Building new SNF means moving away from Medicaid for Diakonos Group

Tightening margins and drying up supplier relief funds have made renovations and new construction nearly impossible for many skilled nurse operators.

The Diakonos Group, however, recently opened its second new SNF in Oklahoma in the past year – this one costing $17 million – as the state’s longtime operator is tired of waiting for Medicaid rates are catching up with operational costs.

CEO Scott Pilgrim has taken matters into his own hands by bringing a new model of care to the Oklahoma City area and adjusting its payer mix accordingly.

“We have another building that has significant [short-term post-hospital stay patients], but most of our buildings, like most buildings in Oklahoma, are primarily Medicaid,” he said. “Generally, if we can increase our quality mix by up to 25-30%, we would be really happy. With these new buildings, our quality mix should be 100%.”

The Diakonos Group opened the Parc Place Medical Resort this year, which is intended to be primarily post-acute and designed to be more of a “resort environment” where patients come on a short-term basis. The new building adds 73 beds to the Oklahoma City market, and Pilgrim expects the average length of stay to be 20 days compared to 18 months at a typical long-term care facility.

“We are prepared for this turnover,” he said. “In Oklahoma, you can count the number of new buildings that have been built in the last 20 years on one hand, so people yearn for a better post-acute environment and specialists in that practice space.”

Parc Place received its Medicare certification on Feb. 24, Pilgrim said.

It is the Diakonos Group’s latest development following the completion of a $15 million, 102-unit skilled nursing facility in Tulsa, Okla., which features several medical resort-like touches.

While the nursing home industry has long been funded by Medicaid reimbursement, Pilgrim will take a different approach with the new facility as it moves more toward private payment and Medicare.

“I’ve been rubbing a lot of pencils in the knot, trying to figure out how to build new buildings and take Medicaid and I can’t do it, in Oklahoma anyway,” he admitted. “I think Medicaid programs are going to have to start paying a rate equal to what the government expects from the level of care and what the public expects from the level of care.”

According to a recent report by professional services firm CliftonLarsonAllen (CLA), up to 40% of nursing home residents could be “at risk” of displacement, as the industry’s median operating margin is expected to be -4, 8% for 2022.

“We cannot continue to provide collective life to the extent that we have in the past,” Pilgrim said.

Susan Ryan, senior director of the Green House Project, previously told SNN that removing financial barriers such as access to capital and Medicaid underfunding would be a step towards innovation in nursing homes, such as the move to private rooms and the tiny house model.

Pilgrim plans to build for the future with Parc Place and additional new facilities the operator has in the works, incorporating improved infection control capabilities, private bedrooms, private bathrooms and square footage that tends to be much larger than most 50 year old legacy facilities.

“I think when you look at the demographics, we have too many nursing homes, especially in Oklahoma State right now, and way too many beds,” Pilgrim said. “But in 10 to 15 years, we won’t have enough.”

From a market perspective, in order to sell nursing home rooms in the future, Pilgrim believes the industry needs to move away from all service type rooms.

About John Tuttle

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