reinventing for a new market place;reinventing for a new ... · trends and changing market demands...

Reinventing for a New Market Place;Reinventing for a New Market Place; Introducing Transitional Care to Your CampusYour Campus

Presenters

Randal BremhorstProject Principal; Hoffman Planning, Design & Construction, Inc.

Jeff VriezePartner; CliftonLarsonAllen LLP

James HolbrookS i Vi P id t C t O ti L th Lif C itiSenior Vice President, Corporate Operations; Lutheran Life Communities

Phil HemmerAdministrator Lutheran Home; Lutheran Life CommunitiesAdministrator, Lutheran Home; Lutheran Life Communities

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Presentation Agenda

1. Strategic Questions:• “Why We Went There.”

2. Market Perspective:• “What We Found!”What We Found!

3. Organizational & Culture Perspective:• “What are the Implications?

4. Financial, Operational, & Clinical Perspective:• “Setting Expectations”

5 The Solution:5. The Solution:• “How We Responded.”

6. Questions and Answers

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A Legacy of Care

Evangelical Lutheran Old Folks HomeAssociation of Chicago Vicinity, Alt h i 1892Altenheim – 1892

Lutheran Home for the Aged – 1953

Lutheran Life Communities – 2000

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Luther OaksBloomington, Illinois

Lutheran HomeArlington Heights, Illinois

Pleasant View Ottawa, Illinois

St Pauls HouseSt. Pauls HouseChicago, Illinois

The Arlington of NaplesNaples, Florida

Wittenberg Lutheran VillageCrown Point, Indiana

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As our “communities within communities” have grown, residential options and services have grown as well.p g

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Project Chronology

1. Initial Planning Concepts: Fall 2006

2. Initial Market Assessment: Spring 2007

3. Master Planning & Market Analysis: Jun-Dec 2010g y

4. Schematic Design: Jan-Aug 2011• Final Market Research

5. Final Design: Sep 2011-Jul 2012• Design Development – Construction Documents

6. Project Financing/Construction Start Nov 1st, 2012

7. Project Completion Apr 2016

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Market Perspective:Evaluating the Local MarketEvaluating the Local Market

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Key Strategic Questions

• What will Lutheran Life Communities need to do in order to compete effectively and to better serve the older adults in the Arlington Heights?

• What are the capital requirements for competing in the market place?

• What is the best strategy to secure and sustain the premier position for senior services in the local market?

• What are the likely financial, clinical, organizational, operational, and cultural consequences of actions taken?

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Context: The Aging Services Field Is Evolving

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The Market –What’s on the minds of leading CEOs and Boards?

• The number of people who need our services

• How buying habits have changed

• The effects of a recessionary economy some good some• The effects of a recessionary economy – some good, some not so good

• A changing work force (formal and informal care givers)• A changing work force (formal and informal care givers)

• Accessing capital – Financing the future of senior living

• Health care reform – what are the immediate and long term implications?

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Critical Matters for Consideration…

• Impacts of health care reform andthe new payment landscape• Accountable Care Organizations• Episodic Bundled or Global PaymentEpisodic, Bundled or Global Payment

• New Forms of Relationships• The effects of a new economy

and capital planning• Affecting Access to capital• Addressing the issue of Negative• Addressing the issue of Negative

inflation (shrinking margins)

• Technology – new applications d li

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and reliance

Key SNF Customer Groups in the Future

• Short stay, post-acute residents who require complex medical care, rehabilitation or time to heal & recover

• End of life residents whose care needs have become greaterthan could be accommodated in their prior residencep

• Frail residents who have limited mobility, complex medical issues or who have no informal support systems & do not have the resources to pay for the support privatelydo not have the resources to pay for the support privately

• Residents with cognitive impairments which make them unsafe, an elopement risk, or the disruption they create in other li i tti i i ifi t th t th d t i iliving settings is so significant that they need greater supervision or control in their environment, i.e., individuals with end stage Alzheimer’s Disease or Dementia

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Profile of Facility/Campus

• Skilled Nursing Beds: 392

• Sheltered beds

• Intermediate care• Intermediate care

• Short-Stay Unit

• Adult Day Care

• Child Day Carey

• Assisted Living: 100

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Arlington Heights Campus - Primary Service Area

The service area for the A li t H i htArlington Heights campus includes nine zip code areas.

