Steve's Senior Care Blog

 

August 26, 2014. 60 Seconds with Steve Monroe.  The Medicare 5-star rating system for skilled nursing facilities may not be all that it is cracked up to be....

Federal Regs and the 5-Star Rating System

I have always had mixed emotions regarding federal regulations for assisted living. If I had operations in 10 states, it would be easier to comply with one set of rules rather than 10. But if there is something you don’t like, what kind of success rate would you have going up against the feds to get something changed, as opposed to your state legislators? Don’t bother answering. Take Medicare’s 5-star rating program. Although many objected to it at first, most have learned to deal with it and use it for marketing purposes when they receive a 4- or 5-star rating. But in a recent New York Times story about one skilled nursing facility in California with a 5-star rating, perhaps the ratings aren’t all that they are cracked up to be. Yes, it was just one property, but would assisted living communities want to be given a 1-5 star rating by the federal government? Or would they rather have the consumers vote with their feet and their referrals to friends? I received a call two weeks ago from the daughter of a resident in an independent living community, which was transferring their beloved live-in manager to another building. Apparently, 25% of the residents wanted to leave because of the change. How does that show up in a 5-star rating? Don’t answer that either. 

 

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August 19, 2014. 60 Seconds with Steve Monroe.  Already the largest skilled nursing company, Genesis HealthCare will be merged into Skilled Healthcare, retaining the Genesis name and George Hager as CEO, creating a skilled nursing behemoth....

HealthCare and Skilled Healthcare To Merge

In what must certainly be welcome news to the shareholders of Skilled Healthcare Group, the company will be merged into Genesis HealthCare, the largest skilled nursing operator in the country. Genesis is currently private and controlled by Formation Capital, but the merged company will retain the Genesis name and will remain publicly traded with George Hager, Genesis’ CEO, at the helm. Skilled Healthcare had been looking at strategic alternatives for several years, but it also has had a few too many operational problems over the years. It had always been known as one of the earlier firms to have a strong focus on subacute care, not to mention an above-average Medicare census, and it owns a majority of its properties, something which Genesis does not anymore. There will be about $25 million of cost synergies, and when completed early next year, Skilled’s investors will own 26% of the combined company, Formation will own 28%, management will own 9% and other Genesis shareholders will own 34%. The pro forma market cap should be between $1.1 billion and $1.3 billion, and Skilled Healthcare's shares surged by 25% in early trading. We will, of course, have a full analysis in the upcoming SeniorCare Investor. 

 

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August 13, 2014. Health Care REIT (NYSE: HCN) announced today that it has entered into an agreement to purchase HealthLease Properties Real Estate Investment Trust (TSX: HLP.UN) for C$14.20 per share, representing a 31% premium to the previous day’s closing price. The deal is valued at US$950 million for the 53 properties with a total of 5,331 beds, or just over $178,000 per bed. Of that total, 14 properties are in Canada and 39 are in the United States. One of the attractions to Health Care REIT of this portfolio is that it is the newest portfolio of senior care properties of all the REITs (or really, any operating company). Nearly all the properties have a combination of skilled nursing (but really short-term subacute care) beds and high-end assisted living. A typical property that has been recently built includes 70 skilled nursing beds (private rooms) and about 30 assisted living units (private rooms). These are trying to set the standard for post-acute care, at least with regard to the physical environment. Great care, however, can be provided in any setting.

The other attraction is that Health Care REIT has entered into an agreement with Mainstreet Property Group, which has been developing many of the properties purchased by HealthLease, to acquire 17 seniors housing and post-acute development properties from Mainstreet upon issuance of a certificate of occupancy and licensure at a 7.5% cap rate on 12-month forward net rent. The projected value of this rental income is approximately $369 million. It’s not over. Health Care REIT has also entered into an agreement with Mainstreet to provide mezzanine financing and receive purchase rights, at HCN’s option, for another 45 properties beginning in 2016. The purchase option price on this pipeline represents a 7.7% initial cash yield on the projected rental income. If all of these transactions end up closing, the total deal value will approach $2.3 billion.  

HealthLease’s tenants include such respected names as Trilogy Health Services and Life Care Services, names very familiar to Health Care REIT. This acquisition will certainly bring down the average age of Health Care REIT’s portfolio, giving it assets that are expected to be positioned for the future. But the 17-property “sub-deal” will come at a time when the market could be hit with higher interest rates on top of occupancy pressures from new development. At least the 45-property future deal is option based, so if the market gets a little ahead of itself it can take a breather. All year we have been saying that the bigger REITs will be buying the smaller ones, and in the past three months we have seen three billion-dollar REIT-on-REIT deals, and the buying spree is not over.

