Closure of historic nursing home reflects sector’s increasing infrastructure problems

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An unsuccessful, years-long bid to find a partner willing to finance needed capital improvements or help redevelop a historic nonprofit nursing home in South Boston will lead to its closure this summer.

Marian Manor, owned and operated by New York’s Carmelite Sisters for the Aged and Infirm, has operated for 70 years, initially in former hospital buildings. The nursing home, licensed for 366 residents, was able to add 100- and 120-bed buildings in the 1960s and 1970s.

But in today’s environment, just the cost of needed updates was enough to push the community landmark out of operation. The doors will close for the last time by September, according to papers filed with the Massachusetts Department of Public Health last week.

“Despite our best efforts to find a partner to redevelop the current location, we have been unable to create a plan that is financially viable given the challenges that all healthcare institutions currently face, including nursing shortages, skyrocketing real estate costs, and inflation,” a spokesperson for the nursing facility told local media. “Having exhausted every practical option, we have made the difficult decision to close Marian Manor as the aging building has come to the end of its useful life.”

It may become an increasingly common story as the nation’s stock of traditional nursing homes ages to the point where many facilities need major physical upgrades.

Those are challenging to finance when many facilities tore through their reserves during the pandemic. Some delayed major improvements, only to find that loans were hard to come by — and harder to afford, given inflation — after the public health emergency ended.

“The vast majority of homes were built in the 1960s and 1970s, when the then-new Medicare and Medicaid programs created government reimbursement streams for institutional nursing care services — and thus incentivized lenders and investors to put up the money for new construction based on the promise of steady, government-backed revenue for years to come,” explained Alex Spanko, director of communications and marketing for the Center for Innovation, which advocates for new nursing home approaches and funding to support them 

“Once the market hit a critical mass of nursing homes, there was no more incentive to build new homes, and thus we have an infrastructure that’s stuck in the Ford administration.”

In today’s high-interest market, traditional bank loans are nearly impossible to get, forcing nursing homes to use non-traditional and potentially more expensive or more risky financing vehicles. And lenders, Spanko said, favor projects that they expect will generate new revenue.

While that might include expansions or new facilities designed to attract high-needs patients whose care is paid for by Medicare, it’s less likely to be an option for the typical nursing home that needs routine-but-expensive capital investment such as a new roof or new electrical or plumbing systems. 

At Marian Manor, officials noted a lack of sufficient funding or grants for redevelopment or relocation — as well real estate prices that escalated in the old neighborhood — made moving forward an insurmountable challenge.

Spanko’s Center for Innovation and its Green House Project is promoting government incentives that support construction of modern, person-directed facilities through targeted grants or Medicaid rate increases. Providers in Arkansas and soon Ohio, for instance, receive Medicaid rate add-ons for private room nursing care, he noted.

Still, there is no federal revenue stream dedicated to a nursing home’s capital costs. And at least one state is cutting back what it dedicates to capital costs. New York Gov. Kathy Hochul (D) this spring proposed a 10% cut to the capital component of her state’s Medicaid rate.

Spanko encouraged officials to adopt policies that make it easier for providers to make their buildings the kinds of places patients want to be.

“Small incentives — paired with strong oversight to ensure the money is being spent correctly — can make the difference between a yes and a no from a lender,” he said.

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