Evolving Care

By Business Observer Staff
| 6:00 p.m. September 7, 2007
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Entrepreneurs

Evolving Care

COMPANIES by Dave Szymanski | Tampa Bay Editor

Brandon-based Senior Care Group, a survivor in a turbulent industry, responds to an increasing need by seniors for a variety of housing

Elderly care facility operators must feel their industry has reached the market equivalent Dante's 9th circle of hell.

At least two major corporations with several facilities sought protection in bankruptcy court. There were hostile takeover attempts. Companies put themselves up for auction. Spiraling malpractice insurance costs spiked 51% in 2003. There were mega million-dollar lawsuits by law firms specialized in suing the industry. One company lost a $20 million lawsuit.

This has been the economic life of nursing homes, assisted-living facilities, skilled nursing facilities, independent-living facilities and other residential developments for retirees with health care services in the past decade.

While the aging U.S. population makes it a growth industry, it is one of the most difficult and costly.

Yet one of those organizations, Senior Care Group of Brandon, a manager, operator and owner of nursing homes and assisted-living facilities in and out of Florida, seems to have escaped all of Dante's Inferno, operating with relative stability for more than 20 years.

How? By following the desires of the demographically significant Baby Boomers. This large chunk of the U.S. population is getting older and it's demanding a greater variety of facilities, with health care options, but also group activities and upscale features.

"This is an industry that used to be like three kinds of ice cream," says David Vaughan, CEO of Senior Care. "Customers have redefined everything. There's a huge diversity of what people want."

Senior Care, a 501(c3) non-profit, plans to open one of those facilities, The Bridges at Winthrop, in Riverview, just east of Tampa, in the fall of 2008. It is planning to expand another facility, Lakeshore Villas, in north Tampa, with more upscale, more independent housing on 20 acres across the street.

Beginning in Pennsylvania

Senior Care began in Shenandoah, Penn. in 1983 when a group of businessmen bought a hospital and converted it into a nursing home.

It later sold that facility and changed its name from Locust Mountain Health Care Facility to Senior Care, to reflect its growth ambitions. It moved the headquarters to Florida, home to many nursing homes. Vaughan, who started as an advisor to the company, later joined its board and became its CEO.

In 1999, it bought one of the region's largest family-owned senior living and care facilities, Lakeshore Villas in north Tampa, in a $36.7 million deal. The deal was financed principally by $35.2 million in revenues from bonds issued by the Hillsborough County Industrial Development Authority.

Senior Care bought the complex, including a 156-bed assisted-living facility and a 179-bed nursing home, from father and son, Roland and David Goehring. It has since made millions of dollars of renovations, including the construction of a new wellness center for residents and a lodge for Alzheimer's patients.

The company, which has about 2,800 employees, has facilities in seven states.

After seeing tort lawyers wield considerable influence, changes in state laws in Texas and Florida helped limit lawsuit costs, bringing the number of suits against the industry down.

But there is still legal risk. "You're dealing with some people who maybe can't move, so you're going to get some bed sores," says Homer Duvall, partner with the Holland & Knight law firm in Tampa, who has done legal work for nursing homes. "It's compensable. There are damages. People are entitled to get payment."

He added that juries are sympathetic in such cases: "They seem to rule in favor of the residents. The legal fees can be substantial."

Upscale touch

Part of the new nursing home industry is being responsive to more discriminating tastes. The improvements and expansion of Lakeshore Villas in Tampa are examples. The facility is minutes away from Avila, one of the Tampa Bay area's most exclusive communities.

"Someone from Avila can move in and feel right at home," says Vaughan, 76, a South Carolina native, Valrico resident and longtime businessman. "We're dealing with the most affluent group of people the world has ever known."

There are several needs: Safety, independence, health care and convenience. At The Bridges, some residents want to play golf and tennis nearby.

"People have protection and security, and at the same time freedom to enjoy life to the fullest," Vaughan said.

One of the larger health care needs is mental health. Studies have shown that 25% of the elderly have treatable depression. "We offer a whole spectrum of those services," Vaughan says.