The demographic data for this area was used to

l l t d d fcalculate demand for independent living, assisted living and nursing care.

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Demographic Summary

• Age 85+ population – the most common users of traditional LTC services – is projected to increase 9.8% by 2016.

• Age 65+ population in the area is projected to increase g p p p j11.8% by 2016.

Market Market Market % Change % ChangeMarket Market Market % Change % Change2000 2011 2016 2000-2011 2011-2016

65-74 21,813 23,020 27,222 5.5% 18.3%

75-84 13,622 13,445 13,664 -1.3% 1.6%

85+ 4,622 5,925 6,505 28.2% 9.8%

Total 65+ 40,057 42,390 47,391 5.8% 11.8%

Source: Claritas, Inc.

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Demographic Summary

• By way of comparison, the age 55-64 cohort encompasses 40,085 individuals in 2011 and is projected to grow 13.6% in the next five years.

• This is the emerging market opportunity for rehab-oriented skilled nursing providers.

• Younger populations are likely to see increased utilization of non-acute settings for post-surgical rehabilitative care, given impacts of health care reform.

• SNFs represent one of the most cost-effective settings for post-acute rehabilitative care – typically half as much as an IRF.

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Organizational & Cultural PerspectiveCultural Perspective

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Overview of Interview Process

• Contacted 15 members of Lutheran Life Communities senior staff June 15-17senior staff, June 15-17.

• Questions approved in advance, added questions with input from Lutheran Life Communities management.

• Topics:• Strengths/assets of Luther Life Communities (could be the

organization overall or the Lutheran Home campus specifically)organization overall or the Lutheran Home campus specifically)• Unique services/approach to serving seniors• Existing services that could be expanded or done differently

A i i l ki i th A li t H i ht ?• Any seniors services lacking in the Arlington Heights area?• For the Lutheran Home specifically, any specialized services or

programs that should be offered?

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• Uses for the Pavilion Building should nursing beds be moved.

Strengths/Assets of Lutheran Life Communities

• Staff – longevity of staff, quality of caregivers, dedication, i illi t b t l t lcompassion, willingness to serve, above average talent pool,

“we hire the right people”• Reputation for great care, history, longevity in the community,

it t t icommitment to seniors• Cutting edge/willingness to try new things, management always

open to new ideas, forward thinking, our vision of growing and developingdeveloping

• Leadership team: Roger W. Paulsberg (visionary)/department heads/ administrators/ senior management; how we manage our sites/deliver services to all our sitessites/deliver services to all our sites

• Mission/faith based• Holistic approach to serving seniors, intergenerational programs,

i f i ff d

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variety of services offered

Unique Services/Approach to Serving Seniors

• Scope of services/community services, meals on wheels, adult day care, child day care, hospice, moving services

• Lutheran Life Communities tends to be more cutting edge, a trendsetter (i e the neighborhood concept for nursinga trendsetter. (i.e., the neighborhood concept for nursing care was implemented 15 years ago)

• Large dementia continuum on campus• 12-hour shifts; universal workers• Charity care: no one is asked to leave when they can no

l ff d tlonger afford to pay

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Existing Services to Expand or do Differently

• Expand community services; Gero Solutions allows people to stay i th i h h t ill th b b b t? ( i fin their homes – what will the baby-boomers want? (expansion of home health was mentioned by nearly all persons interviewed)

• Expand adult day care• Provide memory support assisted living units • Provide palliative care at all our sites• Expand in-room dining and other dining options; larger dining p g g p ; g g

areas• Expand/better use of/standardization of application services

(i.e., “Answers on Demand”)( , )• Continue to modernize buildings; provide private rooms with

private baths and showers

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Services Missing in the Arlington Heights Area

