Thursday, June 13, 2024

A nine-year resident of Neville Center enjoys the weather Friday outside her home. (Photo: Marc Levy)

Neville Center, the city-affiliated nursing home near Fresh Pond, is asking for $2.5 million in city funds, warning that the 112-bed facility could close if the nursing home cannot refinance its mortgage. A related assisted-living facility has already been promised $5.7 million from the city’s Affordable Housing Trust, partly to allow refinancing its debt.

After Cambridge Day questioned a city spokesperson about the statements from Andrew Fuqua, a Cambridge Health Alliance executive, about the possible nursing-home closing, Fuqua said through an Alliance spokesperson that he had been referring to “potential long-term consequences” and not “imminent” plans.

“At this stage, [the nursing home] is actively engaged in constructive dialogue regarding its refinancing and is focused on ensuring its long-term sustainability as a community resource,” Fuqua said through Alliance spokesperson David Cecere.

Fuqua is president of Neville Communities, the nonprofit corporation that oversees the nursing home and assisted-living center, and also chief counsel to the Cambridge Health Alliance. Representatives of the Alliance, the Cambridge Housing Authority, the city and the city’s Affordable Housing Trust sit on the nonprofit’s board because all four public entities were involved in creating the nursing home and assisted-living center in 1998.

Members of the City Council’s Health & Environment Committee, who heard the plea to help Neville Center at a hearing May 23, said they were reluctant to agree because part of the city aid would pay off a portion of the $14 million in loans that will be due Oct. 31 and need to be refinanced. “There’s a definite consensus that we want to be helping the staff and the residents, and a consensus that we cannot just be a piggy bank to say whatever money is needed, especially when there’s a for-profit bank involved,” said councillor Patty Nolan, chair of the committee.

Councillors urged the city administration and Neville Communities to come up with a solution that doesn’t involve a direct payoff to the bank, Rockland Trust. Assistant city manager for fiscal affairs Claire Brewer Spinner said the parties, including the bank, have been negotiating for several months. Deadlines are pressing, she said.

If the city wants to use free cash, its budgetary surplus, to help the nursing home, the decision must come within weeks – in June, she said. If that doesn’t happen, the next chance to use free cash would happen in October, she said, the same month the loan must be repaid or refinanced.

When Fuqua was asked at the hearing what would happen if the loan isn’t repaid, he said: “The ultimate implication would be that we would, in all likelihood, in order to ensure that we could continue with the assisted living, we would need to close the nursing home.”

At another point in the questioning by councillors, Fuqua said that if Neville couldn’t refinance or restructure its debt, “we would in all likelihood need to close the nursing home.”

Profits at former Neville Manor

Neville Center and Neville Place, the assisted-living center, were opened in 2001 on city land that formerly housed the city’s Neville Manor nursing home. Neville Manor was more than 70 years old, in disrepair and losing money. A 1999 state law authorized the redevelopment of the property.

At the time, the Cambridge Health Alliance owned Neville Manor, and the Alliance, the Cambridge Housing Authority, the city and the city’s Affordable Housing Trust collaborated to create the new development, with financial help from the state and other affordable-housing organizations. The nursing home and assisted-living center sit on city-owned land next to Fresh Pond.

“For the first 20 or so years of its existence, after the development of the property and the passage of the [state law], Neville was actually able to manage positive bottom lines to support its operations and capital needs,” Fuqua told councillors. “It would vary back and forth. There would be times when the assisted living performed more strongly and other times, particularly looking back a decade or 12 years ago, when the nursing home performed more strongly. But in recent years with changes in reimbursement methodologies, as both the state and [federal government]  had been looking at ways to reduce overall health care costs, Neville’s finances were really quite fragile.”

“Then the pandemic hit, which threw everything into a loop. And it completely disrupted the balance … because costs accelerated at a far greater pace than reimbursement. Reimbursement simply has not caught up to cover the costs of care, especially with the growth of wages,” Fuqua said.

