Genesis Healthcare, after years of shrinking, is adding nursing homes again in Pennsylvania

After years of shrinking, especially in Pennsylvania and New Jersey, Genesis Healthcare Inc., based in Kennett Square, is slated to add 34 nursing homes in Pennsylvania to the 15 it now operates in the state.

Genesis, now controlled by a New York investment firm and with new high-level management, will take over the facilities, plus four in Colorado, from ProMedica Senior Care, said Lori Moyer, a spokesperson for Genesis.

The change in trajectory at Genesis — which shrank by a third from 2015 through last year — is happening because of a decision by Welltower Inc., a large nursing home landlord, to change operators at 147 nursing homes run by ProMedica.

ProMedica has faced huge financial losses from its nursing homes in the last two years, including $316 million in the first nine months of 2022.

Welltower said nursing homes where it replaced ProMedica two years ago have gotten better, but the Toledo, Ohio, company did not respond to a request for detail on those facilities, making it impossible to verify that claim.

Mayer declined to provide a list of Genesis nursing homes. The company’s website says it has more than 250 centers in 22 states.

Welltower’s move is an example of how big real estate investment firms, once attracted by the cash flow nursing homes were expected to generate as the U.S. population ages, have been distancing themselves from the industry. Nursing homes were hammered by COVID-19 and now face higher long-term costs. Additionally, more families have become wary of nursing homes after the pandemic.

Genesis’ deal brings the nursing home stalwart back into a closer relationship with Welltower, which bought most of Genesis’ real estate for $2.4 billion in 2011. As Genesis struggled to keep up with regularly rising rents in recent years, Welltower began extracting itself from the business relationship.

As part of the effort to distance itself from Genesis, less than two years ago Welltower brought in ProMedica to manage nine Genesis PowerBack facilities, including six in the Philadelphia area. Genesis launched PowerBack in 2012 as a brand that was more focused in short-term rehabilitation than most nursing facilities.

But now, in a turnabout, Genesis is coming back as the operator of five former PowerBack facilities, in Pennsylvania and Colorado, Moyer said.

Genesis, which was founded in 1985, has had a tumultuous financial history, including a bankruptcy in 2000, and has cycled through public and private ownership over the last 20 years.

During Genesis’ latest run as a publicly traded company from 2015 into early 2021, the company shrank by nearly a third, as Welltower and other landlords sold some nursing homes and turned facilities over to other operators, hoping they could turn a profit and keep up with ever-rising rents.

The sale of Genesis nursing homes hit New Jersey and Pennsylvania particularly hard. The number of Genesis facilities in those states plummeted to 25 at the end of last year from 95 at the end of 2015, according to the Kennett Square company’s website and regulatory filings.

Genesis is not adding to its 10 facilities in New Jersey, the Genesis spokesperson said, and it’s not clear who has taken over operations from ProMedica there.

The three ProMedica sites in Pennsylvania that Genesis is not getting are going to Tryko Partners, a Brick, N.J., company. Those sites are in Allentown, Easton, and Yardley, a spokesperson said.

Tryko has been expanding in the Philadelphia region, last year acquiring the former Restore Health University City, Virtua health nursing homes in Berlin and Mount Holly, and The Springs at the Watermark, according to public records. Tryko was also trying to buy Inglis House, a nonprofit nursing home that serves people with physical disabilities, but Inglis called off that deal Tuesday.

ProMedica, Welltower, and Integra Healthcare, a new company that has formed a partnership with Welltower to find new operators for the ProMedica site, have not answered repeated questions about the transition underway at 147 former ProMedica nursing homes in 15 states.

Integra was a new firm with no track record when Welltower hooked up with it last fall, but Welltower’s chief executive assured stock analysts that Integra’s principals had helped Welltower move 21 ProMedica sites and 35 Genesis nursing homes to new operators in 2021.

Welltower declined to provide details about those transactions.

The elusive tie between Integra and Welltower is evident in the 2021 transfer of numerous Genesis nursing homes in Pennsylvania and New Jersey to Complete Care Management of Lakewood, N.J.

Public records in Montgomery County list Aurora Health Network LLC as the owner of Complete Care Harston Hall in Flourtown, a former Genesis site. Aurora Health’s cofounder, Joel Landau, is also a cofounder of Pinta Partners, the New York investment firm that controls Genesis. In addition, the chief financial officer of both Genesis and Aurora is Jonathan Kirschner, according the companies’ websites.

In that context, the comment by Welltower CEO Shankh S. Mitra about Integra’s experience in the industry makes more sense.

“We have worked with Integra and its parent company on many of these transactions before,” Mitra told analysts in November. “There’s no question that they are significantly better in the skilled nursing business than we ever were and will ever be.”