Nursing care officials find it easy to restart

Expertise: The turmoil in long-term health care left a fertile local niche for executives with know-how and access to capital.

December 30, 2003|By M. William Salganik | M. William Salganik,SUN STAFF

His grandfather had a pharmacy in Pimlico. His father had a pharmacy on Joppa Road in Baltimore County, and his earliest memories are of stacking returned Coke bottles at the stores of both.

So it didn't take long for Stephen Handelman to choose a career. "Who am I kidding?" he recalled thinking. "It's in my genes."

Since graduating from pharmacy school in 1979, Handelman has seen his career take a few turns, but his passion for pharmacy has never waned.

He worked with his father to develop a business filling prescriptions for nursing homes. They sold the business to the NeighborCare chain, and then NeighborCare was sold to Pennsylvania-based Genesis Health Ventures.

Then Handelman started all over again.

He began a new business filling prescriptions for assisted-living facilities. The business grew and began serving nursing homes as well. Two former NeighborCare executives joined him to help run and expand a company now called Woodhaven Health Services.

Think of it as a restart. Someone builds a business, sells it to a large operator, and then begins building something new.

Restarts aren't limited to a single industry. Business professors speak of "serial entrepreneurs" in varied fields.

But the trend has been particularly pronounced lately in nursing homes and related businesses, such as rehabilitation companies and institutional pharmacies like Woodhaven.

"It's a lot more fun to build than to maintain," said Alan P. Bronfein. "At the heart, we're entrepreneurial in spirit."

Bronfein helped the growth of NeighborCare, which was founded by his brother, Michael Bronfein. Now, like Handelman, he's an executive vice president of Woodhaven. The chief executive officer of Woodhaven is another former NeighborCare executive, Barry A. Schepp.

"I left because I thought I would build a better mousetrap," said Handelman. "I wanted to serve customers the way I was taught to serve customers by my father."

One reason for the recent boom in restarts in health care is a surplus of executive talent.

The long-term care industry went through rapid consolidation in the mid-1990s. Then, after Medicare began cutting its reimbursement in 1999, five of the seven largest nursing home chains filed for bankruptcy. The result was a lot of experienced executives who chose or were forced to leave the large consolidators, but had the knowledge and access to capital to launch re-startups.

"If you look at the big [nursing home] chains, there have been all sorts of people who have been spit out and are starting their own companies," said Stephen B. Monroe, editor of The SeniorCare Investor, an industry newsletter.

"The industry is fairly close-knit," Monroe added. "If people know you, you can get capital, and there have been lots of buildings available."

Not only were the buildings available, but the prices were low.

"Basically, it's been a yard sale," said Schepp, the Woodhaven CEO, about the nursing home industry. "They've been able to buy up homes at bargain prices, and they have the expertise to fix them."

There are several long-term care restarts in the Baltimore area.

Consider Francis B. Kirley, who was an executive of Integrated Health Services, a giant nursing home chain based in Baltimore County. Integrated grew rapidly through acquisitions -- at one point, it operated 1,700 nursing homes and rehabilitation centers -- and then ran into financial problems and began pruning in the late 1990s.

"When the decision was made to eliminate my division," Kirley said, "driving home, I called my partner, Brett Bolt, and said, `Are you ready to start this thing?' "

Now, Kirley and Bolt operate about 40 nursing homes with a company named Nexion Health Inc., with headquarters in Eldersburg.

Consider Stephen J. Allen, who was chief operating officer of Home Quality Management, a national nursing home company based in Florida with about 50 homes.

As nursing homes ran into financial trouble, Allen and a Home Quality colleague, Charles A. Ritchey, started Xavier Health Care Services Inc. The Baltimore company specializes in turning around troubled nursing homes, generally starting with a management contract and getting an option to buy the home. Xavier now owns six homes in Maryland.

Consider Anthony Misitano. He helped start a nursing home company called Continental Medical Systems. That was sold to a larger chain, which in turn sold many of the homes to Integrated Health.

Misitano went back to the same venture capitalists who financed Continental Medical and launched a new business called Trans Healthcare Inc. When Integrated Health was in bankruptcy reorganization, Trans Healthcare seized the opportunity to take over operation of the Integrated homes (some of which were former Continental Medical homes).

Housed in what used to be Integrated's headquarters in Sparks, Trans Healthcare now operates about 215 nursing homes.

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