As plans to privatize and replace the Lake County Winchester House nursing home move along, the facility’s new private operator will benefit from some additional incentives beyond those originally included in its 2015 deal with the county in light of a Jan. 17 vote by elected officials.
The County Board overwhelmingly approved a change order to its agreement with Transitional Care of Lake County that will extend the three-year deal to a potential fourth year, increase the incentive payments made by the county to Transitional Care by $192,000, and forgive millions of dollars more in rent and startup capital already budgeted by the county, provided that Transitional Care meets construction milestones for a new facility in Mundelein.
The board also approved a 50 percent reduction in sewer fees, potentially worth more than $400,000, for the future facility.
Only Terry Wilke, who represents portions of Round Lake and Round Lake Beach, voted against the two measures.
The changes to the Winchester House agreement were necessary, officials said, because the original deal was built on faulty assumptions that resulted in revenue shortfalls for Transitional Care. There have been fewer patients than initially anticipated at the Libertyville nursing home, which has a 150-year-plus history of providing low-income seniors and people with disabilities with medical care, and some patients have not had the payer sources that officials first assumed.
The result has been that the private operator lost money some months last year and barely broke even during others. In November, according to figures provided at a Winchester House Advisory Board meeting Thursday, there were about 127 patients compared to an anticipated number of about 162 based on the 2015 agreement. The facility has 360 beds, according to Barry Burton, Lake County’s top administrator. Winchester House’s net income for the month was about $28,000 based on more than $892,000 in total income and nearly $864,000 in expenses.
“We have to recognize that even though we’re modifying the deal, it’s still a better deal for the taxpayer in the long run,” Burton said. “It’s saving (taxpayers) more money than it would cost for us to operate it.”
Minutes from a Jan. 11 meeting of the County Board’s Financial and Administrative Committee show that, though the panel unanimously forwarded the amendments in the agreement to the full County Board, members informed Burton that the changes “would be the last assistance provided to TCLC (Transitional Care of Lake County) in terms of the lease and management agreement.”
“It’s our last, best chance to make Winchester House continue,” Steve Carlson, chair of the County Board’s Health and Community Services Committee, said in a phone interview. He added that “barring disaster,” the latest modifications to the privatization agreement “should work.”
During the Jan. 11 financial committee meeting, Carlson said, “Nobody was particularly happy with the way things have worked out in the long run, but we’ve come to the conclusion that this is the best we’re going to get.”
All told, Burton said, the county could forgive as much as $2.5 million over the next 2 1/2 years, the financial committee minutes show.
Amid a changing national health care landscape, the County Board approved the original three-year agreement to privatize and replace the nursing home in May 2015. Winchester House was operating at a deficit, and officials projected at the time that the deal’s net cost to taxpayers would be $800,000 cheaper than it would cost the county to continue running the facility itself.
Burton said taxpayers are still saving money, even in light of the new adjustments to the deal.
“It’s still a much better deal than what it would have cost us to run the facility,” Burton said. The county used to pay another operator $3 million a year to manage Winchester House, he said.
One of the reasons it was more costly for the county to run Winchester House, Carlson said, was that staffers were earning county wages and county benefits, while the private competition’s employees were not.
Other developments were the advent of assisted living facilities in the area, driving down the number of patients at Winchester House, and the Affordable Care Act resulting in more seniors gaining access to nursing home facilities through Medicaid.
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“We served because nobody else would take them,” Burton said. “Well, now, it’s Medicaid’s responsibility.”
Still, he added, the county didn’t want to lose the number of beds in the immediate area, which is why officials required Transitional Care to build a new facility as part of the incentive package.
Wilke, the lone “no” vote, said in an email he is “philosophically opposed” to giving taxpayer money to private, for-profit companies.
“With this new set of giveaways, I asked … ‘If the company were profitable, would our taxpayers be paid back?’ ” Wilke said. “The answer was, ‘No, we hadn’t included that’ in the first deal, nor was it in this new giveaway, either.”
The $192,000 increase to the lease incentive payments to Transitional Care results in the county’s share of those payments rising from about $6.7 million to $6.9 million over the span of the deal. Transitional Care’s yearly rent payment will also decrease from $480,000 to $144,000, documents show, with utilities decreasing from $360,000 annually to $130,000.
The new rent payments are more proportional to how Transitional Care is actually using the building, according to Burton, who said the space is much larger than Transitional Care requires. He called the current facility “dated.”
The county will retain ownership of the original Winchester House building. There are no plans yet for how to use that facility in the future, Burton said.
Officials hope to break ground on the new facility in Mundelein this spring.
“This is our big year,” said Denise Norman, president at Transitional Care. “This is when things are happening for us, so we’re excited for that.”
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