By Cheryl Brumbaugh-Cayford
Pinecrest Community, a retirement community and nursing care facility in Mount Morris, Ill., has been sold to the for-profit Allure Healthcare Services. The sale was finalized on Friday, Dec. 2.
Please pray… For the Pinecrest community–employees, residents and their families, and the new ownership.
Founded by the Church of the Brethren in 1893, Pinecrest is a community of some 150 residents in three levels of care: independent living, nursing care, and memory care. Around 80 are in nursing care and memory care, with the rest in independent living. Pinecrest was affiliated with the church’s Illinois and Wisconsin District and was a member of the Fellowship of Brethren Homes.
That church relationship has ended.
“The Board of Directors and leaders of Pinecrest grieve the loss of more than a century long connection to the Church of the Brethren,” said a Pinecrest release. “Our rich history with the Church of the Brethren has been woven through every day of our service to Pinecrest residents and our greater community. This connection will be a bedrock for committed staff as they continue to serve residents with the new owners. We are forever grateful to the Church of the Brethren and its members for 129 years of support of Pinecrest’s ministry to seniors.”
An unsustainable financial situation
“Pinecrest has been losing $150,000 or more each month during the last two years, which has caused us to burn through cash at a rate that alerted the board and management to the need to act,” said Ferol Labash, Pinecrest CEO.
Low Medicaid reimbursement rates in Illinois top the factors creating Pinecrest’s unsustainable financial situation. They “have been insufficient to cover the cost of care for Pinecrest residents for decades,” according to the release.
“Medicaid reimbursement is the primary source of payment for the majority of people, 57 percent in Illinois, who reside in nursing homes long term,” said Labash. However, the state’s Medicaid reimbursement for nursing home care has been one of the lowest in the nation and Illinois “historically took months to approve applicants, sometimes as long as a year or more, and typically paid months in arrears. Frequently the state owed three to six months of reimbursement and on occasion it fell to eight months behind on payments.”
At Pinecrest, “Medicaid reimbursement was less than half of the cost of providing care for residents. The difference in reimbursement and cost of care was covered by private pay rates, other areas of operation, and donations,” Labash said.
When COVID-19 hit, the already difficult financial situation worsened. There were added expenses for PPE equipment, COVID testing, cleaning supplies, medical waste removal, and hazard pay.
“The losses experienced due to the Medicaid system left no margins to help Pinecrest through the financial challenges of the pandemic,” Labash said. “Revenue fell significantly during the first year of the pandemic as admissions were halted in the nursing home and memory care and individuals became hesitant to move into independent living.”
During the first year of the pandemic, government funding helped keep Pinecrest afloat. However, the added expenses from the pandemic continued but the government funding did not.
And then there were staffing shortages.
In a nursing care facility, staffing shortages result in a lower resident census. When there are not enough employees to provide care to residents, beds that become available cannot be filled, and applications from new residents cannot be accepted. The community loses yet more revenue.
“Historically, Pinecrest employed approximately 185 staff,” Labash said. “We currently employ 155. Hiring dietary, nurses, and CNAs became nearly impossible during the past two years. Pinecrest cannot compete with the wages that are being offered by staffing agencies. We have 11 less nurses than we had during normal staffing, and management has filled in shifts in dietary for months.”
A very difficult decision
Once it was determined the financial situation was unsustainable, Pinecrest’s board faced a very difficult decision: whether to close the facility, forcing residents to seek other places to live, or seek a purchaser that would maintain the facility and continue to provide care to the residents.
The board and management began the process of looking for a partner approximately a year and a half ago, Labash said. “Initially, a partnership was pursued with another faith-based, not-for-profit organization. That organization did an analysis but eventually decided an affiliation was too risky to its current operations.”
They turned to Ziegler, an investment bank that specializes in healthcare and senior living communities. “Ziegler attempted to find a not-for-profit partner for Pinecrest,” said Labash. “Unfortunately, due to the market conditions, not-for-profit organizations were not in acquisition mode. Ziegler then turned to a select group of for-profit owner/operators that have the best reputations for care in the for-profit side of the business. Four of those companies toured Pinecrest and offers were received from two.”
Both companies who gave offers were vetted by the Pinecrest board and management through presentations and interviews, research with Medicare, contacts to people who had experience with them, and unannounced visits to facilities they own.
In selecting the purchaser, the board set the priorities “of maintaining a retirement community in Mt. Morris, honoring its commitment to provide quality care and meet its financial commitments to Pinecrest residents, providing continued employment for staff and meeting obligations to vendors,” said the release.
Allure Healthcare Services was chosen for being “committed to quality care for its residents and to creating a family atmosphere among its staff,” the release said. The company is just a few years old, and already owns nine other facilities in Illinois in addition to Pinecrest.
“We will not realize a profit from the sale of the home,” said Labash. “This is an asset sale and Pinecrest will be responsible for paying off bank bonds, or debt, with the proceeds; paying the new owner for accrued vacation, sick time, etc., for staff so that benefits are not lost; providing an allowance to the buyer for deferred maintenance; and finally meeting vendor obligations. If there were any proceed left, the bylaws call for that to be given to the Church of the Brethren.”
Grieving the loss
“We are grieving the loss of our Church of the Brethren connection,” said Labash. “While we may no longer officially be connected to the church, so many of us are followers of Christ and will continue in his service as we care for our residents.”
Pinecrest had maintained its affiliation with Illinois and Wisconsin District through board membership. Prior to the sale, Pinecrest bylaws required that a majority of its board be members of the church, and that the district conference approve their appointments.
However, the district did not own the home. Ownership of retirement communities often is separated from the church “to protect the denomination from financial liability related to the operation of the retirement community,” Labash said.
There was verbal assurance from Allure that chaplain Rodney Caldwell, who also pastors Mount Morris Church of the Brethren, will continue as chaplain, among assurances that most employees will be kept on. Already, a few positions have been ended, and others are expected to be “repositioned into other roles in the organization,” she said. “At this point, Allure seems committed to minimizing job loss as much as possible.
“The one really positive to me is the continuation of Pinecrest’s original mission to take care of the poor,” Labash said. There is an assurance that a for-profit will be able to continue care for residents on Medicaid.
It is counter-intuitive that Medicaid is more advantageous for a for-profit than a not-for-profit, but Labash explained that for-profits have the resources to fill beds with Medicaid residents. In the state’s most recent revamping of its program, Illinois created variables that mean per-day, per-resident Medicaid reimbursements vary widely for different facilities. Non-profits are at a sharp disadvantage because they do not have the resources to hire the staff and set up the systems needed to do the charting that is required. “Pinecrest hasn’t had the staff to chart everything that captures all the Medicaid documentation that you get paid for,” Labash said. Allure, as a for-profit company with more resources, will be able to get significantly higher Medicaid reimbursements.
“It’s a really broken system,” Labash said, and she fears it will force many more faith-based not-for-profit facilities to sell or close. “The generosity of donors had kept us going,” she said. “For decades, Pinecrest survived on donors.”
What will happen to Pinecrest’s Good Samaritan Fund, and other donations? Labash reported that the financial situation was such that all donations were used immediately for resident care. The Good Samaritan Fund was not held separately from the operating budget.
Pinecrest has been a ministry.
“It’s an emotional time. This has been a ministry to me,” said Labash. “It’s heartbreaking to lose that. It was a hard choice. We didn’t want to see an empty building with our residents with no place to go. But the level of care will continue because it’s the same team who will be working here.”
— Cheryl Brumbaugh-Cayford is director of News Services for the Church of the Brethren.
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