Senior Living Business: M&A Continues At A Fast Pace For One Group--

Masonic Health System Of Massachusetts Is Bucking The Trend

The otherwise soft merger and acquisition market has not slowed down at all for the Masonic Health System of Massachusetts (MHS), which has been growing and growing and growing since the Grand Lodge of Masons of Massachusetts created the organization in 2001. The group’s most recent acquisition activity, which was announced June 15, was the purchase (for an undisclosed amount) of Consultation, Advocacy and Resources for Elders, LLC (C.A.R.E.) of Hingham, Massachusetts, which provides geriatric care coordination and support services, by MHS’s Overlook Visiting Nurse Association & Hospice Services division, which delivers home health care throughout Massachusetts.

“That’s actually just one among a couple of other acquisitions that we’re doing right now,” said David Turner, president and CEO of MHS. “We’re currently working on Hampshire Care in Northampton, Massachusetts, which should be completed this month, and we’re also looking at a large independent living project closer to Boston that we hope to acquire—or perhaps we will create a joint venture—in roughly the next 90 days.”

MHS evolved from a single-site, rather unspectacular “old folks home”—100 skilled nursing beds, 69 immediate care beds, and a two-year waiting list—in the central Massachusetts community of Charlton. When Turner was hired in 1999, the Masons had about 35,000 fraternal members statewide (average age, 67-68 years), a bundle of money (a $120 million endowment earmarked to the care of the 169 residents of the nursing home, plus $500,000 to $1 million in annual gifts and contributions), and almost 470 acres of land. That was also a time when CCRCs were emerging as a popular senior living model again.

With expansion clearly in mind, the board at the time developed a strategic plan and a corresponding 10+-year financial plan that included creating MHS in 2001, replacing the original Charlton facility, adding independent living, and aggressively embracing home health care in order to be able to serve those thousands of Masons and their wives and widows located throughout the Commonwealth.

By 2005, MHS had rebuilt the original nursing and rest home (Overlook Masonic Health Center), developed 219 independent living units on the Charlton campus (Overlook Lifecare Community), acquired two regional home health care providers, and absorbed two others that it pulled out of bankruptcy. In the five-year period, the reach of the home health care services division (Overlook VNA & Hospice Services) grew from zero to nearly 60% of Massachusetts in terms of geographic coverage.

“We’ve continued to expand our strategic initiatives in the last couple of years by growing current services and adding new markets,” noted Wayne Regan, president of Overlook VNA. “We expanded Bay State VNA in Greenfield, Massachusetts from a satellite site to a full-blown branch in late 2007-early 2008. We were able to employ all of Bay State VNA’s staff and transfer its patients, and now it’s a very robust and lively branch of Overlook VNA that is doing very well.”

More recently, Overlook VNA absorbed many of the staff and patients of a competitor, Personal Touch Home Health Care in Worcester, Massachusetts, that went out of business. And now, it has acquired C.A.R.E. “Our geographic coverage of the state in terms of home health-care services remains at about 60%,” said Regan. “We’ve primarily taken on more patients in current service areas.”

The new Overlook C.A.R.E.
In acquiring C.A.R.E., Overlook VNA’s interest focused on expanding its community-based service sites, as well as providing diversification in its community offerings and capabilities. “We feel C.A.R.E.—renamed Overlook C.A.R.E. to benefit from the two strong brands—will become a pretty unique point of entry for geriatric care management,” said Regan, “as well as for the coordination of care that we provide on the certified side, the private duty side and the hospice side.” In 2008, MHS divided Overlook VNA into three subdivisions: certified home health care, private duty home health care and a hospice program. With the acquisition of C.A.R.E., a fourth subdivision will be added: case management.

The C.A.R.E. acquisition was a cash transaction, which Overlook VNA executed completely on its own strength and with its own funds, according to Turner. “The division was able to complete the acquisition without having to borrow anything from the parent organization,” he explained.

