When the Fong family bought a 100-bed Salt Lake nursing home four years ago and changed the name to Woodland Park Care Center, they brought in a management firm to run it for them.
When that didn't work out, they tried operating it themselves. After 18 months of that - along with some $250,000 in capital improvements - they called in Heritage Management Inc., a Salt Lake firm that currently owns, leases or manages some 1,200 beds in 15 care centers across Utah.One year later, said owner Bryan Fong, that move has proved to be just what the doctor ordered.
"It has been an excellent match for us," said Fong of his contract with Heritage. "Their ability to provide the financial accounting as well as the nursing care expertise that is needed in this industry has made the difference. We feel really good about what they are doing."
Like corner grocery stores, gas stations and video rental outlets, the days of the "mom and pop" nursing home are numbered, says Charles R. "Randy" Kirton, president of Heritage Management.
"It's not just a trend, but a complete changing of eras in the long-term health- care industry," said Kirton, who is a member of the Governor's Task Force on Long-term Care and a subcommittee chairman of the Utah Health Care Association, which is drafting a "white paper" on aging and nursing homes to be submitted to The Church of Jesus Christ of Latter-day Saints.
Kirton said smaller nursing homes across the state are caught in a cost vs. revenues squeeze that makes it difficult for them to stay in business.
"On the one hand, social pressures for high-quality care have led to regulations which drive up compliance and paperwork costs. On the other, the state can afford only modest increases in Medicaid payments."
That means that operators of nursing homes have to make do with average payments of $65 per patient per day in an age when hospital costs can run 10 times as high.The result has been an ongoing, statewide consolidation of nursing home operations as smaller firms either sell out or turn their management over to larger companies such as Heritage.
Kirton said he and the other principals in Heritage, a closely held company, could see the trend emerging 10 years ago when the firm was founded under its original name, Bonneville Health Systems.
"We could see that the need for long-term care was increasing because the fastest growing segment of the population is among the very old," said Kirton.
"There is also a trend to keep hospital stays to an absolute minimum. That means there will be a greater need for nursing homes to provide the skilled care for recuperation or rehabilitation."
Kirton, who has years of experience in real estate development, said he moved into long-term health care because he saw opportunities in the field if the cost/revenue obstacles could be overcome. A decade later, his assessment has proved accurate.
The strategy adopted by Heritage Management was one that has proved successful for a wide variety of businesses: economies of scale derived from managing not one but many facilities.
Bulk buying of food and medical supplies has lowered expenses. So have cost control programs, accounting, admissions and quality assurance programs. Shared expertise has also proved cost effective. By spreading the cost of corporate management over many facilities, Heritage can offer resources to group members that would be out of the reach of stand-alone operators.
Despite the changes taking place in the industry, Kirton concedes that much of it has gone unnoticed by the public. People look at the small size of most nursing homes - 125-150 beds is considered the maximum practical number - and decide it is still a "mom and pop" business.
"Image problems are apparently the price we pay for maintaining a homelike atmosphere," said Kirton. Each Heritage nursing home seems small in itself even though it is part of a company that employs some 1,200 full- and part-time people throughout its 15 facilities - sufficient to staff a large hospital.
"We must close the gap between the perceptions and the realities of our industry - particularly in the financial and medical communities - if we want to keep pace with the growing need," Kirton said.
Also, he pointed out, consolidation of existing nursing homes has its limits.
"We can control costs and quality over the short term, but the only lasting solution is new construction. For that to happen, the long-term care industry will need the support of lenders and investors, and the backing of other medical professionals who recognize us as an indispensable part of the state's health-care continuum."
Kirton says long-term health care has become a regional business. Asked to project how his company will grow and change through this decade, he predicts Heritage will expand into adjoining states and will become increasingly more sophisticated in the managed care it provides, including sub-acute care (such as post-operative care that gets patients out of the expensive hospital environment more quickly), home health programs, adult day care and retirement care.
Although all of Heritage's 15 nursing homes are virtually full (95 percent occupancy), Kirton said the number of people in such homes has remained stable in recent years, mainly because the regulations on who may get in have tightened.
"But it will be held down only so long," he said. Population demographics assure that long-term health care is a growth industry. Currently, the main growth in nursing home occupancy is in people age 85 and up.
While most people in nursing homes are very ill, said Kirton, the image of such facilities as being "the end of the line" is wrong. "We rehabilitate some people and send them home," he said.
In addition to providing quality care at low cost, Kirton said the challenge always exists to find employees who are "optimistic, upbeat and forward thinking."
To that end, an organization such as Heritage is a major asset. It provides both employee benefits and a corporate ladder for advancement, neither of which most stand-alone facilities can offer. Without them, worker burnout and high turnover are inevitable.
"We look for what we call the `Three E's' in our employees," said Kirton: Energy, enthusiasm and ego. Also, I look for people who have a sincere love for the elderly."
Heritage care centers
Here are the 15 nursing homes owned, leased or managed by Heritage Management Inc. The most recent addition, Eastridge Care Center, was added Oct. 1 and is the fourth edition to the group over the past year.
Fay Case Nursing Home, Salt Lake City, 68 beds.
Heritage Convalescent Center, American Fork, 74 skilled/intermediate care beds and a 15-bed residential care unit.
Emery County Nursing Home, Ferron, 50 beds.
Highland Cove Health Center, Salt Lake City, 34 beds.
Richfield Care Center, Richfield, 98 beds
Zion Health Care Complex, Hurricane, 62 beds.
Alpine Valley Care Center, Pleasant Grove, 52 beds. Recently completed a $300,000 capital improvements project.
Hillside Villa Care Center, Salt Lake City, 120 beds. Completed $120,000 in improvements last year.
West Jordan Care Center, West Jordan, 82 beds for the mentally retarded. Willow Wood Care Center, Salt Lake City, 86 beds.
Heritage Bennion Care Center, Bennion, 104 beds.
Cedar Care Center, Cedar City, 44 beds.
Woodland Park Care Center, Salt Lake City, 100 beds, recently added $250,000 in capital improvements.
Canyon Hills Health Care Center, Nephi, 80 beds.
Eastridge Care Center, Salt Lake City, 113 beds.