 

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August 12, 2014. 60 Seconds with Steve Monroe. As seniors housing property values continue to rise, the publicly traded stocks are not sharing the same investor excitement....

Seniors Housing Values Not In Sync

It is hard to believe that 18 years ago there were 15 publicly traded seniors housing companies, plus another 21 skilled nursing companies. Today, we are down to just three seniors housing and six skilled nursing companies, and that may even shrink. One company, Brookdale Senior Living, has a market cap greater than all the other publicly traded companies – seniors housing and skilled nursing combined. One might think that with how hot the property acquisition market is, that investors would look to the public equity markets for some options, not to mention the liquidity it provides their investments. Although we forecast that the peak in the acquisition market will not arrive until 2015 or 2016, is it possible that with publicly traded stocks, we may already be there? From what we could tell, Brookdale turned in a pretty decent quarter, and it has great plans for its acquisition of Emeritus, but investors gave it a ho-hum shrug, even sending shares down a bit. Yes, the overall market seems to have hit a wall, but it just seems that investors are valuing the real estate of the industry at greater levels than the companies that own and operate that real estate. That spells a disconnect of sorts to us.  

 

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August 5, 2014. 60 Seconds with Steve Monroe. NorthStar Realty has agreed to pay $4.0 billion for Griffin-American Healthcare REIT II....

NorthStar Realty Wins Griffin-American Healthcare REIT bid

At long last, Griffin-American Healthcare REIT II has announced that NorthStar Realty Finance was the winning bidder, as expected since they entered into exclusive talks several weeks ago. The surprise was the price, which came in at $4.0 billion, or $11.50 per Griffin-American share and a little higher than the $3.7 billion that had been bandied about. While we know that Health Care REIT would never have paid that much, it is difficult to derive any valuation intelligence because the REIT is made up of mostly medical office buildings with more than 3.5 million square feet, plus a half dozen senior care portfolios with 2.7 million square feet, excluding the UK portfolio. A few hospitals are in there as well. At least the saga is over, and it was worth the wait to get a few hundred million more in value for the selling shareholders. And it was worth the wait for Emeritus shareholders, which closed on the sale to Brookdale Senior Living last week. With more than 1,100 properties, Brookdale is the largest provider in the world by a factor of three, and we wish them success in the integration and future performance.  

 

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In this "Expert Opinion" interview, Scott Hassan, CEO, Suitable Technologies, discusses senior care technology, integration, robotics, and more.........

Scott Hassan Read the transcript

Scott Hassan created Suitable Technologies with the goal of redefining presence, by giving people the power to choose when and where to be present, regardless of geographic location. Prior to Suitable, Scott founded Willow Garage, combining his belief in open source technology and his passion for bringing robotics into everyday life.
Scott has been a driving force behind some of the most influential Internet companies and projects. He was the founder of eGroups (now Yahoo! Groups) and was the key software architect and developer of Google, Alexa Internet and the Stanford Digital Library. Scott invests in start-ups that aim to make fundamental quality of life improvements for citizens around the world.

 

Contact Information:

Scott Hassan
CEO
Suitable Technologies
 

Read the interview transcript:

Steve Monroe
Hey, Scott, can you come up here. Scott just gave a remote presentation at the Aging2.0 Conference in San Francisco in May. His company has a technology platform that allows you to be at a meeting, a conference, in your father’s living room, in a retirement community, practically anywhere where wireless Internet service is available.  Let’s see if he can explain how it works.

Scott Hassan
It’s pretty complicated to use. You use your arrow keys to move it around.  Back, forward, left, right. A lot of gamers know how—they’re awesome at it. The only difference between this and a game is that there’s no gun. All you can do is talk to people. Turns out, that’s like 90 percent of what you want to do anyways. You just want to talk to people and say hi and greet ‘em and things like that.

And so that’s sort of what we do. We build these, manufacture these in the United States, in Palo Alto, California and we started about 4 years ago now.

Steve Monroe
How many do you build a year?

Scott Hassan
We don’t build enough. We’re expanding the whole manufacturing process and so we’ve been running out of Beams because our sales guys have been selling too many of them.  So we have to work on making more of them, but we’re constantly improving this product and it’s a pretty amazing technology for people to use to travel around the world and to interact with loved ones and to be present anywhere. You can have conferences this way. You can be the guy who flew 36 hours to be here…

Well, you have to have good Internet to make this thing work. The Internet—mark my words, it’s going to be a big thing.

