By Scott Robertson
Mountain States Health Alliance President Alan Levine this week announced two new partnerships he said are designed to expand and enhance rehabilitation and skilled nursing services for the Tri-Cities area. Both involve the entry into the Johnson City market of national companies already doing business in the Tri-Cities.
HealthSouth partnering on Quillen Rehab
Mountain States, said Levine, has entered into a definitive agreement with HealthSouth Corporation to create a partnership that will expand both the existing facility and the offering of services at Quillen Rehabilitation Hospital. While Mountain States will retain 50 percent interest in Quillen Rehab as a joint venture partner, said Levine, current employees will become employees of HealthSouth.
“HealthSouth is the national leader in providing rehab services, with a network of 103 hospitals across the nation,” said Levine. “HealthSouth is the largest provider in terms of the number of patients that they treat and discharge, in revenues, and in the number of hospitals. Their quality of care is among the best in the nation.”
Levine said HealthSouth is annually in the top 10 percent in the metric used to determine the quality of outcomes at rehab facilities, called FIM scores. “We’re proud of the fact that here at Mountain States our FIM scores exceed both the state and national averages. The quality of care that we provide in our rehab services at Quillen is outstanding today. The fact that we’re linking up with another provider that is a national leader in those metrics is truly important to us.”
Grace Pereira, vice president for post-acute care services at Mountain States, echoed Levine’s assessment that the partnership will make a good facility better. “We already have a high quality of care and outcomes. So why take on this partnership? There is always opportunity for improvement, and it really quite frankly is part of the evolution of health care. We already have a good product. So to partner with an entity that just focuses on inpatient rehabilitation, what we are going to do is strengthen that service even more. They bring to the table specific clinical education programs for our staff, and that will only make us better and stronger. They have the ability to develop specific programs for some of out patient populations and that will bring the services to a different level.”
Pereira said Mountain States hopes to have the actual partnership with HealthSouth ready to close by the fall of 2014.
Quillen currently operates 26 inpatient rehabilitation beds, and HealthSouth intends to add at least 10 beds to better serve the needs of the local community. The facility will continue to be known as Quillen Rehabilitation Hospital.
“We expect all of our employees at Quillen to be offered the opportunity to stay with Quillen upon the consummation of the transaction, and that is something that HealthSouth has agreed to,” said Levine.
HealthSouth operates two other inpatient rehabilitation hospitals in the area: HealthSouth Rehabilitation Hospital in Kingsport, Tenn. and The Rehabilitation Hospital of Southwest Virginia in Bristol, Va.
Signature HealthCARE to build on old North Side Hospital site
On Tuesday, Mountain States officials signed a letter of intent with Signature HealthCARE to develop an assisted living community and skilled nursing facility on the campus of the old North Side Hospital. The old North Side will be demolished to make room for a new facility. In the meantime, Signature will partner with Mountain States in the operation of the existing 34 transitional care skilled nursing beds at Quillen.
“Within the next two years we plan to construct a new skilled nursing facility that will have 47 beds,” said Levine. “And we’ll be adding a 60-bed assisted living facility on what is currently the old North Side Hospital site.” That site has been dormant since Mountain States closed the hospital in July 2010.
“Over the next several months, we’ll iron out the definitive agreement with Signature and begin the planning process for the new facility,” said Levine. Signature operates 99 communities in 15 states including Signature HealthCARE of Greeneville, Pine Ridge Care & Rehabilitation Center in Elizabethton, Mountain City Care & Rehabilitation Center, and Signature HealthCARE of Rogersville.
Pereira said Mountain States hopes to have everything in place with Signature within 18 months to two years. “The partnership with Signature gives us the opportunity to expand the skilled nursing services, which, with an aging population in this area, becomes critical. Because skilled nursing and assisted living is their focus, have specific programs to improve the clinical outcomes in that area. We are already a four-star facility at Princeton, so increasing the services only brings better opportunities to this community.”
The available land on the North Side site creates the opportunity to create a campus environment, said Steve Fleming, vice president for skilled nursing partnerships with Signature. “There will be the acute rehab center that HealthSouth will be operating. Then we’ll be able to have the assisted living and nursing home there and look to the future of bringing independent living services there as well because we have the space.”
“This (project) represents a reinvestment into local infrastructure that we believe is going to add more than 100 jobs to the region,” said Levine. “We expect this building will be at least 70,000 square feet in size and will cost about $16 million in construction costs for the development of the six acres – there’s a total of about 20 acres, give or take, on that property.”
Levine echoed Fleming’s statement that the partnership’s intention is to develop the skilled nursing facility and assisted living facility, then to look at development opportunities on the other 14+ acres of land at the old North Side site, perhaps in independent living options for seniors. The redevelopment and construction components of the new agreements are expected to stimulate the local economy. “Economic growth is important to all businesses, and we hope that this investment will help spark growth and development in the surrounding area,” said Levine.
The Washington County Economic Development Council is already sold on the economic potential of redeveloping the North Side site, especially with Mountain States at the helm. Mitch Miller, WCEDC president said, “When you think about what Mountain States’ economic impact already is on this region, it’s $1.3 billion. Here in Washington County alone that impact is over $683 million.
“It’s projects like this and organizations like Mountain States that really help drive our economy,” said Miller. “We are particularly excited about the redevelopment of the North Side Hospital property. It’s been sitting vacant. This is an opportunity to bring new commerce there, with jobs during the construction phase. Also when it comes into the operational phase, it could also lead to more commercial development around it. We see that opportunity as a good thing for Washington County.”
Plan predates current president
The conversation about Mountain States’ direction with respect to long-term care and rehabilitation began early last year. Levine made it clear during the Wednesday morning announcement that these partnerships are not something cooked up in a hurry by a brand new CEO. “The board last year, during my selection, inquired of me about my thoughts on this. I thought it was the right thing to do. But we just executed the definitive agreement with HealthSouth yesterday. These are things I strongly believe in, but also things our board feels passionately about.
“We went through a very good due diligence process in looking at these partners and looked at their financial wherewithal, making sure we’re partnering with enterprises that have the financial stability to be able to serve this population and make the capital investment necessary.” said Levine. “HealthSouth has a market capitalization of $3.1 billion. They have $130 million in free cash flow and only $1.5 billion in debt so they have a very strong balance sheet and have great strength. Signature started in 2007 with 48 homes. Their revenue is now approaching $1 billion a year. So we feel very good about the financial strength and viability of both of these institutions.”
In both partnerships, Mountain States will be an equity partner and will continue to participate in governance, giving up 50 percent of governance of Quillen Rehab operations to HealthSouth and sharing governance of the Signature project on a 50-50 basis as well.
“These will be true partnerships,” said Levine. “We will bring the best of what Mountain States has to offer and the best of what these national organizations have to offer in terms of their expertise and frankly the access to best practices throughout the nation.”
“Our relationship with both these companies is strong and we look forward to great results,” concluded Levine.