Assessing the Financial Viability of The Green House Model: Slaying the Urban Myth

By / Posted on June 20th, 2014

Take any urban myth, such as the popular one about alligators living in the sewers;  people talk about it, but nobody has seen it.  The urban myth about Green House homes is that they are not financially viable because they are too expensive to build, and too expensive to run.  But when you really look at it, the facts don’t support the myth, according to Scott Townsley, Principal, CliftonLarsonAllen, LLP, in a presentation at LeadingAge of Pennsylvania.

Public perception of nursing homes continues to be negative.  Despite that, occupancy remains pretty high.  Nursing homes have benefited from Certificates of Need, which peg nursing home bed supply to demand.  Nursing homes have never had to worry about marketing a product that the public didn’t want – demand is guaranteed.

Over the next 10-15 years, utilization will decrease, according to Townsley, meaning that supply will outstrip demand.  Consumers will have more choice and nursing homes will have to compete to keep rooms filled.  To succeed, something will need to change.   And Green House homes represent one of the biggest innovations – and opportunities – for operators.  Research shows that consumers will drive farther and pay more for Green House homes compared to traditional nursing homes.

The Green House model is not just about doing good – you can do well.  In addition to deep culture change, person-centered care, a unique residential environment, and better quality of life, Green House homes also generate better outcomes, improve payor mix and increase occupancy.

In most cases, the urban myth about Green House homes is based on nothing more than rumors or a cursory review.

For example, in a strategy review and financial analysis performed by CliftonLarsonAllen for a struggling provider, they looked at the impact of incremental strategy improvements vs. conversion to Green House homes.  With the incremental approach, the organization was out of business by 2019.  By building Green House homes and improving occupancy and payor mix, and getting a higher private pay rate – typical results with the Green House model – the organization will turn around and ultimately thrive.

St. Johns Homes near Rochester, New York demonstrates the financial impact of Green House homes.  Susan Frazier presented a case study comparing St. Johns traditional nursing home to their recently developed Green House homes.  The Green House homes are generating improvements in occupancy and payor mix, with exemplary survey results, at operating costs that are 30% lower PPD than the legacy nursing home.

Don’t fall for the urban myth about Green House homes.  With 152 Green House homes in operation, and another 150 under development, the facts tell a different story.