Discarding the ‘Red Ocean’ Mindset: Inside Ignite and AG Rhodes’ Paths to Growth for Nursing Homes

Growth strategies for nursing homes can vary greatly, depending on nonprofit versus for-profit status, especially the geographic market in which an operator is currently operating, leaders have said. But growth and innovation – no matter the sector or region – require risk and a lot of vision to properly execute.

Providers will have to reimagine a grander vision in order to meet consumer expectations, and the necessity for growth in today’s market, said Deke Cateau, CEO of nonprofit operator AG Rhodes in Georgia. The nonprofit provider operates three facilities.

“We are a sector that is very red ocean. “We see what one person’s doing, we copy it, we spit it out, we do it in all kinds of versions,” he said. “We need to look at new housing models. Nursing home care in this nation is less than what it should be; the shared rooms, the long hallways… it’s not how we would want to live.”

Fulfilling what consumers need in the future means not just construction, but a visionary standpoint on quality of care, he said. Cateau and Tim Fields, CEO of Ignite Medical Resorts, spoke about routes to growth at Skilled Nursing News’ ReThink conference in Chicago. Ignite operates 23 facilities across six states.

For Ignite, new development, acquisitions and creative deals have been main growth strategies that seem to work well in a suburban environment. Meanwhile, nonprofit AG Rhodes has grown its revenue by 35% since 2018, focusing on mission-based growth, private room renovations and memory care expansion, as well as building out an in-house dialysis clinic. The nonprofit also opened its own staffing agency a year and a half ago, which helped the team reach its targeted revenue statistic.

“Growth and scale are very relative terms,” said Cateau. “We have gotten leaner and a lot better at what we do, even through Covid. The quality we were able to show in the Atlanta market put us on the top of that market.”

AG Rhodes has bid on other facilities in the Atlanta market, but inflation and other forces put the price per bed outside of what a nonprofit organization would be willing to pay, he said. Instead, the company went back to its roots, building a 72-bed skilled memory care unit, all private rooms utilizing the household model. The nonprofit also renovated one of its properties to be all private rooms as well, with plans to do the same with its other two, one of the first in the Atlanta market to take that big leap.

As for Ignite, there’s not a lot of “new development” going on right now, said Fields.

“We’re still very bullish on (development). “We think it’s disruptive to have new, innovative buildings inside of our seven markets,” he said.

Refurbishing vs. building

In terms of acquisitions, Fields said about two-thirds of Ignite’s properties were built by other operators and are located in a good market, but where day-to-day operations could have been better — efficiencies Ignite has brought in. Its other acquisitions are one-offs, off-market creative deals that usually involve retrofitting an older building.

Also, Ignite has two construction projects in the works, one in Chicago and another in St. Louis, which are both set to open next summer. But, financing was a challenge to secure for these. Moreover, costs for such construction mainstays as HVAC, electric and plumbing went up 40% to 60% coming out of Covid, and only just started to normalize in 2023.

“We joined a bunch of the development partners. We’ve got some creative deals we’ve done where someone’s going to help with managing construction, finding the land,” said Fields, along with partners to help build in a certificate of need (CON) state. “These are strengths on the building development side.”

Long story short, relationships matter and creativity matters when getting a skilled nursing construction project off the ground, Fields said.

When it comes to funding for innovation, Cateau added that nonprofit fundraising has helped with growth in that way for their team.

Looking ahead, Fields said Ignite won’t just grow to grow. And there really isn’t a target size mind in terms of an ideal facility count or revenue number. Whether it’s ancillaries, added products or brick and mortar locations, growth that helps with access or one that grows revenue is ideal. Growth strategies that energize company culture is something Ignite considers as well.

“Our team wants to see that energy of us growing and continuing to do innovative things,” said Fields.

Diverse operators, common goals

Still, there are some commonalities among so many varied types of operators. The importance of regulatory, litigious and reimbursement environments is always something to pay attention to when considering growth, and all providers are feeling the pressures of workforce shortages and regulatory hurdles, along with the need for technology adoption in the industry.

Growing the footprint involves several other considerations.

Figuring out how to control value-based care in certain markets through involvement with institutional special needs plans (I-SNPs), adding ancillary services and taking the lead with staffing via in-house staffing agencies to control costs while providing alternative revenue streams, are all important factors to consider when scaling up, Fields added.

But, smaller operators should be careful when searching for opportunities to scale, Cateau said. An operator may not have the size to pull off adding an ancillary service, and maybe partnership for certain services would be the way to go.

Cateau said that operators should look into collaboration as well if brick and mortar acquisitions aren’t currently in the cards. The nonprofit is considering getting into the management side of the business rather than more ownership, and has had a partnership for years with for-profit Georgia operator PruittHealth. The relationship with Pruitt is mutually beneficial, he said, using them for a lot of ancillary services and they get competitive pricing on such services because of that, Cateau said.

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

AG Rhodes is looking into participating in the Program of All-Inclusive Care for the elderly (PACE) program as well, which is set to come to Georgia soon, Cateau said. The organization’s existing in-house dialysis clinics among two properties serve two communities in the state with the highest incidence of end stage renal disease.

For growth, partnership and sharing responsibilities across different service lines is important.

“Tim spoke about sharing that responsibility, right? It’s been really good from an admission standpoint as well,” Cateau said of the in-house dialysis services. “We have a lot of people that want to come to us because we have that availability and they don’t have to travel… it has really been successful.”

Now, Cateau said there are plans to add in-house dialysis to the third facility.

“That is the nonprofit difference. “I think our growth is going to be how we place ourselves within the health care ecosystem to be most beneficial to those within that ecosystem,” Cateau added.