As a result of the acquisition, C.A.R.E. will immediately increase its service delivery area to include central Massachusetts, as well as Boston’s South Shore, the Dartmouth/Fall River/New Bedford area, and Cape Cod. In addition, Kate Granigan, founder and formerly executive director of C.A.R.E. and now vice president of geriatric care management at Overlook VNA, will lead a new Virtual Continuing Care Retirement Network that will coordinate care and assist with the delivery of care throughout Overlook VNA’s other service sites, as well as educate and train the caregivers.

Basically, Overlook VNA entities will benefit from input from the C.A.R.E. people, who are all certified, master’s-prepared geriatric care managers, while C.A.R.E. will expand its team to include master’s-prepared social workers in the Overlook VNA network. Among the services offered by C.A.R.E. are assessments, crisis intervention, assistance with end-of-life planning and oversight and management of home care.

“Our goal is to utilize our other entities to help with the delivery of services,” said Regan, “although the services may not always be delivered through our entities. We won’t disrupt an ongoing relationship and will always coordinate with other caregivers if it’s in the best interest of the patient. We’re immediately going to reach out and provide case-management assistance to the community on campus in Charlton, as well.” The current average daily census on the health care side in Charlton is about 2,000 (compared to 1,600 in December 2007).

A new CCRC in MHS’s future
While home health care has been the primary focus of expansion for MHS in recent years, plans are on the drawing board to develop a brand-new CCRC on the Hampshire Care property being acquired this month for $3.7 million. “Hampshire Care is a 120-bed nursing home on 106 acres out in Northampton, Massachusetts,” said Turner. “We’ll finance it with a straight, short-term (five-year) loan from a western Massachusetts bank. We’ve found that local banks are a little more nimble in this economy. Also, since the property was owned by Hampshire County, we thought it would be best if the loan went through a local bank.”

Once the capital markets loosen up, the short-term loan will get rolled into a much larger financing that will be used to do a major renovation. “We’ll probably take down the existing building and build small homes,” Turner said. “Jude Rabig, R.N., Ph.D., a gerontologist and the first director of the National Green House® project, is now working with us to establish a national training center for the small-house concept right there on the Northampton site. So rather than Dr. Rabig traveling around the country to explain the small-house concept, people will be able to come to our new center to observe it in practice, talk to staff, and actually see how the residents live. It will be a real learning environment.” And with five colleges in close proximity, it certainly will be located in a “learning environment.”

The prospect of other new CCRC developments are unlikely for MHS, however. “The future is really in community-based services and how we can help seniors stay in their homes—where they want to be,” said Turner. And MHS’s strategy of expanding home health care services through its Overlook VNA & Hospice Services division seems to be serving everyone well.

Firm foundation, smart board
Financially, MHS continues to be impressively sound, although the $120 million endowment the organization enjoyed has “taken a whack” due to the current economy, according to Turner. “We’re probably down to $100 million at this point,” he said. “The gifts and contributions are still coming in at a good rate. While the size of the gifts isn’t increasing significantly, our development efforts through the hospice, through the VNA, and through our sub-acute program have increased the depth of our gifters. So rather than relying solely on the fraternity, which we had done for years and years, we now have a larger pool of gifters. And down the road, we expect that some of the newer ones will also begin to make major gifts and bequests.”

While it is certainly a blessing to have such a healthy balance sheet, Turner gives most of the credit for MHS’s continuing and successful growth over a relatively short period of time to members of its board of directors for their foresight, their level of involvement, their ability to recognize opportunities, and their willingness to take advantage of those opportunities.

“A lot of organizations have bigger balance sheets, and the economy has made them buckle down and bury their head in the sand,” he says. “Although it’s not a great time for the economy, our board realizes that there are some good opportunities out there and have encouraged both Wayne and me to examine all of them. Our board members are not entrenched and wanting to just ride out the economy. If a good opportunity comes along, they want us to maintain our strategy and stick to our long-term plan.”

If the strategy works, which it seems to be for MHS, stick with it during both good times and bad, according to Turner. “You might tweak it here and there,” he says, “but the conversation we’re having now is more often how to get the deal done, not whether to do it. The economy may dictate that we look at different ways of doing the deal; but our board is still looking for every opportunity to add to our service capabilities.”

Perhaps most importantly, the MHS board involves itself at the right level, which is strategic planning, and lets the managers run the operations—and investigate opportunities.