So, instead of flying 36 hours, he could have just clicked and been here.

Steve Monroe
Well, that’s the funny thing, because we’re thinking about opening up a satellite office for our business and I’d love to have one of these in the home office and go from office to office and chitchat with people, as opposed to calling them up on the phone. In your sales team, are you marketing to like big retirement communities to get a couple of these things in there?

Scott Hassan
We haven’t done that yet. We would like to, but we just haven’t done it yet. We’ve been mostly going after the big Fortune 500 companies. But if you have an “in” somewhere we’re all for it.

Steve Monroe
No, I have “ins” in a lot of places. They’re going to rebel against the price, and I’m sure if you sell more and build more, pricing will come down, but…

Scott Hassan
Yeah, it’s all a volume thing.

Steve Monroe
Well, I think it’s a great tool.

Scott Hassan
It can also be a great differentiator for a retirement home in the first place. I mean, there’s a lot of, in retirement homes, they pretty much are very similar. You make one that has all these beams in it and you’re like, well, if you use this retirement home, all your loved ones can be met.

Steve Monroe
You can go have dinner with your mother or father in the dining room with all their friends.

Scott Hassan
Yeah.

Steve Monroe
Yeah, no, I think you got a huge market there, because it’s so easy to use.

Scott Hassan
You can do something really simple like, one thing that I’ve done with my father is sometimes I Beam in and just watch TV with him.

Steve Monroe
Right.

Scott Hassan
And he really likes that because it’s like we’re sharing an experience. It’s kind of funny to do that, but it turns out that’s what he likes to do and sometimes my daughter beams in and plays games with him. Like, he likes doing board games and things like that and so she’ll beam in and play a game with him.

Steve Monroe
And you can watch the same TV program and then you then you can turn to him at the commercials, start chatting with him and then turn back to watch the show.

Scott Hassan
Well, actually, what you do is you just watch it over the Beam.

Steve Monroe
No, I know, you’re watching it, but then you face him to talk to him during the commercial.

Scott Hassan
Yeah, say, hey, yeah, we’re watching, beam room, watching the same program at the same time and you’re like, hey, come on, can you fast-forward till we see the commercials? Which my father seems to like to watch commercials, I just, I don’t understand it, but.

Steve Monroe
Entertainment.

Scott Hassan
Yeah, so.

Steve Monroe
Well, listen, Scott, it’s been wonderful. You’re the CEO of Suitable Technologies in Palo Alto, California, right?

Scott Hassan
Yeah, yeah. And I got to get going, I got to go to the reception. There’s a wine and cheese reception, I hear, so I’ll get some of that.

Steve Monroe
Well, I’ll follow you out of here in a minute, I got a few more people to talk to.

Scott Hassan
Okay, good, see you.

Steve Monroe
We’ll see you around.

Scott Hassan
Great talking with you.

Steve Monroe
All right, bye-bye.

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July 29, 2014. 60 Seconds with Steve Monroe. AdCare Health Systems is getting out of the operating business to become a landlord....

Another Health Care REIT?

Despite the temporary slump in health care REIT stock prices a year ago, becoming a health care REIT still remains one way to achieve a higher valuation. Although The Ensign Group’s stock price performed better than average, it went the way of a REIT spin-off. Now, AdCare Health Systems, which has certainly underperformed the market and its peers, has decided to get out of the operating business and lease its skilled nursing facilities to third party tenants. It plans to start a dividend at 5 cents per quarter, which is a 4.3% annual yield, increasing it quarterly so that by the end of 2015 the yield would increase to 7.7%, assuming no price increase, and even higher the next year. Sounds like a good deal to me if it all works out. Although AdCare did not say it, we assume the ultimate goal is to convert to a REIT at some point, perhaps when all their tax loss carryforwards have been used up. While it would be fair to say the last thing we need is another REIT, there is a surprising amount of opportunity out there for investing, and don’t forget more REIT on REIT deals that we expect to see. It’s all part of the circle of life.   

 

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In this "Expert Opinion" interview, Kai Stinchcombe, Co-Founder, True Link, discusses senior spending solutions, and Rahul Mahadevan, President & COO, Life2, explains predictive medical analytics......

Rahul Mahadevan, Life2 Inc. Read the transcript

 

Rahul Mahadevan is President & COO of Life2 Inc.  He has over 17 years of Healthcare IT experience, starting and leading numerous startups focusing on technology for the Healthcare sector.  Prior to joining Life2, Rahul spent 3 years at Stanford Hospital and Clinics leading their Strategic Growth and Outreach program.  Before that he held various leadership positions including running the Healthcare Informatics Group over Asia and Latin America for Philips.  He has an MBA from Duke and a MA in International Economics from UCLA.   