• Supportive living, low/moderate income housing

• In-home monitoring; assistive services(lawn care food caring companion)(lawn care, food, caring companion)

• Aqua therapyq py

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Special Programs or Services for the Lutheran Home

• Responses were all over the board to this question, but there littl ti d b t f ith i lwas little mentioned about programs for persons with special

health issues• Alternative dining options/expanded dining/ upscale dining• Parkinson’s unit• Bariatric program• Dialysis• Dialysis • Cardiac program• Aqua therapyy• More support groups for people with vision impairments,

diabetes; education regarding healthy eating/cooking classes• Expand wellness center; more fitness programs

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• Expand wellness center; more fitness programs

Uses of Pavilion Building

• Medical offices/expand clinic• Out-patient diagnostics center, sleep center, dialysis center• Expanded adult day care• Dining options: restaurant, pub, larger dining room• Independent living, possibly dual licensed assisted

living/independent living; small apartments for couples withliving/independent living; small apartments for couples with nurse; housing for younger persons with special needs

• Movie theater/more community spaces• Guest suites• More support for nurse practitioners, training area

Tear down all or part of the building provide more parking

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• Tear down all or part of the building provide more parking

Other Comments

• Parking is a major issue

• Need to ramp up nursing programs for the medically complexp

• There is an opportunity to become a “metric organization” a way to measure success of all business processesa way to measure success of all business processes

• Potential to convert the Pavilion building to 12-bed units

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What does all this mean?

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Summary of Key Findings

1. Moderate population growth and declining income produce stagnant to declining demand for market rate private pay independent living, assisted living and skilled nursingskilled nursing.

2. Anticipated moderate growth of short-stay / post-acute population.

3. Current market share approximate 25% of demand.4. Demand does seem to exist for some level of Memory

Care servicesCare services.5. 2010 occupancy decline in private pay population served.

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Summary of Key Findings

6. Market opportunity for short-stay beds in the market will continue increasing into the future; there will be awill continue increasing into the future; there will be a corollary reduction in need for traditional LTC beds.

7. Private pay is likely to continue declining, necessitating p y y g, grevisions to current payor mix.

8. There is likely to be increased patient volume in the 55-64 cohort, given population increases and how hospitals will use SNFs in the future.

9 Programmatic opportunities or “areas of specialization”9. Programmatic opportunities, or areas of specialization , for the Lutheran Home will be vested in cardiac, vascular and pulmonary illnesses – CHF, COPD,

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stroke and pneumonia.

Other Considerations

• Effects of new payment systems• PACE or some other all inclusive payment system• Willingness to accept Public Aid admissions• Wellness Center• Gero Solutions (Personal Care Agency)

Physician Services on Campus• Physician Services on Campus• Expansion of housing and / or independent living with

services – consider SLF?• Connection with Luther Village

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Other Considerations

• In lieu of reducing long term care (SNF) capacity, grow Public Aid population

• Expand service reach to Luther Village

• Expand Assisted Living (or housing with services) capacity to capture private pay population.

• Add Memory Care assisted living

• Develop Wellness Center

• Expand Home & Community Based Services

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Development Implications

Anticipate increased volume of short-stay patients in two categories:

1. “Younger” rehab patients (ages 18-74, focused in 55-74)

• Population does not wish to intermingle with “old” patients. Thus, consider dedicated unit development on new building, ground floor. (26 beds – split Commercial/HMO + Medicare payors)

2. “Older” rehab/medically complex patients (age 75+)

• Unit development focused in new building, 1st & 2nd floor with p ginterconnection to 1st floor Olson (82-110 beds – Medicare payor)

– Recommend that 2nd floor new building configured to support complex cardiac, pulmonary and stroke patient populations (medical gas, vacuum, etc.)

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Financial, Operational, & Clinical PerspectiveClinical Perspective

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Project Chronology








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Project Goals & Objectives

1. Position Lutheran Home to be responsive to ongoing trends and changing market demands by incorporating flexibility of use and licensure.

2 Promote a person centered household care model2. Promote a person-centered household care model through an enhanced physical environment.

