Large Skilled Nursing Chain Signature Plans Eventual Home Health Expansion

When Signature HealthCARE added a home health arm through a 2014 acquisition, the major skilled nursing facility (SNF) company intended to eventually operate home health in all its SNF markets. Four years later, Signature’s home health footprint has not yet grown, but the Louisville-based company still believes in expanding home health once headwinds abate for its skilled nursing operations.

“We wanted to become a larger solution to post-acute challenges, and we recognized the need to be more than a siloed SNF operator,” Mark Wortley, CEO of Signature Rehab and executive sponsor of the home health program, told Home Health Care News, sharing the reasoning behind the entry into Medicare-certified home health. That was accomplished through the acquisition, for an undisclosed sum, of Florida-based ConfiCare Home Health Solutions.

ConfiCare was renamed Signature HomeNow after the transaction closed in March 2014, and that business today is operating in 11 Florida locations. Signature decided to launch home health in the Sunshine State because it has a high concentration of SNFs there, Wortley said. The company currently operates about 120 locations in 11 states, with 23 SNFs in Florida.

While Signature wanted to break out of the SNF silo by adding home health, it viewed its core facility-based services as a key strength to be leveraged. The idea was to add home health in areas where Signature could manage a large patient population through the continuum of care, achieving cost and operational synergies while ensuring high quality outcomes such as low hospital readmission rates. This would make Signature a more attractive partner for managed care payors, accountable care organizations (ACOs) and similar referral sources, which under Affordable Care Act policies have incentives to work more closely with post-acute partners to keep costs down while hitting quality benchmarks.

So far, the play in Florida has worked well, Wortley said.

“We introduced the synergy opportunities between the SNFs and home health, partnering in those markets to both jointly communicate to potential referral sources about that continuum and also enabling the smooth transition of SNF to home health…and looking at sharing clinical protocols, clinical best practices, programs of distinction,” he told HHCN.

There has also been upside on staffing, as Signature’s therapists can sometimes take on home health patients when there are fewer hours available in facilities.

As for whether hospital readmissions are lower in Florida than in states where Signature does not have its own home health business, Wortley said he is not able to share any data at this point.

Although Florida is the only state where Signature has a Medicare-certified home health offering, its Silver Angels business provides in-home personal care services in Tennessee. Signature built Silver Angels from the ground-up and launched it in 2011, in response to Tennessee tightening Medicaid requirements for skilled nursing facility care. At the same time, waivers became available under which the state offered more compensation for home- and community-based care.

“It seemed a logical progression for the organization, if you’re seeing census challenges through a reimbursement change, to look at where the opportuntieis lie,” Wortley said.

Like Medicare-certified home health, private-pay and Medicaid-reimbursed personal care services can play a crucial role in keeping people out of the hospital. For this reason, expanding in home health and personal care is “definitely in the cards for the future,” Wortley said, adding that Tennessee and Kentucky—where Signature is based and has a large number of SNFs—are the two most likely states that the company would target.

Yet, at the moment, Signature has its hands full trying to get its skilled nursing facilities on firmer footing. As of October 2017, it was $10 million behind on its rent with one of its major landlords, real estate investment trust (REIT) Omega Healthcare Investors (NYSE: OHI). Last month, Signature and Omega leaders said that they were close to working out a financial restructuring that would enable Signature to avoid Chapter 11.

Signature is not the only SNF operator in financial straits. Another Omega tenant, Orianna Health Systems, entered bankruptcy protection in early March. A Nebraska chain of 21 nursing homes was placed in receivership this week. Toledo, Ohio-based HCR ManorCare, the second-largest U.S. skilled nursing provider, is also in Chapter 11 and being taken over by its REIT landlord, Quality Care Properties (NYSE: QCP), through a prepackaged plan of reorganization. And Kennett Square, Pennsylvania-based Genesis HealthCare (NYSE: GEN), the largest SNF operator in the nation, also has been restructuring its financial obligations and took heavy losses in 2017.

All these companies have been blaming a slew of challenges, including a labor crunch, burdensome and punitive regulations, diversion of patients to other settings, and pressure from managed care payors to reduce length of stay for post-acute rehabilitation.

These SNF companies have taken differing approaches to home health during this period of duress. In 2016, Genesis divested its home health and hospice business for about $84 million, as a move to monetize non-strategic assets. ManorCare, on the other hand, relied on the strong performance of its home health and hospice division, with that part of the business floating money to the struggling SNF side.

Some of Signature’s home health branches are still in turn-around mode, but “many” are exceeding the company’s SNF margin contribution, Wortley said.

Although concerned over the current state of play for SNFs, Wortley believes that the future holds promise, as the massive baby boomer generation ages. Skilled nursing will likely change, he said, becoming a setting for higher-actuity individuals with multiple co-morbidities, putting pressure on SNFs to manage chronic diseases and coordinate care. However, he’s optimistic about prospects across the continuum.

“The gray tsunami is coming, and it’s real,” he said. “I think there’s significant upside for both SNF and home health.”

Written by Tim Mullaney