June 25, 2020 //. Episode 4
Operating Through COVID with guest David Eppers (Carespring Healthcare Management)
– Presented by Senwell Senior Investment Advisors
June 25, 2020 // Episode 4
Operating Through COVID with guest David Eppers (Carespring Healthcare Management)
– Presented by Senwell Senior Investment Advisors
Episode 04: Operating Through COVID – Presented by Senwell Senior Investment Advisors
On this episode of The Investment Opportunity Podcast, we welcome David Eppers with Carespring Healthcare Management. Carespring Healthcare Management and its family of facilities provide skilled nursing, assisted living and independent living services to seniors in the SW Ohio and Northern KY communities.
In this episode, we cover the following topics:
- Successful, evolving protocols for COVID
- Additional challenges and expenses tied to COVID
- Grant money – CARES Act, $4.9B Relief Fund
- In-room Medicare therapy
- Physical plant changes
- Industry funding
You can learn more about, and contact Carespring by visiting their website: www.carespring.com.
The Investment Opportunity Podcast is presented by Senwell Senior Investment Advisors, a mergers and acquisitions advisory firm specializing in skilled nursing and seniors housing. The show is hosted by Ben Bohland and Brandon Bohland.
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Contact Senwell Senior Investment Advisors for mergers, acquisitions and dispositions. Senwell specializes in working with owners and operators of skilled nursing (short-term rehabilitation and long-term care) facilities, assisted living and memory care facilities, independent living facilities, continuing care retirement communities and owners of bed licenses in Certificate of Need (CON) states or states with a moratorium on bed licenses.
Thank you for listening to The Investment Opportunity Podcast!
David Eppers is a Certified Public Accountant with more than 30 years experience and a history of executive financial leadership in the health care industry. He has served as Carespring’s Chief Financial Officer since 2004, achieving his primary vocational goal of using financial, analytical, and leadership skills to help the company achieve excellence. He became an owner in 2007.
Mr. Eppers joined Carespring with more than 15 years experience in the long term care industry which began in 1989 with a large publicly traded corporation, Extendicare Health Services, Inc. There he served for eleven years directing internal financial operations, and accounting functions. Also prior to joining Carespring, Mr. Eppers was responsible for chief financial and operational accounting functions in both for-profit and not-for-profit multi-facility senior care companies. David began his successful professional career working for the audit division of Arthur Anderson & Company.
David was born and raised in Sheboygan Falls, Wisconsin, enjoying youth interests such as hunting, working on nearby farms and playing sports. His introduction to the business world was through his first job, restoring and selling antique furniture. David attended the University of Wisconsin – Whitewater, where he played Division III football and met his wife prior to graduating with a Bachelors’ Degree in Accounting. Mr. Eppers is a member of both the Wisconsin Institute of Certified Public Accountants and the American Institute of Certified Public Accountants.
Episode 04: Operating Through COVID with guest David Eppers (Carespring Healthcare Management) – Presented by Senwell Senior Investment Advisors
Ben: [00:00:00] On this episode of the Investment Opportunity podcast, we’re joined by guest David Eppers, CFO of Care Spring Health Care Management, to discuss operating through COVID.
Intro/Outro: [00:00:11] Welcome to the Investment Opportunity podcast. We’ll educate you on the latest investment trends happening in one of the hottest real estate classes, skilled nursing and seniors housing. We’ll point out the risks so you can reap the rewards of investing in this growing and complex industry. And now your hosts, Ben Bohland and Brandon Bohland.
Ben: [00:00:35] Welcome, everyone, to the Investment Opportunity podcast. I am Ben Bohland, joined by my brother, Brandon Bohland. We are presented by Senwell Senior Investment Advisors, a senior care and seniors housing investment mergers and acquisitions investment advisory firm. With us on the show today is David Eppers. David is the chief financial officer for Care Spring Health Care Management and its family of facilities provide skilled nursing, assisted living and independent living services to seniors in the southwest Ohio and northern Kentucky communities. David, welcome to the show.
David Eppers: [00:01:13] Hey, how you doing, guys?
Brandon: [00:01:14] Doing great. Thanks for joining us today.
Ben: [00:01:19] So, David, you and I had a conversation last week and you brought a few interesting perspectives to what Carespring is actually doing through this new era. Can you share with our listeners in terms of how you’ve set up your facilities to adjust to the current environment?
