By Steven W. Kennedy

The “Main Street” concept in nursing home design has been growing in popularity as a tool to create a comfortable, less institutional home for residents and to stimulate memories. Good Samaritan Home in Evansville, Ind., is taking the idea one step farther, transforming its hallways into actual recreations of Evansville, circa 1940, complete with a riverboat.

“Over the course of a couple of years, you’ll see this facility transformed into early Evansville, and it will be a walk back in time,” Administrator Thomas Slaubaugh said. “We’ve moved beyond the Main Street concept …. We used those concepts, but it really is a unique custom project.”

A familiar place
The continuing care retirement community’s Recollections Project is recreating the 1940s – 1960s Evansville community within its residential hallways, administrative areas and common spaces. Nursing stations become verandas and gazebos. Residential hallways of similar-looking doors will become Evansville streets with reference points and elements from the actual community, with each unit defined by a brick or stucco façade. Call lights above resident doors will become porch lights; room numbers will become mailboxes.

Large-scale photographs of Evansville’s most well-known areas will help recreate the community and provide a familiar setting. The front lobby has become the riverfront along the Ohio River, complete with a photographic mural of the Delta Queen riverboat. A famous hotel and historic house stand opposite, and a look down the Main Street administrative hallway offers the illusion of storefronts from the era.

“We recognize that even in a nursing home setting, if you looked at the diagnoses in our industry, there is maybe not a primary but a secondary diagnosis of some sort of confusion,” Slaubaugh said. In a building that is 45 years old and showing wear, most people might just repaint or add modern amenities. But residents, even those without Alzheimer’s or dementia, may not recognize or be comfortable in their homes after such changes. “If we change that and make it more modern at all, we’re going to advance their confusion. … We might resort to medication use to calm them down, and now we’ve increased the cost of health care and diminished their ability to interact.” The Recollections Project is meant to draw residents out and give them a timeframe and a place that is comfortable and familiar. “Therapeutically, it has a lot in it that’s subtle that people don’t recognize.”

Making the Numbers Work
In order to bring the Recollections Project to life, Good Samaritan Home’s leadership had to embrace a change in financial strategy. While the organization’s profitability and leverage ratios were strong, it had very limited liquidity (16 days cash on hand, compared to typical investment-grade ratios exceeding 300 days) and its debt service coverage was not as high as it could have been.

High annual debt service payments were preventing the facility from accumulating cash, and the short amortization of outstanding high-interest debt compounded the challenges to build liquidity on the balance sheet. The resulting “generate-cash-flow-then-spend-cash-flow” cycle limited Good Samaritan Home’s ability to progress on the Recollections Project.

Lancaster Pollard recommended an approach that would create an optimal capital structure tailored to Good Samaritan Home’s strategic plans. Refinancing existing debt with tax-exempt revenue bonds would offer opportunities to:
1) strengthen profitability by eliminating high-interest-rate debt
2) build liquidity by eliminating high annual principal payments, financing renovations with long-term, low-cost debt, and allowing the accumulation of cash through operations
3) utilize prudent leverage by maintaining near investment-grade capital structure financial ratios.

The refinance was structured as a tax-exempt revenue bond issue enhanced by a local bank letter of credit. This allowed Good Samaritan Home to issue tax-exempt bonds at historically low variable rates (the 15-year average totals 2.85 percent) with the option to fix the interest rate on all or a portion of the debt at any time. With no prepayment restrictions, the property has the flexibility to take on additional debt or restructure should future projects require it.

Bringing back memories step by step
The transition period has created a temporary conglomeration of styles, but, Slaubaugh says, the phased approach may help residents who could be overwhelmed by wholesale change.

“I refer to it as being much like a large jigsaw puzzle. There are multiple pieces,” he said. “As you look at all these pieces independently, they really don’t mean much. Even when you put a few of the pieces together, it still doesn’t form a picture. It’s only as you get enough of this together that you see what it’s going to be that you begin getting these ‘aha’ moments.”

With an ultimate goal of reducing agitation and stimulating memories, the concept is already working, Slaubaugh said. One resident expressed curiosity over whether every house front on what will become West Franklin Street would be brick. He noted that his former home had a specific type of siding, but could not recall its name. He eventually did. “Now it’s already done what it’s designed to do,” Slaubaugh said. “We got him to think about something he hasn’t thought about in 40 years. It’s beginning to happen.

“We’re getting suggestions now. We’re getting people to begin to talk. I think that it will create some community spirit and draw some people out.”

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