Kaleida Health wanted to sell HighPointe nursing home -- then Covid happened

Apr. 26—Will Kaleida sell its HighPointe nursing home at some point?

It was February 2020 when Jody Lomeo, then Kaleida Health CEO, informed employees that the health system would put its HighPointe on Michigan long-term care facility up for sale.

A month later, the Covid-19 pandemic started, with nursing homes among the first facilities to feel the effect. Most health care business strategies — at Kaleida and beyond — were temporarily put on the backburner as doctors, nurses and support staff scrambled to respond to the kind of health crisis that hadn't occurred in 100 years.

Two years later, efforts to sell HighPointe remain on hold due to Covid-19, said Michael P. Hughes, senior vice president and chief administrative officer at Kaleida.

Asked for further comment, Hughes responded: "Not much to talk about. Everything is on hold."

But that doesn't mean we can't talk about it.

Let's start by exploring the reasons Lomeo cited in his memo to employees — back at a time when nobody knew Covid-19 would dominate our daily lives for the next two years. Lomeo, who stepped down as CEO at the end of 2020, said at the time that long-term care represented less than 3% of Kaleida's overall revenues. In addition, he noted long-term care posed "a significant financial, legal and risk burden" that is not justified by the benefits to Kaleida.

So Kaleida set out to find a buyer who focused on nursing homes as a core business. Then Covid-19 hit.

Financial burden

Kaleida opened the $64 million HighPointe, between High and East North streets on the eastern edge of the city's medical corridor, in December 2011, the first urban nursing home built in Buffalo in decades. At 300 beds, it remains one of the region's largest nursing homes.

By the time Kaleida announced plans to sell HighPointe, the 9-year-old facility had piled up $80 million in losses.

In 2018, for instance, the facility logged a loss of $3.4 million on net patient revenue of $41.4 million, according to cost reports filed with the Centers for Medicare & Medicaid Services. Its performance was worse in 2017: a loss of $5.2 million on net patient revenue of $39.8 million.

While more recent federal numbers weren't readily available, not too many nursing homes emerged in better financial shape from the pandemic.

A common complaint: Long-term care facilities say the state's Medicaid program, which covers nearly 75% of the days of care nursing homes deliver, has consistently had stagnant rates of reimbursement, making it difficult to operate profitably as costs rapidly increase.

The recently signed state budget includes a 1% across-the-board increase to Medicaid rates, less than nursing home trade groups were hoping for.

Legal, risk burden

Some of that "legal and risk burden" Lomeo referred to is evident in past fines that the facility has collected.

In November 2019, for instance, the state attorney general slapped Kaleida with a $500,000 penalty in a settlement that criticized the care provided to 16-month-old Jameir Benn — who died at HighPointe in February 2015 — and called out falsified records for 56-year-old Larry Myers, who died there in January 2014. Myers' case ended with 17 workers getting convicted of falsifying records or other crimes.

In the aftermath of those two incidents, Kaleida invested $12 million in staffing and quality of care improvements, the system said at the time.

Just recently, HighPointe was hit with a $40,000 fine by the state Health Department due to lapses in Covid-19 testing frequency and missed temperature screenings of some employees — issues found during an unannounced state inspection in May 2021.

"While we have complied and paid the fine, we remain steadfast in our belief that HighPointe on Michigan's record during the pandemic stands out among the best for all long-term care facilities in Western New York," Hughes said.

Hughes' comment holds water, according to state and federal data, which show HighPointe had one of the lowest rates of Covid-19 cases and deaths per 1,000 residents.

State data shows that nine HighPointe residents died from Covid-19 as of April 20. Across Erie County's roughly 35 nursing homes in state data, 1,033 residents died from the virus.

If it sells?

If nonprofit Kaleida does, indeed, sell HighPointe at some point, it will fit into an ongoing trend of nursing homes being scooped up over the last five years.

In fact, more than 3,200 nursing homes were sold across the country from 2016 to 2021, according to recently released federal data. That works out to about 40 of every 1,000 nursing homes selling each year.

Compare that with hospitals: Only 348 hospital sales during that timeframe, or about 10 per 1,000 hospitals each year.

Breaking down the data further, more than 80 nursing homes were sold in New York from 2016 through 2021. And, clearly, the pandemic chilled the deal-making: Only six of those deals became effective after March 1, 2020.

Some have complained of a slow approvals process at the state Health Department. In fact, the dealmakers behind the planned $47 million sale of Weinberg Campus in Amherst said a pandemic-delayed state approvals process killed that deal.

Time will tell whether Kaleida starts actively shopping HighPointe again.

Want to know more? Three stories to catch you up:

—Kaleida seeks buyer for HighPointe in bid to cut costs and stem bleeding

—Kaleida's HighPointe nursing home fined $40K for Covid-19 violations

—No deal: $47 million sale of Weinberg Campus to Elderwood operators has been terminated

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Welcome to Buffalo Next. This newsletter from The Buffalo News will bring you the latest coverage on the changing Buffalo Niagara economy — from real estate to health care to startups. Read more at BuffaloNext.com.

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