What is common in couples at senior facilities is that one of the two people in the senior couple has more health care problems, prompting the need to move to a senior community, which has more convenient health care and other services.

Different competition, economics

Besides other retirement homes, the industry competes against homebuilders, companies that stress the greatest independence for seniors: their own home.

However, those companies don't provide any other services to help the elderly, who may start off independent, but need convenient medical services and other care in years to come.

The economics of the industry depend on the way the business is set up. Some companies develop and own properties, but get someone else to manage them. Some do everything. Most facilities deal with getting reimbursements from the federal government through Medicare and Medicaid.

Nursing homes submit their expenses to the government. The government sets the rate on allowable expenses on a per-patient day until the next reporting period, when it sets a new rate. "Not all companies can afford to stay in that kind of business," Duvall says.

"A few years ago, the government cut what it was going to reimburse nursing homes for," he adds. "Here you had nursing homes with patients and they their reimbursement was cut fairly drastically. It hurt them substantially."

Vaughan wants to continue to provide housing for seniors and meeting their expectations. He is hesitant to quote numbers on the company's expansion, but he is clearly looking to bring new facilities into the company fold because he is traveling and talking to potential new clients.

"My vision for the next five years?" he repeats. "Going with the flow. We're largely a health care provider. We manage assisted-living facilities."

Vaughan expects the upscale trend to continue as more people enter retirement age. He is meeting with church groups in Chicago, Denver and elsewhere who want to take care of some of their aging members.

The focus on what current and future customers want remains a strong element for Senior Care.

The Bridges at Winthrop

Research indicates that the current generational approach to aging requires a wide assortment of housing options to accommodate individual situations. Studies show that the major drawbacks many retirees feel toward senior communities are the loss of independence and equity. Based on this research, Senior Care Group has developed a variety of equity-based homes and rental units for The Bridges at Winthrop, a new senior community in Riverview scheduled to open in about a year, including:

• Single Family Villas: Two or three bedrooms with attached garage; 2,044 sq. ft. to 2,429 sq. ft.; Flexible membership package

• The Dorchester and The Upton Grey House - Condominiums: Two or three story buildings featuring one, two or three bedrooms; 665 sq. ft. to 1,340 sq. ft.; Flexible membership package

• Claridge House - Assisted Living: Two-story, 71-unit, 103-bed Florida-licensed assisted living health center with a 16-bed memory wing. Provides assistance with daily living activities, three meals per day and planned activities, plus transportation, housekeeping and limited nursing services provided

Additionally, while some retirees still want to adopt a standard set of services, the majority of seniors desire services and amenities that are as unique as their lifestyle. As a result, The Bridges at Winthrop has prepared a selection of services and amenities so every resident can choose their own lifestyle. An on-site wellness center will provide a host of ancillary services including professional physical, speech and rehabilitation therapy, educational clinics, seminars and demonstrations.

As the heart of The Bridges, The Cambridge Club will include grand entrance, full-service dining room, bar & grill causal dining, arts & crafts room, beauty salon, library, conference room, pool and spa. Additionally, The Bridgeport will provide medical and ancillary care to The Bridges' residents and the surrounding community.

trends

Here are the five main trends shaping the senior housing/senior care industry:

1) Consolidation: Because of bankruptcy court filings, million-dollar lawsuits and malpractice insurance costs, the industry has consolidated. Because of changes to laws and better business practices, legal costs have declined.

2) Baby Boomers: This demanding, somewhat affluent and giant segment of the population is aging. That means companies are building a greater variety of senior facilities, allowing for independent living and activities as well as medical care. More upscale settings are more common.

3) Care for depression: Many elderly suffer from depression, so facilities are making mental health care professionals available.

4) Group activities: Many facilities have staff that plan group outings and activities at the facility.

5) Longer term residents: As the population ages, many Americans are also living longer, making rental arrangements longer than in the past.

INFORMATION

Senior Care Group

Fiscal Year Revenue:

2007 $90 million

2006 $83 million

2005 $48 million

2004 $38 million

2003 $28 million

For the fiscal years ended June 30; source: Senior Care Group