After 20 acquisitions last year, Creative Solutions in Healthcare has no plans to slow down in 2023.
The Texas-based company rang in the New Year adding two skilled nursing facilities to its roster, purchased from Southwest LTC, another regional player.
Creative Solutions will also be acquiring eight more SNFs on Feb. 1, CEO Gary Blake told Skilled Nursing News. The communities will be acquired from Diversicare Healthcare Services, headquartered in Tennessee.
“I was actually the administrator of two of the facilities with Diversicare that we are acquiring,” said Blake. “That’s very exciting for me to be able to walk back into those buildings and have a flood of memories and just everything that comes with that, going full circle.”
All the deals are for facilities in Texas – Blake wants to deepen the company’s presence in the state.
The latest acquisitions build on CSNHC purchases in 2022, including nine skilled nursing facilities from the Arboretum Group for roughly $90 million, Blake said, along with 11 SNFs from SavaSeniorCare.
Leaders with Sava said they plan to cease operations by the end of this month. The company once was the 11th-largest U.S. nursing home operator with 92 facilities, according to a Stifel analysis of data compiled by the Centers for Medicare & Medicaid Services (CMS).
One of the Sava facilities has an assisted living component, Blake added. That brings CSNHC’s total building count to 130 facilities, 14 of which are assisted living.
Financing for the deals was a mix of HUD funding, along with traditional and nontraditional sources, Blake said.
Building on a strong base
Blake believes there are plenty more great opportunities for the provider to grow, creating value in the different markets in which they operate. Operators big and small are currently realigning and reassessing their market and figuring out where they fit best.
“We feel like that gives us somewhat of an advantage over competitors that operate in multiple states … we concentrate on what’s going on in this state, how to perform best in this state, and how to be a leader here,” he added.
For one, Blake is keeping a close eye on the Texas legislature and potential movement for a Medicaid rate increase as the state session closes between June and July. Watching policy decisions alongside other local operators has helped forge relationships and in turn often plays a role in M&A too, he said.
The Aboretum transaction was a case in point.
“I’ve known that family for years … socially, I’ve known them throughout the business, we’ve actually crossed in the Senate halls in Washington D.C. together,” Blake said of Arboretum. “That family was a family that I identified with, I have a lot of respect for the work that that family has done for decades in this state.”
This playbook has been apparent before in the dealings of other nursing home executives, with many seeking to be experts in their region while bigger fish like the Ensign Group (Nasdaq: ENSG) try to regionalize their corporate teams.
CSNHC runs the largest percentage of nursing homes out of the approximately 1,200 operating in the state.
Acquisitions in 2022 and into 2023 have been an even split between well-performing properties and turnaround facilities, Blake said, calling it a “mixed bag.” For the turnaround properties, Blake plans to rightsize with the right vendor processing and occupancy stabilization.
Future plans and strategy
The operator’s “core energy” is and will be spent on skilled nursing moving ahead, Blake noted – if assisted living comes along as part of a package, though, the team won’t turn it down.
“We’re already seeing some real upside in those [communities], so we’re really excited about the expansion we had in 2022,” said Blake. “We want to hire as much local and state talent as possible, and continue to grow our business model here in Texas.”
Blake is excited about facility location as well, with many of Creative’s newly acquired properties being in close proximity to great hospitals and medical schools and community hubs. He likened the search for new communities to a heat map, with the hottest spots being near these crucial institutions.
“Their location, their quality that they were producing, even coming out of Covid … those buildings continued to perform well in their market,” noted Blake. “The long-term, tenured staff of those Sava buildings as well as the Arboretum Group was another feather in our cap.”
Outliers were rural facilities, Blake said, but these buildings were leaders in their respective markets. Recent acquisitions are about a 65% urban to 35% rural split.
Creative Solutions plans to continue with its existing business lines, as its growth is more on the brick-and-mortar side.
“I think a great mistake is when people try to do a little bit of everything. We’re going to continue to be satisfied with our performance, challenge ourselves in the senior living space and stay in our lane, so to speak,” said Blake.
Ultimately, Blake wants growth to always be within Creative’s means – in other words, the operator will continue to grow so long as the organization can provide the same quality outcomes.
“We don’t want our quality to be diluted by growth. We want our growth to concentrate on our quality – and we’re committed to that,” he said.
Vendors made the difference
As Creative Solutions continues to deepen its presence in Texas, vendor relationships have become crucial to ensuring upside as the operator takes on more responsibility. Strategic partnerships with for the most part privately-held, family-owned and operated vendors have helped the team mitigate rising costs of care.
“[We are] a private company … We’re drawn to private vendors, private family vendors,” added Blake. “If I need to speak to the president and CEO, I get to do that with these vendors. Likewise, when they need to visit with me, they get to call and they speak to me. They represent their family in the chemical business, in the rehabilitation business, in the medical supply business.”
Because of these relationships, Blake feels he is able to more effectively negotiate pricing when neither party is answering to a board of directors.
“It’s the most under-appreciated, major thing you should pay attention to in this business,” noted Blake, adding that Creative’s relationships with its vendors played a huge role in navigating the ebb and flow of Covid surges.
He’s excited to see how these partnerships evolve in the future. There are “many years of runway left” to produce a new standard of care over the next decade.