Building New Proven Better Than Renovating For One ‘Very Dated’ Minnesota Nursing Home

As the push to private rooms has only grown stronger for nursing homes over the course of the pandemic, some operators are taking a long hard look at what their facilities need to do to modernize heading into 2022.

For some, building new has proven to be the best option.

“I believe if anybody is looking at it, they will come to the conclusion that new is better and in the long run cheaper,” Lakeview Methodist Health Care Services Executive Director Deb Barnes told Skilled Nursing News.
Lakeview recently completed a $24 million construction project for a 72-bed skilled nursing facility in Fairmont, Minn. built by Kraus-Anderson Construction.

Like some senior living executives, Kraus expects more construction activity in the space moving forward.

“I would say for senior housing and other construction in general, that there seems to be some pent up demand that happened during COVID,” Kraus-Anderson Senior Project Manager John Pristash told Skilled Nursing News.

Lakeview’s new facility replaces a building from the 1960s and is designed to be more of a person-centered environment for residents. Barnes thinks it matches up much better with current consumer demands.

She spoke with Skilled Nursing News about the project, what Lakeview needed to do to get the project off the ground and what advice she has for other skilled nursing operators looking to modernize in an interview that’s been edited for length and clarity.

Tell me about the project. 

We have a very dated structure. Our present structure was constructed in the early 60s. It’s very dated, it’s very institutional with long hallways and very hospital-like. There just are not many areas for family gatherings or conversation or anything like that.

And of course when it was built, we didn’t have as many post-acute patients as we do now or short-term rehab residents, but especially the post- acute. There just aren’t any places for all the pieces of equipment we need now. You look down the hall and it’s lift, after bath chair, after sling, after this, after that.

We felt this is such a disservice to our seniors of this area who have built this area and when they need care in their senior years they have to come to this kind of nursing home.

That’s when our board decided, yes, we need to do better.

Did you look to remodel instead of building a new facility?

The first thing we were going to do was remodel. We got an architect and they came and walked through and did the drawings for us and it was going to be so massive to change this structure, that it was actually only about $1 million more to build an entire new building.

Because the cost difference was so minimal for building new, that’s what we decided to do.

How do you look to secure funding?

We are in a town of less than 20,000 so because of that we were able to apply to the USDA for funding.

Any complications in getting the project started?

In Minnesota, there’s a moratorium on building any new nursing homes in the state and that’s probably the case for other states as well. We do have an exception to that moratorium. If we approached the state with how old our structure is and how much updating a structure needs and how outdated it is, the state will look at that and say yes, in this case, we agree your building needs updating and your residents need something new, so they will give an exception to the moratorium. Also with that comes a new property rate.

It was seen as a strong project, strong census driving it two months before COVID and then COVID hit in March so things changed. Our census decreased by about 10 residents. We’re on much less solid footing right now as we go forward but there was nothing we could do about that. We were in the ground and were ready to go.

What are some concerns going forward?

So our building is for 72 people. We forecasted our budget at even the lowest of 63.

We had been running at 68 to 69 not usually 72 but that’s what our bed count will be. But we ran the forecast as low as 63 to make sure that we were strong enough to handle that and we were. Now our bed count has dropped to sometimes 55 to 56 so of course that’s a concern as we go forward. How am I going to handle the mortgage payments now that are set with census having dropped that low?

I truly believe that people will desire to be in this nursing home and that’s my hope.

If our census stays as low it is as it is. I’m having to look at what else do we do and how else can we lessen our expenses to meet that mortgage payment. We have done one major thing, which is we’ve changed our insurance. We were a group policy and now we’ve changed our insurance to offering individual contribution HRAs, which is about $150,000 savings for us.

Was it difficult to secure funding for the project?

It was not difficult. We went through Compeer Bank and they had been interested, they had heard that we were thinking of a project.

We were given one banking agent from their organization to work with early on. The bank has a nonprofit mission division and were amazing to work with.

We did look at local banks for some of the construction loan but the local banks actually decided not to take part and so Compeer entered on their own for the construction loan phase and then helped us do everything with USDA.

Are you happy with the deal you got?

Yes, absolutely. The rates are phenomenally low and USDA always offers a lower interest just because of the economy and everything going on.

We had really no issues they wanted, of course, great detail on what we were going to do, which of course they deserve to see when they’re funding a project of this magnitude but all of the people we worked with were very gracious, very helpful, and from the outset, wanted to see this happen. We’re very grateful that we were making this move and we were coming to them to be a partner with this to advance the life for seniors in this area.

What were some important features for you for this project?

Everything needed to be updated. We wanted neighborhoods instead of long, stark hallways, we wanted neighborhoods that kind of meandered so now some rooms are recessed and some are closer so the hallway is broken up. Each room has a little foyer area before you enter the room.

We have many nooks and fireplaces, and fun places to sit and visit with each other with family members. We have a beautiful new community room. We have family dining areas, and then each neighborhood has its own kitchen and its own dining area so it’s no longer this huge dining room where everybody goes and gathers but each neighborhood has their own area.

You feel like you’re at home, your own kitchen, perhaps with several guests over.

Then the other thing was a feeling of normalcy. I’m in the nursing home, but I still want to communicate. I still want to socialize

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