On October 13, 2020, the Estes Park Health (EPH) Senior Leadership Team and Board of Directors accepted an invitation from some community members to evaluate an independent, third-party management alternative to take over the management and responsibility for the Estes Park Health Living Center (Living Center). A third-party management alternative would be challenging but possible and worth exploring to ensure all possible alternatives were thoroughly evaluated.
A key requirement of accepting the invitation and delaying a decision on the Living Center from mid-October to the end of January 2021 was for the community members to demonstrate the viability of the alternative by producing a comprehensive business plan with a high likelihood of success. We expect to see a comprehensive business plan from the Task Force next week at the Task Force meeting Wednesday, January 13.
Below is a brief summary of why we are evaluating Living Center alternatives at this time.
When the Covid-19 pandemic arrived in early 2020, it caused Estes Park Health (EPH) multi-million-dollar losses from service shutdowns, and these pandemic-related multi-million-dollar losses were projected to continue through 2021. While Covid-19 pandemic financial relief programs have provided some temporary relief, to survive financially through 2020 and beyond, EPH began evaluating all services and personnel for possible expense reductions.
As a result of this evaluation, about $2.5 million in expense reduction was achieved through staff reductions, temporary reductions in pay, consolidation and elimination of services, and achieving increases in operational efficiency.
Evaluating Living Center alternatives represented only one element in the overall search for expense reductions. For at least the last 15 years, the Living Center had financial losses, and its losses had been increasing even before the pandemic because the number of residents had been declining. Then the pandemic further reduced the number of residents. When there were 28 Living Center residents, losses were estimated at $1.5 million. With 17 residents currently, the losses are even greater.
When discussions about alternatives for the Living Center started, EPH had consulted with experts whose opinions were consistent: The Living Center operated by Estes Park Health was not financially viable because:
1. A minimum facility size of 60 to 80 beds was needed for financial viability in the current reimbursement and competitive environment. The Living Center’s 38 bed capacity would always produce a financial loss.
2. Medicaid only pays 70% of the cost of skilled nursing care. With Medicaid paying for 60 to 80 percent of Living Center residents, a financial loss was inevitable.
3. Like nursing homes nationally, the Living Center has had to increase use of more expensive contact labor to satisfy staffing requirements. Labor costs represent about 75% of total Living Center expenses, and the rising labor costs had increased financial losses.
Among other alternatives, 11 facilities rated in the top 10% of nursing homes in Colorado by the Centers for Medicare and Medicaid Services are within 35 to 50 miles of Estes Park.
In the 36 years since the Living Center opened in 1984, there have been major changes in nursing home resident characteristics and preferences, service financial reimbursement, programming for residents, nursing home employees, and alternatives to nursing homes. These changes are why we need look at the viability of the Estes Park Living Center.