Roof repairs and more

Roof repairs are on the to-do list at the city-affiliated Neville properties for seniors. (Photo: Marc Levy)

Consultant Paul Valentine of KCP Advisory Group, which has Neville as a client, said the nursing home is losing about $48,000 a month on revenue of approximately $1.4 million a month, while Neville Place, the assisted-living center, is earning a profit of about $66,000 a month on monthly revenue of $500,000.

Both facilities need repairs such as new roofs. Neville Place will use the $5.7 million from the Affordable Housing Trust for upgrades. That will also play into refinancing the Rockland Trust debt, because the bank required Neville Place to have funding for repairs before it would agree to refinance, the Affordable Housing Trust said last month when it approved the aid.

Neville Center also needs money for improvements and would use part of any city assistance for that purpose, Fuqua said. Refinancing is also essential for the nursing home, he said. A smaller loan will lower operating costs, helping the nursing home return to the black, Fuqua said. His visual presentation to councillors said Rockland Trust also wants a smaller loan, adding that the bank isn’t willing to refinance unless part of the debt is paid off.

Good workplace

The nursing home’s financial report to the state for 2021, the most recent report made public, showed operating revenue of almost $15 million but a loss of $1.9 million after expenses. Still, Neville reported a bottom-line profit that year because of $2.4 million from Covid relief programs.

Fuqua made a point of praising the nursing home for not hiring temporary “agency” staff, which can inflate employee costs. Neville Center also has a much lower employee turnover rate than other Massachusetts nursing homes, according to figures from Medicare.

Some Neville Center staff members worked long hours, though. The highest-paid employee in 2021 was a licensed practical nurse who worked 70 hours a week and earned $232,849, according to Neville’s financial report to the state.

There are two Rockland Trust loans, one to the nursing home and one to the assisted-living facility, according to real estate records. They added up to $19.7 million when Rockland Trust loaned the money in 2013 to replace an “extraordinarily complicated debt structure” that financed the original development work, Fuqua said.

The loans now total about $14 million, Fuqua said. Though they are separate loans, they are connected in that both must be refinanced and the bank wants assurance that both facilities can make necessary upgrades.

Extended deadline

The Affordable Housing Trust approved a $2.5 million loan for the assisted-living center in 2023 and attached a long list of conditions, including requiring Neville to examine its tenant selection policy and to make more use of 30 rental-assistance vouchers for low- and moderate-income persons that the housing authority had given to the facility. Neville was using only 18 of the vouchers, which bring in money from the federal government.

Affordable Housing Trust members were told then that the facility’s mortgage was about to come due and needed to be refinanced. But Neville Place did not sign the loan and its mortgage wasn’t refinanced. When the trust increased its aid to $5.7 million in April, members were again told the assisted-living facility had to refinance its mortgage.

City spokesperson Jeremy Warnick said the mortgage had been due in July 2023 but Rockland Trust extended it while the parties negotiated. The new due date is Oct. 31, he said. No one has explained why Neville Place did not accept the original loan from the trust.

Neville Place is unusual in that 57 of its 71 units must go to low- or moderate-income residents; most assisted-living facilities have no or very few affordable units. In Neville Center, 75 percent of the nursing home’s 112 beds must be occupied by residents covered by public insurance programs such as Medicare or Medicaid. Some nursing homes won’t admit people on Medicaid, which pays low rates for care.

Calling for state action

Fuqua and councillors agreed that the state must increase reimbursement to nursing homes such as Neville Center to put them on firm financial footing. Valentine, the consultant, said that during the pandemic “the cost of wages went up dramatically.”

Reimbursement from MassHealth, the state’s Medicaid program for low-income residents, “simply has not been able to stay in line with those increases,” Valentine said.

The nursing home is trying to maximize revenue from a new MassHealth reimbursement system, reduce expenses while maintaining quality, establish referrals from Beth Israel Lahey Health and Mass General Brigham health care systems and explore the possibility of qualifying for increased reimbursement as a public nursing home, Fuqua and Valentine said.

“The state at some point probably needs to address this with regard to increases in reimbursement rates,” Valentine said.