3. Update the facility to meet current codes.4. Repair and replace systems that have reached the end of

their useful life.5 R i f th L th H t ti d5. Reinforce the Lutheran Homes reputation as a good

neighbor and business partner in the Village of Arlington Heights.

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Concepts Evaluations & Comparisons

Concept Concept ConceptConcept Characteristics / Criteria'A' 'B' 'C'Most LeastMost Least

Concept Characteristics / Criteria

Program / Staff EfficiencyResident Care Environment

Most LeastMost Most LeastLeast Most

Most LeastDisruption of Residents (Moves)Disruption of Residents (Construction)

Response to Market PotentialLong Term Physical Plant Improvement

Most LeastMost LeastLeast Most

Most Difficult Least DifficultDisruption of Neighborhood (Long term)

Disruption of Residents (Moves)

Ease of Approvals

Disruption of Neighborhood (Short term)

Longest Duration Shortest DurationHighest Lowest

ppSchedule

Initial Project Costs

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- View From Northwest -

- Overall Site -

- View From Southwest -

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View From Southwest

Phasing Considerations Construction Schedule

OPTION A Construction Construction

Phase Duration Start Complete Occupancy 1 13 months March 2012 April 2013 May 2013 2 9 months June 2013 February 2014 March 2014

1. Temporary Downsizing a. Impact on Operations / Eliminate Costs b. Impact on Revenue

2. Semi‐Private Rooms 2 9 months June 2013 February 2014 March 20143 9 months April 2014 December 2014 January 2015

35 months Total Construction Schedule

Note: ‐ Temporary Fire Sprinklers in Phase 3 as a minimum

a. New Construction b. Estimate $40,000 per Bed

3. Resident Relocation a. To where? St. Paul’s, Pleasant View, Wittenberg Village b. Management time / energy to coordinate

l i OPTION BConstruction Construction

Phase Duration Start Complete Occupancy 1 13 months March 2012 April 2013 May 2013 2 7 months June 2013 December 2013 January 2014 3 7 months February 2014 August 2014 September 2014 4 7 months October 2014 April 2015 May 2015

c. Relocation costs d. Who will move?

4. Schedule Duration a. Inflation on Construction Costs = 3‐5% per year b. General Conditions = $60,000 per month impact

5. Operational Challenges 5 7 months June 2015 December 2015 January 2016


Note: ‐ Temporary Fire Sprinklers in Phase 3, 4, 5 as a minimum

OPTION C

p ga. Public relations b. Staffing changes c. Quality of Care

6. Timing of Fire Protection Work in Olson Pavilion a. 8 month replacement duration while occupied b d d h l d $ OPTION C

Construction Construction Phase Duration Start Complete Occupancy 1 15 months March 2012 June 2013 July 2013 2 9 months August 2013 April 2014 May 2014 3 9 months June 2014 February 2015 March 2015


b. Estimated premium to update system while occupied = $350,000

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Note: ‐ Temporary Fire Sprinklers in Phase 3 as a minimum

Design Drivers and Criteria

• Curb Appeal/Identity• Parking• Building Service Access• Traffic and Vehicular Access Patterns (ambulance, delivery, staff, ( , y, ,

visitors, etc.)• Storm Water Management• Maintain Green SpaceMaintain Green Space• Infrastructure Repair (sprinklers, domestic plumbing, HVAC, etc.)• Single Occupancy Rooms with Private Baths

A d t M lti l Li• Accommodate Multiple Licensure• Design Flexibility to Accommodate Multiple/Changing Customer Groups• THE RESIDENT HOUSEHOLD/NEIGHBORHOOD OF

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THE FUTURE….NOW!

Other Goals/Opportunities/Challenges

• Community Entry Sequence (multiple entrances, intended site patterns, etc.)