David Eppers: [00:01:41] Regarding COVID-19?
David Eppers: [00:01:42] Well, nursing homes, skilled nursing in particular, is in a different fight than most other acute care, for example. We have to make sure that we protect our seniors. So when I think it was about March, mid-March, when this thing became real for many of us, what we needed to do was make sure our residents in their homes, which is our facilities and our staff, were protected. So the starting point was to make sure we didn’t have visitors coming in who could possibly contaminate them with the virus, but also looking for PPE.
David Eppers: [00:02:28] We needed to have our staff, which we did have our staff in masks and gowns and so forth, so that they’re protected, so that they in turn can keep our seniors protected. And then, you know, to the extent that anybody caught the virus, we didn’t have a situation where we had to send multiples of people home, for example. So that’s what our operating team did. And, I give them credit for doing it early, even though the supplies weren’t necessarily there.
Brandon: [00:03:08] So could you talk a little bit about maybe how that strategy might differ from other operating companies? So, for example, like if we look at a state like Kentucky, I think that they’re giving a fairly good amount of reimbursement per day if you have COVID in the building, from my understanding. And I guess if you could confirm that. And then what is your strategy look like compared to what you’re seeing out there in the market and what other operators are doing today?
David Eppers: [00:03:39] Sure. First of all, having the initial thrust was to not have COVID in the building. We ended up, like I said, having PPE and other protocols to keep people separated. And to the extent that somebody actually caught the virus, we had one facility in particular where a staff member had the virus. They were sent home just on suspicion because we’re testing everybody. And then a week later, we got the diagnosis. And, of course, they stayed home and recovered.
David Eppers: [00:04:15] At the same time, we had residents who we suspected of having the virus. And they went out to the hospital. There they got tested and some of them had the virus and others didn’t. And, of course, they stayed in the hospital until they were ready to return. So as we stand now, we have staff members and residents who had the virus and are recovered that are back in the facility.
Ben: [00:04:43] As opposed to if they were in the facility while they were COVID positive, right to Brandon’s, for example.
David Eppers: [00:04:53] Yes. So if, for example, if somebody is COVID positive and they’re in the facility that’s a separate, another issue we can and we have with the flu and so forth where we isolate quarantine and we’ve done those things within our facilities. For example, hospitals weren’t testing. So we would get an admission from a hospital and they weren’t tested to make sure that they didn’t have the virus. Of course, they were not symptomatic. But what we did at the onset was those people coming into our facilities were in a separate quarantine section for 14 days before they moved into the into maybe a general population hallway. Now, that was our approach. I know that there are some other operators who didn’t have their staff members in PPE, in protective equipment well into April. So and then they, of course, run a different risk. You know, if they have an employee that that gets the virus, then you look at who they got were in contact with. And that person or those that group of people would potentially have to go home.
Brandon: [00:06:15] Could you talk a little bit about you mentioned a lot testing. So how has that evolved since the beginning of this virus started to where you stand today with testing? Is that more favorable today than it was two months ago? Or are you still in the same spot?
David Eppers: [00:06:31] Testing is actually it’s different by state. We operate in two states, Kentucky, and Ohio. And in Kentucky, they’ve actually mandated testing for staff and employees.
David Eppers: [00:06:44] Our staff and our residents in our facilities.
David Eppers: [00:06:49] And that was being implemented just last week. And so they’re going through a mandatory testing phase. So from a testing standpoint, it’s by state, I’m sure, what people are doing and it’s based on availability and the desire to test. So, Ohio is also going to be testing. You mentioned earlier you asked the question, too, about reimbursement. There really isn’t reimbursement, per say for our issues. First of all, our issue is protection, more so than caring for. Now, we’ve opened some COVID units that can talk about in a minute, but that’s just recent. But for the most part, our costs have been incurred in additional salaries. We gave people hourly, hourly employees a raise. As soon as this happened, as soon as this became real and we needed to retain staff was the key thing. We also had to buy additional PPE, which initially couldn’t find. And then if you could find it, it costs more. So we ended up having to pay the additional for that equipment if we could find it. And which we did. And we do have a good supply. And then there’s additional costs in terms of we have people isolated. So they’re not going to the dining rooms for their meals. They’re going into their rooms. So we’re using paper products and so forth. And that’s an additional cost. And then just with protocols, everything is more time intensive. So there’s additional challenges in that in terms of staffing and making sure we keep up with all of the residents needs. And then you have the social aspects. The first thing first thing we did when we found out that we weren’t going to have loved ones come into the facilities, which is really an important part of their experience, is having family and friends come in. We bought iPads and actually ended up face timing and doing different things so that they would have some kind of a contact.
