A Good Investment in Valley Manor!

With the year 2010 quickly coming to an end, it is a good time to reflect on the operations of our Seniorsfirst independent retirement community. While the nursing home business has been a cash challenge, our Valley Manor apartments has been a "cash cow".


Now don't get me wrong. We have had our challenges at Valley Manor over the past few years and the tough economic times have definitely impacted retirement communities. Seniors are much less apt to make major lifestyle changes in these uncertain times. They have seen their investment portfolios diminish, their income remain flat at best and selling their home has become a really big challenge. All of this has had a significant impact on occupancy and limited the number of seniors actively seeking, or moving into, retirement communities.


So how has Valley Manor fared this year?



Well, apparently folks have determined that a property investment in Valley Manor is a real good investment in these challenging times. If they can't take the volatility of the stock market and the fixed investment market is returning a dismal interest rate, many seniors have opted to invest their available capital in a refundable entrance fee apartment at Valley Manor. And why not? Real estate has a history of being a very good long term investment and a good hedge against both inflation and stagnation. In the case of Valley Manor, it is also a lifestyle investment in that it provides housing and a quality of life for the investor.


We have had a record number of new move-ins this year opt for the refundable entrance fee option and as a result expect to take in over 1.5 million dollars in entrance fees alone. This represents a 50% increase over our historical averages and despite a decrease in our current occupancy, we will end the year with ample cash to meet both our current obligations and escrow funds for future obligations.



We continue to benefit from our low, variable interest rate mortgage and we have allocated some of these savings towards a continuing occupancy enhancement program that includes both marketing and capital improvement initiatives. While we anticipate continued pressure and challenges with respect to occupancy, we also anticipate the continuation of high numbers of entrance fees.


We will continue to advertise what many seniors have already come to recognize- that Valley Manor Apartments is a very good investment!

How far can we stretch?

If you are a faithful reader of my Blog, you are aware that at Kirkhaven we have been "patiently" waiting for the State to retroactively begin paying nursing homes the new, updated Medicaid rate effective all the way back to April 1, 2009.


For Kirkhaven, this promises to increase our rate approximately $25 a day and retroactively reimburse us for nearly 1.5 million dollars. Since the State is merely shifting capped Medicaid dollars between nursing homes across the state, they can actually afford to do this. There will be winners and losers when the new rates are paid, and fortunately Kirkhaven is among the expected winners.


The reason for this is in part because Kirkhaven is one of only a few nursing homes who is still receiving a cost-based Medicaid rate calculated from its initial 6 months of operations back in 1984. A lot has changed since then and our cost structure today is very different from what it was back then. While our rates include an inflation factor adjustment, it hasn't kept pace with our real cost increases or inflation.


A recent survey of our peer nursing homes showed that our $155/day Medicaid rate is well below the $183/day peer average. As a result, we are forced to operate at a lower cost per day than our peers while still providing the same high quality of care. This same peer survey showed that over the past 10 years, Kirkhaven's operating costs have increased 36.3% versus the peer average of 64.5%. Our salary costs per bed increased 33.2% over the same 10 year span versus the peer average of 55.6%. And while the peer average staffing per bed increased at a rate of 10.5% over the past 10 years, Kirkhaven's staffing per bed decreased 2.4%.


These are not statistics we necessarily wanted to aim for, but rather had to hit in order to maintain fiscal integrity. With a federal quality rating from CMS of 4 stars, Kirkhaven has attained the envious status of a low cost-high quality nursing home. But how far can we stretch?



In 2010, we pushed our available line-of-credit to the limit and implemented a 6-month austerity budget to keep our cash flowing while we waited for the "imminent" Medicaid rate upgrade. We have literally used every option available to us to out wait the State, but how far can we stretch?


Our Board of Governors has authorized us to continue to leverage our operation in anticipation of the new Medicaid rates rather than cut our staffing and expenses even further. We have requested some level of relief from the State and will continue to do what we can to bridge the gap while we wait for the State to pay the new rates. But how far can we stretch?


2011 promises to start out in much the same fashion as 2010. Still getting paid $155/day for Medicaid residents, who comprise nearly 70% of our resident population and who cost us on average $216/day. We will continue to operate on an austerity budget and hold off on any wage increases, new positions and discretionary expenses. We will advocate and lobby for the State to fulfill its promise of updating the Medicaid rate. And we will wait and pray that we can continue to make ends meet while the State gets it's house in order.


But how far can we stretch?