• Strengthen Centralized Services (gain operational efficiencies)(gain operational efficiencies)

• Enhance Relationship with the Neighborhood (additional green space)

• Create Stronger Sense of Place

• Create Third Place Spaces p(family areas, porches, courtyards)

• Leverage Wellness Across the Continuum (strengthen connections to Luther Village)

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(strengthen connections to Luther Village)

Programming Questions

• What Is Your Vision of Design Flexibility?• What Type of Resident Is Being Served?• How Will Dining Services Be Handled?• How Will Medication Be Stored and Distributed?• How Will Medication Be Stored and Distributed?• European Shower vs. Shower Module?• Traditional Nurse Station vs. Staff Work Area• How Will Laundry Services Be Handled?• How Much Administrative Space Is Needed?

Wh t A LLC’ R i t F th R h b G ?• What Are LLC’s Requirements For the Rehab Gym?• Others….?• Resident Experience vs. Patient Experience.

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Operational Inputs

• CliftonLarsonAllen additionally observed some concerns that may potentially impact its ability to grow short-stay census into the future:• The organization currently employs one field liaison to supportThe organization currently employs one field liaison to support

assessment and referral development. This is insufficient staff, given the volume of quality payor patients desired by the organization. (Industry ratios are typically 1:25-30, liaison to short-stay beds.)( y yp y , y )

• Current model of physician coverage, while very strong, may likely require increased emphasis into the future – assuming growth of short-stay population and increasing complexity.y p p g p y

• Limited number of Medicare Advantage & commercial contracts.

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Demand Model Findings

• While total need for LTC beds will decline slightly in the five-year timeframe, short-term need will increase 9.5%.

Estimated Bed Need in 2016Sh t L T t lShort Long TotalBeds Stay SNF

Base year bed Need in 2011 447 1,551 1,997 Impact of Population Change 53 152 204 Impact of Demand Influencers

N t Ch i H it l U R t 2 00% (10) (10)Net Change in Hospital Use Rates -2.00% (10) - (10)

$2.0M - (44) (44)

5.00% - 2 2 Impact of Changes in Family/Community Caregiving

Impact of Program Funding for Home & Community Alternatives

9.00% - (153) (153)

Total Impact of Change in Population and Demand Influencers 43 (43) (0)

Estimated Bed Need in 2016 489 1,508 1,997 % C % % %

Substitution of Housing/Service Alternatives for Former SNF Residents

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% Change vs. Base Year 9.5% -2.8% 0.0%

Demand Model Findings

• The excess/deficit analysis indicates a potential excessof total beds in the market by 2016.

Potential Excess (Deficit) in Beds by 2016Total

MarketTotal Beds in 2011 2,233

Estimated Bed Need in 2016 1,997 Potential Excess (Deficit) of Beds by 2016 - Before "At Risk" Facilities 236 Beds in Facilities "At Risk"* - Potential Excess (Deficit) Beds Adjusted for "At Risk" Beds 236 *Beds in facilities with less than 10 days cash on hand and negative margin. Source: 2009 Cost Reports

As indicated in the previous slide, the distribution of beds within the population will shifting from LTC to short‐stay.

Future bed reductions in the market will likely occur

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yon the LTC side of business.

Shifting Beds

• Future utilization of private pay will likely decline into the future, given shifts away from institution LTC.

• Providers will adjust payor mix accordingly to maintain volumesvolumes.

Payor Replacement Modeling ‐ Lutheran Home

2012 2013 2014 2015 2016PP Census (Declining) 215 207 200 193 186PP Beds Lost 8 7 7 7

PP Rate (per Diem ‐ 4% increase/year) 361 375 390 406Lost Revenue (PPD) 2,888$ 2,628$ 2,733$ 2,843$ Annual Lost Revenue 1,054,120$ 959,249$ 997,619$ 1,037,524$

Minimum Req'd MC Replacement Beds 7 7 7 7MC Rate (per Diem ‐ 1% increase/year) 400 404 408 412Regained Revenue (PPD) 2,800$ 2,828$ 2,856$ 2,885$ Replacement Revenue 1,022,000$ 1,032,220$ 1,042,542$ 1,052,968$

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Market Share Implication for Shifting Beds

• Assuming an average Medicare census of 75, Lutheran Home’s current Medicare market share is roughly 16.8%.