 

Rahul Mahadevan
President & Chief Operating Officer
Life2 Inc.
rahul.mahadevan@life2inc.com
Cell:  (650) 302-2021

 

Kai Stinchcombe
Co-Founder
True Link

www.truelinkcard.com


 

Read the interview transcript:

Steve Monroe
A lot of the technology that’s affecting senior care right now is kind of more social-oriented. We’ve been hearing things about robotics with the elderly. But there is something that’s coming down the pike that, from my perspective, looks like it could be revolutionary in terms of the entire healthcare system, especially dealing with the elderly.

I’m here with Rahul Mahadevan. He’s a co-founder of Life2. Now, you have built a suite of predictive models to help identify future medical problems or needs for the elderly. Models that will help predict that. How did you create those models?

Rahul Mahadevan
So, we’ve been doing as a company predictive analytics for over 20 years. In other domains. We’ve done predictive modeling in insurance, in finance, transportation was the last company we did it in. And the concept around predictive modeling is all the same—can you take data and look for trends and causality correlation to predict future adverse events? And you can define adverse events in any way you want.

In the transportation industry we were able to predict which drivers in a fleet company were likely to have accidents in the next 30 to 60 days, so that companies could put plans in place to mitigate the risk of accidents from happening. If you take that same concept and apply it to healthcare and you ask yourself how can we use data that exists and try and identify the likelihood of someone having an adverse event—be that the risk of contracting…of preventing an infection in the next 24 to 48 hours or whether they’re likely to be responsive to a treatment to treat diabetes or hypertension or they’re likely to move out of a senior living facility or to keep them in—the concept of analytics is the same. It’s trying to identify what the right predictive variable is and can you use data in a way that allows you to accurately predict something in the future?

Steve Monroe
For the senior care community, do you have that predictive data?

Rahul Mahadevan
So the data exists. The challenge in the senior care community is, I think the industry is a little behind in terms of data collection. So, from our perspective, it’s been challenging to find organizations that are sitting on a wealth of data. So, rather than approaching individual senior care facilities, we’ve had to go and approach business partners, like a Brookdale, Formation Capital and Link-age and so on and so forth, who are sitting on a large amount of data. And being able to predict adverse events is not just a combination of clinical information. It’s also being able to scrape information that exists on the Web. So when you try to predict someone, the likelihood of somebody contracting pneumonia or upper respiratory infection, clinical information is important, but looking at pollen count in the air may be just as important as a potential indicator.

So we look at not just clinical information, but we also look at structural data that exists in our dataset, but are able to mine unstructured data. To identify key phrases within nursing notes or emails. I have on top of that the ability to look at sentence analysis. So it’s not just what words are used in free form text, but the context in which they’re used and are those potential indicators of a potential adverse event?

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Steve Monroe

A lot of people are worried about their parents’ finances, people taking advantage of them. Financial fraud against the elderly is a very, unfortunately a very common thing nowadays. But there’s a new product out there to help take care of that.

I’m here with Kai Stinchcombe, who’s one of the founders of True Link. Why don’t you tell me a little bit about True Link and what it does and when you formed it?

Kai Stinchcombe

So, I came at this as somebody whose family needed the product. My grandma was suffering from kind of mild memory loss, but started donating to a lot of charities, subscribing to a lot of magazines, shopping off the TV, entering sweepstakes. There’s a whole set of patterns. And the thing that we realized was that there wasn’t any way for my mom, her daughter, to help her manage her spending and maintain her independence. So that’s really the genesis of True Link is a set of tools for somebody caring for or concerned about an elderly person’s finances to help them stay on track.

Steve Monroe

But why not just get a debit card and have someone just put a hundred bucks, two hundred bucks in it every month and so you can’t overspend.

Kai Stinchcombe

Yeah, exactly. So, typically the problem might involve overspending, but it’s not necessarily a spending volume thing so much as what you’re spending the money on, right? So, my grandma was living independently, cooking her own meals, shopping for food, cleaning her apartment, buying her clothes. And yet was also donating tons of money to these charities in the mail, for example. So we couldn’t really say you only have $1,000 a month, because she might give it away to charities in the first week and then not be able to cook her food for the rest of the month.

And so the point is you need tight, fine-grained controls. I mean, basically the story is that every senior’s spending patterns and needs are different. But we’ve seen it all before.

Steve Monroe

And your mother was the one who was monitoring?

Kai Stinchcombe

Exactly.

