was much higher costs combined with challenging triple-net lease structures that affected North American’s ability to make lease payments for the 24 buildings it formerly ran for Sabra. Those were transferred to Ensign Group and Avamere.
“My primary effort right now as a 13-month old CEO is really to rally the troops, if you will, and create a culture and environment where everyone feels like they’re involved in our future and what that looks like,” Moore said. “There’s still quite a bit of cleanup post-mortem … and that will go on for a few more months. But we are absolutely growth-oriented and look forward to restoring the size of our company to 36 companies and beyond.”
Who and what will fuel that growth is part of the discovery process Moore is on now. He said he is looking at new partners to help manage Medicare Advantage pressures and find value-based opportunities. He’s evaluating the potential of an Institutional Special Needs Plan, in part because of their focus on complex clinical care and readmissions reductions.
The company is also investing in technologies that can improve patient outcomes, such as the use of bladder scanners to spot UTIs early, and ease staff workflows through communication tools and more. Both should contribute to being able to take higher-needs patients over time.
“That ability to care for more medically complex patients is greater with each passing year, especially when you think about the continuum of care and the ACO partnerships between hospitals and just the emphasis on hospital readmissions,” Moore said. “It’s a signal that they want us to be better able to care for these patients that they have a change of constitution. We really have to elevate our capabilities and find opportunities to get better.”