• A decline in private pay beds by 2016 will require 28A decline in private pay beds by 2016 will require 28 “replacement” Medicare beds - an adjusted market share of 21.1% by 2016.

Growing market share will require expanded relationships and increased volume with other acute‐care hospitals.

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Referral Behavior

• The bulk of Lutheran Home admissions are heavily vested in one referring hospital – Northwest Community Hospital (NWCH)• The next largest referral source represents less than 10%• The next largest referral source represents less than 10%

of the NWCH referral volume.

Hospital Referrals Admits ConversionHospital Referrals Admits Conversion

Northwest Community Hospital 314 202 64.3%

Lutheran General Hospital 29 13 44 8%Lutheran General Hospital 29 13 44.8%

Alexian Brothers Medical Center 24 16 66.7%

Total Referrals 429 265 61.8%Source: Lutheran Home

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Source: Lutheran Home.

Acute to SNF Discharge Behavior

• While NWCH offers the largest volume of SNF discharges, the total market capture is fairly low.

• Market captures from Lutheran General and Alexian Brothers lare low.

Hospital Discharges to SNF

LH Admits

% Hospital DischargesSNF

FY2010Admits Discharges

Captured

Northwest Community Hospital 4,208 808 19%

Lutheran General Hospital 3,498 52 1.5%Lutheran General Hospital 3,498 52 1.5%

Alexian Brothers Medical Center 1,814 64 3.5%

Source: American Hospital Directory (ahd.com – accessed July 2011), Lutheran Home

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Operational Challenges

ACOs – examples of what they want in a SNF partner• Staffing – low turnover, nursing supervisor all shifts, RN 24/7 on

short-stay units, consistent staffing assignments• Collaborative quality improvementq y p• Admission 7 days/week and late evenings• Environment meeting patient expectations• High quality therapies palliative care• High quality therapies, palliative care• Thorough, expeditious care planning and regular interdisciplinary

team meetingsR l d t ti t ffi ti f ti• Regular data reporting on staffing, surveys, satisfaction

ACO concept is flexible, many varying configurations possible for the future.

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p

Overall Site Plan

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Overall First Floor Plan

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View from Southeast

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View from Southwest

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Olson Pavilion at Lutheran Home

$42.4M

$56.0M $56.2M

$64.3M$67.3M

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Feasibility Zone of Influence = $13.8M

Feasibility Drivers

• Key Influencerso Type of Financing

• Variable/Fixed Rates• Existing Debt

o Equity Amounto Project Capital/Construction Costs

• Program Scope• Project Quantity• Project Product Quality• Project Product Quality• Project Allowance Assumptions

• Niche Market Revenue/OperationsOther Infl encers• Other Influencers

o Operational Assumptionso Capital Campaign

P j t F ibilit R ti P to Project Feasibility Ratio Parameters

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Recommended Programming Modifications

1. Review Mechanical / Electrical Systems for Efficiencies / Minimize Phasing Impact

2. Eliminate Underground Parking and Transfer to Surface ParkingSurface Parking

3. Eliminate the East and West Additions – Potential Reduction in Bed Count

4. Reduce Allowance Assumptions• Design Contingency• Loose Furnishings and Equipment• Loose Furnishings and Equipment• Technology• Owner Contingency

5 Eli i t S i T l d El t

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5. Eliminate Service Tunnel and Elevator

The Final Solution

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Project Chronology








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New Entrance Lobby

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New Entrance Lobby

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New Rehab Gym

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New Short-Term Stay Dining

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Current Progress

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THANK YOU!

Randal BremhorstProject Principal; Hoffman Planning, Design & Construction, Inc.

Jeff VriezePartner; CliftonLarsonAllen LLP

James HolbrookS i Vi P id t C t O ti L th Lif C itiSenior Vice President, Corporate Operations; Lutheran Life Communities

Phil HemmerAdministrator Lutheran Home; Lutheran Life CommunitiesAdministrator, Lutheran Home; Lutheran Life Communities

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