COVID-19’s lasting impact on long-term care assets

COVID-19’s lasting impact on long-term care assets


Cataldo Ambulance medics bring a patient who has tested positive for the coronavirus disease (COVID-19) to the ambulance at an assisted living facility in Chelsea, Massachusetts. REUTERS/Brian Snyder

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July 12, 2021 – Kyra Fischbeck Howell of Bradley Arant explains that the COVID-19 pandemic has highlighted a need to move toward integrated models of skilled nursing and long-term care, requiring real estate practitioners to engage in new types of collaboration.

COVID-19 came upon us all like a tsunami, leveling life as we knew it and causing an entirely new paradigm of behavior to be necessary. No segment of the population was hit harder than seniors, both in our communities and in senior care facilities. Long-term care facilities were on the frontlines of the battle, being one of the first industries to be required to wholly alter traditional behaviors to try to stop the inevitable spread of this deadly virus.

Long-term care facilities are, for simplification, generally broken down into three categories — nursing homes (skilled nursing facilities), assisted living facilities, and independent living facilities. Of these, skilled nursing and assisted living facilities faced the greatest challenges in containing the virus. This was due primarily to the proximity of patients or residents to one another — including shared rooms — as well as the frequency with which caregivers in these facilities needed to be present to care for patients.

Assisted living facilities are generally described in terms of “units” per facility, with many units consisting of two beds. Skilled nursing facility (SNF) capacity is generally described by the number of beds, and there are in many instances two beds per room, with some SNFs having three or four beds in a room. Thus, during COVID-19, the facility space did not easily allow for separating patients to slow the spread of the virus.

When it was apparent that COVID-19 was invading these communities quickly and causing a disproportionate number of deaths compared to the rest of the population, long-term care facility operators and federal regulators raced to find solutions given the hard asset environment in which they were operating. Common rooms were turned into makeshift bed quarters, and tents were erected adjacent to facilities to house patients and residents in order to avoid such close proximity.

Nursing homes and hospitals were quickly and routinely faced with the difficult question of what to do with elderly COVID-19 patients who had been discharged from the hospital but were still under quarantine for a requisite length of time.

Some SNFs were only taking COVID-19 patients (indeed some states were requiring nursing homes to accept COVID-19 patients) while others were having to deny them. Makeshift quarters, primarily comprised of tents, were also used in these instances. The difficulty with spreading out the physical resources, however, was the shortage of nursing staff that grew progressively worse as the virus raged.

Now, with hindsight to ponder, the federal government is investigating what needs to be done to prevent a similar impact on the elderly in long-term care facilities in the future. Congress has been holding hearings on alternatives to the traditional SNF environment, with many in the Executive Branch and in Congress supporting greater access to home health.

The challenge with this model on a wholesale basis, however, is for the nursing and caregiver industries to keep up with the need. Out of foresight or necessity, many long-term care facilities have already shifted primarily to private rooms. Many others lack the access to capital required for this sort of infrastructure change.

Still others, in California for example, are embracing a hybrid home health/assisted living environment by utilizing clusters of residential homes in standard neighborhoods, each being a separately licensed facility with six or fewer patients, to bring the home health environment to their facilities. Due to the need for more acute care in SNFs, however, more specialized considerations come into play.

Prior to COVID-19, several facility real estate owners and operators had either implemented solutions without knowing of the looming crisis to come or were already discussing shifts in real property assets to accommodate the increase in the aging population over the coming decade. In particular, they have moved toward increasing the infrastructure in their communities to integrate multiple services. Some senior living communities have begun to integrate skilled nursing and assisted living care into their community structure while also adding so-called “social” resources such as movie theaters, fitness centers and other social constructs.

In some instances, these providers are allowing seniors in the surrounding area to utilize services within the senior care community on an a la carte basis. The result has been that the planned increase in infrastructure has made the need to move to private rooms less of a burden and in some cases, not a shift from the plan at all.

Several in the long-term care industry believe that smaller SNFs with private rooms are the way of the future. While that may be the case, look for these facilities to be integrated with other real property assets to form structures that encompass a more holistic and integrated environment for the elderly.

Hospitals, SNFs, assisted living facilities, independent living facilities (multi-unit residential buildings with safety features and daily maintenance provided), social gathering places, fitness centers, entertainment venues — all of these are increasingly likely to co-exist in the future rather than be separate campuses.

Does the infrastructure and physical plant exist for this sort of collaborative environment? Absolutely. Repurposing large, vacant real property structures for medical purposes is already happening. Those of us in the legal community will need to begin thinking beyond our normal scope to prepare for these integrations.

Real estate practitioners can begin partnering with their healthcare regulatory colleagues to better understand the current Medicaid and Medicare payment models and stay on top of changes as they occur to deal with this emerging landscape. Legal practitioners whose practice primarily consists of standard long-term care real estate and finance transactions should be aware that traditional leasing may become an integral part of these transactions beyond the standard owner/operator lease.

Practitioners should begin to develop collaborative partnerships with experts in pertinent fields that will position them to be able to advise clients as they move through the challenges and opportunities being presented by an ever-increasing aging population and the physical plant requirements in the aftermath of COVID-19.

COVID-19 has been a gut-wrenching and heartbreaking episode in the story of long-term care facilities due to its disproportionate impact on the elderly. However, if otherwise independent industries continue to collaborate on ways to solve this problem, it is likely that senior living and care will accelerate to an integrated model more quickly than it might have otherwise, with greater space utilization to thwart a recurrence of the rapid spread of a predatory virus such as we have seen.

These shifts will have benefits not only for the senior population seeking a more seamless solution to the challenges of the later years, but also for the property owners holding vacant buildings and care providers who, with the assistance of the government in preparing for these changes, can perhaps pursue a more supportive business model based on a collaborative set of services.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Westlaw Today is owned by Thomson Reuters.

Kyra Fischbeck Howell is counsel in the Nashville office of Bradley Arant Boult Cummings LLP, where she practices in the area of commercial real estate and finance transactions in the firm’s Real Estate and Finance and Healthcare Practice Groups. She has been involved in closing over $2 billion in financing transactions in the long-term care industry, for which she is involved in purchases, refinances, bridge-to-HUD loans and HUD loans. She can be reached at khowell@bradley.com.



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