Brandon: [00:09:11] How are they adjusting? Are you, just out of curiosity, are you using your staff to train them on how to use that and get that up to date on how to do a face time call and things like that?
David Eppers: [00:09:23] That’s a good question, and frankly, I don’t know. I mean, I’m the CFO.
David Eppers: [00:09:29] Everybody knew how to do it. There’s enough tech savvy. And actually, we have a good I.T. department that set them up.
David Eppers: [00:09:37] But in terms of training, I don’t think it took much.
David Eppers: [00:09:44] So there’s many facets to this. As far as reimbursement is interesting, kind of being cutting edge and getting the iPads out there.
David Eppers: [00:09:53] For example, grant money was available from a federal standpoint like a month later. So the only issue is if you bought it already, you can’t use the grant money. So we were ahead of the curve on that. We could step up what we’re doing with iPads, for example, communication with grant money. But there wasn’t a chance to recover what we’ve already spent. States aren’t really paying for this additional cost. That’s one of the issues. We did get federal grant money through the Cares Act initially. That came based on our Medicare census and our Medicare experience over the past couple of years. They determined an amount that would come to us and that appeared in our bank accounts. So that’s been definitely a good federal support for us.
Brandon: [00:10:51] Was that a one time support?
David Eppers: [00:10:56] Yeah, it actually came in two payment. But it’s expected to be one time. I don’t know if there is additional funding coming our way from the Cares Act for that component. But there are other components that are yet to be paid.
David Eppers: [00:11:12] We did receive another piece of funding in terms of a grant that came just a couple of weeks ago that was nursing home specific.
David Eppers: [00:11:25] So we’re the first batch was based on Medicare census. So the people who don’t have Medicare in their facilities didn’t get anything. The second actually, the second tranche came based on just a census population.
Ben: [00:11:45] So was that that $4.9 billion dollar relief fund? Yes. Yes. So from what if I understand that, correct. I think that was that 50000 per facility and twenty five hundred a bed in addition to that. Okay. OK. So you have two sides of the coin here. You have really no help from the states on the revenue side. Just a couple of grants that offset these increased expenses. You have the PPE at least when it. Yeah. At least when it comes to the states that you operate. Correct. Right. Ohio and Kentucky. Yes. OK. So you have the PPE that obviously all those additional costs, you have the labor and with the labor, you’re giving them raises. Was there much overtime or agency associated with that increased costs as well?
David Eppers: [00:12:40] Actually, there was in some cases, people came into work, of course, but in other cases they were scared as a whole. Our heroes are really our staff members.
David Eppers: [00:12:56] They stepped up in a major way. That being said, some of them were afraid that some of them had family members that I’m sure told them they shouldn’t go in and so forth. And at a certain level we had some staff that decided not to continue to work, but for the most part, our staff did. Now, that caused some shortages. So, we had people work overtime because we have a very much a special group of staff that care for our seniors and our skilled nursing facilities. It’s amazing. They’re very mission driven and they’re going to see that the needs are met for our residents. So whatever it took some incredible people worked extra hours and did what they needed to do to make sure everybody was cared for and our needs are met. There’s some additional costs. Some of those some of those are hourly, some of them our salary.
David Eppers: [00:13:59] So but from a staffing standpoint, we also are dealing with the census drop. So then we get to the point where you can’t retain all the staff. So that’s part of the challenge, too, when census decreases, which is mainly an issue with just stopping elective procedures in hospitals and just the general fear that would possibly stop somebody from going into a nursing home.
Ben: [00:14:37] Yeah. And you turn on the news and nursing homes aren’t necessarily getting the best coverage right now. And you said it well. There is a lot of fear in your mom falls, breaks her hip, goes to have surgery. The kids might not want her in a nursing home right now. So.
Ben: [00:14:57] How do you as an operator, how do you get rid of that stigma? That’s going. How do we get past this?
Brandon: [00:15:05] Well, not only. Sorry. Not only does that pertain to the actual resident and the families, but the employees, as you mentioned. Yes. Well, I think it’s a challenge to bring staffing in. And you mentioned that you’re already losing staff because of this.
