Ancillary services led to complex deal as part of major CommuniCare expansion

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Adding ancillary services is widely seen as a way for nursing home operators to increase sustainability. When the time comes to sell, these related companies and the diversification of their income can generate a lot of interest, but also complicate transactions.

That’s what the owners of 18 West Virginia skilled nursing facilities — including a 90-bed private room building under construction — discovered when they went on the market earlier this year.

Stonerise Healthcare, a regional transitional and skilled nursing care operator, has an extensive service network that includes therapy, home health, and palliative care delivered throughout West Virginia and Southeast Illinois. Ohio.

The sale of its skilled nursing facilities and a therapy company closed on June 30, with ownership going to an anonymous New York-based real estate investment firm and a new operator, CommuniCare Health Services, based in Cincinnati.

The sale of seven home care and palliative care agencies, a special needs institutional plan and the project being developed are pending regulatory approval, although CommuniCare said on July 6 that it would also assume the operations of Stonerise’s home care and palliative care lines.

The addition will expand CommuniCare’s footprint to more than 110 health centers in seven states and nearly 14,000 skilled nursing beds.

Lument served as Stonerise’s financial adviser on the deal, with chief executive Laca Wong-Hammond calling his offers on Wednesday a “once-in-a-lifetime acquisition opportunity.”

Among the company’s attractive qualities were its extensive network creating a dominant market share; its location in West Virginia, where Medicaid reimbursement is relatively large; and a portfolio with margins above 20%.

“As a result, there was a lot of competition for this deal,” Wong-Hammond said. McKnight Long Term Care News.

CommuniCare did not respond to a request for comment from McKnight’s regarding any immediate operational change plans. The company previously announced that longtime Stonerise general manager Jessica Hudson will serve as vice president of the CommuniCare Centers Division in West Virginia.

Related Benefits and Challenges

Larry Pack, co-founder and CEO of Stonerise, called the sale complex this week, given the scale of the company’s ties, their potential value and the need for revenue stability.

Skilled nursing providers are increasingly turning to service diversification as a way to generate revenue, creating new streams that can help offset slowdowns in basic services.

A Ziegler CFO hotline earlier this year revealed that senior care organizations’ interest in such services has doubled during the pandemic.

But adding new businesses can make it harder to close deals, with complex leadership, cash flow, operational and regulatory challenges to resolve with potential buyers.

Wong-Hammond noted that transferring ownership of Stonerise’s closely held businesses required “creating tax-efficient exit structures, leveraging our relationships with buyers, and delivering results despite the volatility of capital markets and operating environments”.

Still, she said the market remained supportive of sellers, despite buyers facing rate hikes. There is no need to turn around, especially for sellers who can offer options to potential buyers.

“The best strategy for achieving seller objectives in this environment is to consider a variety of exit options, which are not limited to a simple cash sale,” she said. McKnight’s. “With many clients, we are seeing increased demand for tax-efficient sales structures, such as an ESOP [employee stock ownership plan] for example. Creativity, hard work and experience will win deals in this tricky market. »

Richard F. Gandhi