Former Nursing Homes Finding New Life As Behavioral Health Facilities

As the demand for behavioral health services continues to grow, so does the industry, with new developments and facilities popping up every day. Nursing home providers, on the other hand, haven’t been as lucky.

The skilled nursing world continues to see financial strain and, in some cases, closures. In that misfortune, a number of behavioral health providers are finding opportunity, repurposing post-acute real estate into behavioral health facilities.

In recent years, a variety of industry-watchers have floated the idea of converting unused skilled nursing assets into behavioral health sites, including treatment centers for mental illness and substance use disorders. Faced with low occupancy and payment headwinds, nursing home operators looking to leave the industry have in some cases fielded offers from curious behavioral operators.

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Barriers to entry remain: For instance, area residents who were fine living near a nursing home may express objections to a drug treatment center moving into their neighborhoods, while the rules regarding such conversions — or the simultaneous operation of nursing home and behavioral care beds — remain ambiguous in many states.

That hasn’t stopped some prominent players in the space from touting the strategy’s potential: Sabra Health Care REIT (Nasdaq: SBRA) chief investment officer Talya Nevo-Hacohen told SNN last month that former SNF stock can serve as a logical home for new behavioral health centers, particularly as the industry looks to build more substance use facilities close to where people live — as opposed to in traditional “destination” locations such as Florida or Southern California.

“You can modify any building that is residential in its nature — whether it’s student housing or senior housing or skilled or an LTAC,” Nevo-Hacohen said, referring to long-term acute care hospitals.

The past week brought news reports of SNF-to-behavioral conversions across the country, potentially illustrating the viability of the strategy moving forward.

For example, Darrin’s Place of New Mexico, a new behavioral health center, will soon replace the Espanola Valley Nursing and Rehabilitation Center, with financial assistance from the county government, according to the Rio Grande Sun.

The facility plans to treat about 100 residents for substance problems and will be fully functional by June 2020, the Sun reported, with a variety of services — including 12-step meetings, medication control programs and therapy.

Rent is set to total $240,000 per year for Rio Arriba County, according to the report, and the county will receive $500,000 from a U.S. Department of Housing and Urban Development Community Development (HUD) block grant. The new operators will use that funding to reconfigure the building for its new role, including the addition of a new fence designed to discourage illegal drug use.

In another case, community members in Massachusetts were less than congenial about the conversion of a nursing home, known as Daniels House, into a sober facility run by Process Recovery Centers, a for-profit company, according to The Daily Times Chronicle.

Locals protested the incoming “sober home” at a board meeting last week, speaking against the residents’ potential threat to children walking to and from the nearby library — and describing the project as a general detriment to the neighborhood, The Daily Times Chronicle reported.

Finally, after the Park Royal Nursing Home in Washington state closed its doors in September, Core Health swooped in to plan a transitional housing facility to assist the mentally and/or physically frail homeless population, according to TDN.com.

The Longview, Wash. facility will serve 75 homeless individuals in a setting classified as “assisted living and congregate care,” as opposed to naming the facility a shelter, Core Health director Frank Morrison told the outlet.

Royal Park Nursing Home was a 50-bed facility that fell victim to an ongoing trend of smaller nursing homes closing due to financial constraints — and more particularly, shortfalls in Medicaid reimbursements.

Core Health will offer continued assistance for those seeking Social Security and long-term housing while struggling with mental and medical impairments, Morrison told the publication.

The mental health agency bought the facility for $625,000 and will need to apply for a “change in use” permit, tnd.com reported.

The center will allow patients to remain for as long as two years, with nursing assistants and up to 30 total staff keeping the center up and running.

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