David Eppers: [00:15:23] Yes.
David Eppers: [00:15:24] Like I say, it’s as a majority of our staff are incredible. We’ve got, nurses, nurse aides, therapists, dietary staff, and then all of the other functions that are direct care providers as well as our administrative functions and the facilities that all keep it going as a whole. And I’ve been in this industry for 30 plus years. It’s amazing to see the people who choose to work to care for our seniors. How driven they are to provide that care. So, they’ve stepped up as a whole. That’s probably the bigger story. There are some people, like I say, they chose not to come in. But from a majority standpoint, they were going to do what needed to be done.
David Eppers: [00:16:21] And they still are, frankly, this this is not subsided by any means.
David Eppers: [00:16:29] And you know, the additional thing is we have residents that are in their individual rooms, so they need people to come in and care for them. So where they’re lacking in socialization. They’re not going to the dining room three times a day or other activities and so forth. That’s a crucial part of their daily experience that they’re missing out on. So we make sure that that people come to them. And one of the other areas of support for us was that we were able to and we are able to skill some of the residents in their room. And by that, I mean, you know, we look for some needs, for therapy and other things and make those assessments. And we could qualify them for Medicare, for example, Medicare Part A, which typically to qualify for a new service or to meet the skilling criteria. One of the things is you have to be in a hospital for three days. Well, that was waived as part of the response to COVID. That allowed us to then provide that additional care within their rooms, which I think it was a major benefit.
Brandon: [00:17:49] Absolutely. And I think, you know, one additional selling feature, at least for your company, is that you aren’t allowing COVID patients in your facilities or essentially employees. You’re saying that they need to be quarantined. That hasn’t necessarily been the story that we’ve heard in other states throughout this entire process. So I think that story is a good one and a positive one, that you’re treating it serious and you’re looking at the data that’s coming out and treating it as if it is real data. These are real people and it is serious.
David Eppers: [00:18:29] Well, yeah, and it’s also timing.
David Eppers: [00:18:32] And so when we looked at how this was how we were confronted with COVID-19 initially and our executive staff is second to none from Chris Trumbull, our CEO, John Muller, a COO, and Kim Majick or one of our officers, our executive team, really analyzed with, among others, every bit of information that was coming out and CDC guidelines and constantly changing like we had to change what how you use PPE so that we could extend the life of the PPE. So we had sufficient quantities. So, since this evolved, the initial thrust was, yes, we want to keep them out of our facility, keep COVID positive out of our facility. To the extent that we knew that they’re positive. Now, that’s changed. We’re looking at we have a couple facilities because of the physical plant and the decreased census. We have wings that we could use that have separate entrances where we can treat COVID and take COVID positive residents in those facilities. So, we’ve done that. So, we have a couple of facilities where these residents are not, they don’t need to be hospitalized. They don’t their symptoms are such that we can care for them and we can care for them very well. And with our protocol and the physical plants, we can make sure that they are very much safe and the rest of our residents are safe from getting a COVID infection from the individuals that come in because we have these separate wings that we could use.
Brandon: [00:20:30] Do you think, you mentioned the physical plant do you think that we’re to the point where? We start to look at the existing physical plants going forward and whether that be through renovation or, as we start to develop new senior housing projects and skilled nursing facilities throughout the country. Do you think that’s something that people need to start taking a look at a little bit more seriously and kind of reassigning their CapEx to accommodate that?
David Eppers: [00:21:01] Our industry is constantly changing in terms of what our demands are from a physical plant. People want more private rooms. People want more amenities. What we do at Carespring is we’ve always tried to meet those needs. Our founder, Barry Bortz, who passed away in 2016. He had a mission to make sure that our residents needs were met, but also that they really had a nice environment. I always like to hear many times that people who move into our facilities say these are the nicest. This is the nicest place I’ve ever lived. And so to do that, we’ve had to make changes and accommodate changing needs. I think that will continue. In terms of from a financial standpoint, what we need in this industry is to have more capabilities to pay for and fund replacement facilities. You know, we’re in this challenging phase in our industry where we want to do more. And there’s more demands on us for quality and measured quality from the state’s perspective and more documentation. All these things take time and resources. Yet we’re asked to do more. But then there’s more demands on us from a physical plant in terms of what people want for amenities and private rooms and things like that. So to meet all of those things with some buildings that, frankly, industry wide are getting old. That creates a huge challenge. So somewhere to meet the needs going forward, we’re going to need some additional funding and investment in our industry.