Steve Monroe

No push-back from your grandmother?

Kai Stinchcombe

You know, I think that there’s a set of difficult conversations around aging. In some cases it’s pretty amiable. I think there were times when my grandma didn’t want my mom breathing down her neck about one particular charity or another. She would say, Oh, you know—like she would hold up a fundraising letter, for example, and say, If I don’t write this check, it says here that this kid is going to die if I don’t donate six cups of rice. My mom would say, okay, so I did a little bit of reading about this particular organization and actually 97% of the budget goes to fundraising. She says, Oh, okay, and she’ll put down that letter and open the next one. And you say—you see there’s this whole pattern, right? But if you have memory loss, you might, for example, renew your annual subscription every week.

Steve Monroe

What happens, I assume when your grandmother is using this, she has to use a pin number when she’s buying something?

Kai Stinchcombe

No. You sign it just like any other Visa card.

Steve Monroe

Okay. So how about if she’s doing it on the phone?

Kai Stinchcombe

Same story. It works like any other Visa card. You can use it with a pin to get money out of the ATM. You can go into a bank and give them the card and take out cash over the counter and get cash at point of service, if you remember your pin. You can just swipe it like any other Visa card. Put it into an online form, give it out over the phone.

Steve Monroe

Tell me about the blocking mechanism. How does that work?

Kai Stinchcombe

So, because it’s a card that we’ve issued, when you swipe it, the transaction actually gets routed to our servers and so we can compare it in real time to a database of known sketchy merchants, to individualized patterns and rules. So, for example, for one person it might be no magazine subscriptions. For another person, it might be, here’s five magazines she likes. For another person it might be magazines are fine, they’re not a problem.

Steve Monroe

And that’s all done electronically?

Kai Stinchcombe

Yeah. Yeah, we have about a fifth of a second to do that, so.

Steve Monroe

And so the family members basically fill out a form to let you know all that kind of stuff?

Kai Stinchcombe

Yeah. Exactly, exactly.

Steve Monroe

Are there any glitches with that?

Kai Stinchcombe

You know, there’s always some complexity. So you might say, oh, I don’t want any charities. And then you say, oh, actually, when I said no charities, I meant no charities except her church. And so you’re going to end up going back and kind of fixing that over time. But basically the idea is that you have all the tools you need.

 

 

 

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July 15, 2014. 60 Seconds with Steve Monroe. With $26.62 million to invest, a new fund has been formed to invest in new technologies to help the senior living population.....

Aging2.0 Meets Ziegler LinkAge Longevity Fund

Is there new competition for Aging2.0 and its Generator Ventures business? I hope you have been watching my interviews with the founders of several technology start-ups featured at the Aging2.0 Conference in May that hope to have a major impact on the senior living market. Now, the investment banking firm Ziegler has linked up with venture firm Link*Age Ventures and formed the Ziegler Link*Age Longevity Fund, with total capital commitments for the first close of $26.62 million. What is different is that the initial investor group is made up of 70 not-for-profit providers plus some additional strategic investors. The key investment themes will include things such as aging in place, coordination of care, chronic disease management, reduction of hospitalizations and readmissions and disease prevention and wellness strategies. The General Partner of the fund is a 50-50 joint venture between Ziegler and Link*Age, and they plan to use their industry knowledge to help the companies they invest in. All I can say is, it’s about time that there is some excitement in technology and senior care. Let the ideas start to flow.  

 

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July 8, 2014. 60 Seconds with Steve Monroe. After being rebuffed at every turn, Kindred will either be forced to increase its bid or walk away....

Will Kindred Up It's Price For Gentiva Health?

Is time running out for Kindred Healthcare’s bid for Gentiva Health? Kindred has been repeatedly rebuffed by the Gentiva board, even after sweetening the offer by a small 50 cents a share. Now, with rumors of Gentiva perhaps going after Amedisys as a possible means to block Kindred’s takeover attempt, which has turned hostile, it is looking more like nothing will happen. Unless, of course, Kindred really tries to up its stake beyond the 14% or so of Gentiva shares it has accumulated. Gentiva is now trading well above Kindred’s last offer, so if a deal is to be struck the price will have to be increased again. There will be a limit to Kindred’s generosity, however. But we do tire of Gentiva management’s whining that Kindred is undervaluing the company. Come on, in April Gentiva was trading at $7.50 per share, and Kindred’s offer was almost double that. It looks like Kindred was the only one who saw value in Gentiva, or at least saw its value in combination with its LTACs, SNFs and rehab operations. Something will have to pop this month.   

 

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