Leaving the Red Ocean Mentality Behind: Inside Ignite and the Path Forward for AG Rhodes Nursing Homes

Growth strategies for nursing homes can vary widely depending on nonprofit or for-profit status, especially the geographic market in which the operator currently operates, leaders said. But growth and innovation—regardless of sector or region—require risk and big vision to get right.

Suppliers will have to reimagine the bigger picture to meet consumer expectations, which is a necessity to thrive in today’s market, said Deke Cateau, CEO of nonprofit operator AG Rhodes in Georgia. The nonprofit supplier operates three facilities.

“We are a sector that is very much a red ocean. We see what one person does, we copy it, we spit it out, we do it in all sorts of different versions,” he said. “We need to look at new models of housing. The care in nursing homes in this country is worse than it should be; shared rooms, long corridors… that is not the way we want to live.”

Meeting what consumers need in the future means not just building but taking a visionary view of quality care, he said. Cateau and Tim Fields, CEO of Ignite Medical Resorts, spoke about growth paths at Skilled Nursing News’ ReThink conference in Chicago. Ignite operates 23 facilities in six states.

For Ignite, new investments, acquisitions and creative deals are key growth strategies that seem to be playing well in the suburban environment. Meanwhile, nonprofit AG Rhodes has increased its revenue by 35% since 2018, focusing on mission-driven growth, renovating private rooms and expanding memory care, and building an in-house dialysis clinic. The nonprofit also opened its own staffing agency a year and a half ago, which has helped the team hit revenue goals.

“Growth and scale are very relative terms,” Cateau said. “We’ve gotten leaner and much better at what we do, even during Covid. The quality that we’ve been able to show in the Atlanta market has put us at the top of that market.”

A.G. Rhodes bid on other properties in the Atlanta market, but inflation and other factors meant the price per bed was beyond what the nonprofit would be willing to pay, he said. Instead, the company went back to basics, building a 72-bed memory care unit, all private rooms, using a home-based model. The nonprofit also renovated one of its properties to include private rooms, with plans to do the same with the other two, one of the first in the Atlanta market to make that big move.

As for Ignite, there aren’t many “new projects” at the moment, Fields said.

“We’re still very bullish on (the expansion). We think having new, innovative buildings in our seven markets is disruptive,” he said.

Renovating vs. Building

As for acquisitions, Fields said about two-thirds of Ignite’s properties were built by other operators and are in a good market but where day-to-day operations could be better — efficiencies that Ignite has brought. Other acquisitions are one-time, creative, off-market deals that typically involve retrofitting an older building.

In addition, Ignite has two projects underway, one in Chicago and another in St. Louis, that are set to open next summer. But securing financing has been a challenge. In addition, construction staples like HVAC, electrical, and plumbing have seen their costs rise 40% to 60% post-Covid and are only starting to normalize in 2023.

“We’ve joined a group of development partners. We’ve done some creative deals where someone helps manage construction, find land,” Fields said, along with partners who help build in a certified-need (CON) state. “Those are strengths on the building development side.”

In short, when it comes to building a skilled nursing facility, relationships and creativity matter, Fields said.

When it comes to funding innovation, Cateau added that nonprofit fundraising has helped grow their team.

Looking ahead, Fields said Ignite won’t grow for the sake of growing. And it doesn’t really have a target size in mind in terms of the ideal number of facilities or revenue. Whether it’s ancillary services, ancillary products or brick-and-mortar locations, growth that helps with access or one that increases revenue is ideal. Growth strategies that drive company culture are something Ignite is also considering.

“Our team wants to keep that energy going and keep doing innovative things,” Fields said.

Different operators, common goals

Still, there are some similarities among so many different types of providers. The importance of regulatory, litigation and reimbursement environments is always something to consider when considering growth, and all providers are feeling the pressure of labor shortages and regulatory hurdles, along with the need for technology adoption in the industry.

Increasing your reach involves a few other issues.

Fields added that as the business scales up, it is important to determine how to control value-based care in certain markets by engaging institutional special needs plans (I-SNPs), adding ancillary services and taking the lead in hiring through internal staffing agencies to control costs while providing alternative sources of income.

Still, smaller operators should be cautious when looking for opportunities to scale, Cateau said. An operator may not have the size to add an ancillary service, and perhaps a partnership for some services would be the way to go.

Cateau said the operators should also consider working together if acquisitions of brick-and-mortar stores aren’t currently on the cards. The nonprofit is considering getting into business management, rather than larger ownership, and has been working with a for-profit operator in Georgia, PruittHealth, for years. The relationship with Pruitt is mutually beneficial, he said, with both parties using it for many of its ancillary services and getting competitive prices for those services, Cateau said.

“In the state of Georgia, we have very good, very strong, reputable assisted living facilities, CCRCs and independent living operators. I personally see a role for us there to do what we do best … we specialize in skilled nursing care. I see a big, big game there.”

AG Rhodes is also considering participating in the Program of All-Inclusive Care for the Elderly (PACE), which is coming to Georgia soon, Cateau said. The organization’s existing dialysis clinics at two facilities serve two communities in the state with the highest incidence of end-stage kidney disease.

To achieve growth, partnerships and sharing of responsibilities across service lines are important.

“Tim talked about sharing that responsibility, right? It’s been really good from an admissions standpoint, too,” Cateau said of the in-house dialysis service. “We have a lot of people who want to come in because we have that accessibility and they don’t have to travel… it’s really worked out.”

Cateau said plans are now afoot to add on-site dialysis at a third facility.

“That’s the nonprofit difference. I think our growth will depend on how we position ourselves in the health care ecosystem to be most beneficial to those in that ecosystem,” Cateau added.