Ben: [00:23:13] All right. Yeah. That’s what it sounds like. You mentioned that the industry is changing. This is an extreme situation where it’s just such a fluid environment. And it sounds like you all have done a great job with getting through the chaos. And now we’re at a point where you can come up and breathe. But I don’t think that you’re unlike any other operator in you’re studying the environment and trying to figure out how to best care for the patients, and that’s ultimately the most important responsibility. It sounds like you guys are doing a great job with that, with you and your staff.
Brandon: [00:23:58] So, David, and one thing I just wanted to ask kind of before we let you go, is, is there anything that you mentioned a lot of the issues going on with staffing reimbursement? I guess at the end of the day, what’s keeping you up at night? Today?
David Eppers: [00:24:21] I would think the main thing I think about is what’s right for our residents? This is their home. So, we need to care for them. And then how do we support our staff in this process?
David Eppers: [00:24:36] And as a whole, I’m not staying up at night. And that’s because the leadership that we have at Carespring and, I’m talking down through our facilities and our staff as a whole, they’re focused. They’re focused on what’s going on. The challenge we face is how are we going to roll out of this? Give an example. We’re very tight margin facility or industry as a whole. And our facilities are. Ah, it’s a challenge to keep operating. And at 90 percent occupancy, we do fairly well. Interesting enough, at about 88 percent occupancy. We struggle.
Brandon: [00:25:28] Doesn’t take much.
David Eppers: [00:25:30] It really doesn’t. And we are currently at 79 percent as an average. How do we move forward through the next several months and who knows how long this is going to last?
David Eppers: [00:25:47] How do we move forward to get where we need to be to be on a firm footing financially so that we can sustain ourselves without grants or additional funding? So that’s probably my as a CFO, that’s my biggest concern is dealing with the unknown. And so far, the federal government has stepped up and the states and state associations are doing a good job in analyzing what we need to do going forward.
David Eppers: [00:26:29] But, we’re not done yet.
Ben: [00:26:33] I just can say, are they. I mean, at 79, 80 percent occupancy, obviously that can’t keep up for too long or the PropCo’s that you’re working with. Are they giving you any grace during this time?
David Eppers: [00:26:48] That’s a good question. So we operate with a REIT and private equity companies which functionally own our facilities and we rent them from them. And in long term leases. They have given us moral support, but I don’t expect that they’re willing to not have a rent payment come in. So from that standpoint now, the one I talked to, the REIT, said they would look at it on a case by case basis, but would not, I don’t know what they would end up doing if we were not to pay the rent. That’s a different relationship. As far as covenant violations, we have certain tough financial covenants that we need to meet. I did get assurance that they’re not going to hold us accountable for maintaining certain covenants during the COVID-19 epidemic.
Brandon: [00:27:53] Yeah, we’re seeing that with other PropCos as well.
Brandon: [00:27:58] Yeah, well, David, we certainly have appreciated your time and your input here.
Brandon: [00:28:04] I think that we’ve definitely gained some value from this conversation. I certainly appreciate your time.
David Eppers: [00:28:13] Absolutely. Thank you for asking. Appreciate it.
Brandon: [00:28:16] David Eppers is the chief financial officer at Carespring Health Care Management. And thank you for joining us on the show today. Thanks, David.
David Eppers: [00:28:25] You’re welcome. Have a good day.
Ben: [00:28:27] Hey, welcome to the What You Got segment of the show this week, I would like to discuss the opportunity to acquire two skilled nursing facilities in western Michigan. Both of these facilities include about 90 beds or so, so 180 beds total. The owner would like to sell this in one transaction. So total EBITDAR is about break even. However, the owner just received their updated Medicaid rate letter and that should increase the EBITDAR by about three hundred thousand dollars. There is additional potential upside, but again, these are these are turnaround assets in western Michigan, about 180 beds. And there is some upside here. So if you would like to discuss this opportunity further, please contact me at Ben@senwelladvisors.Com. Thanks.
Intro/Outro: [00:29:20] Thank you for listening to the Investment Opportunity podcast. If you want to hear more about investing in the skilled nursing and seniors housing industry, head to our Web site at www.senwelladvisors.com/podcast.