The Hubbard County Board is contemplating its relationship with the Heritage Living Campus, the county-owned nursing facility.

At Tuesday’s meeting, county commissioners authorized advertising for a request for qualifications (RFQ) from firms who can appraise the property.

Interim county administrator Kay Mack said County Attorney Jonathan Frieden has been researching which assets would be involved in the appraisal, while she looks for model RFQs to serve as a template.

Completing an appraisal of the nursing facility “is just one step in a long process,” Mack said.

Board chair David De La Hunt agreed, saying it’s “part of the data gathering” so the board can make an informed decision in late summer or early fall. “In order to have a sense of where we might be going, we have to know what we have, so it’s probably just good practice to get a solid appraisal on the properties the county owns,” said.

Newsletter signup for email alerts

De La Hunt noted there are a couple parcels that Heritage Living Center and the Cottage sit on, but Park Villa is a separate entity that may or may not be part of the process.

County commissioner Char Christenson noted the New Market Tax Credit expires in the next year or so. The board needs to decide whether to refinance or divest, so an appraisal is necessary, she said.

In Dec. 2014, the nursing home issued a $10,145,000 taxable revenue bond in Dec. 2014 to remodel Heritage Living Center, using New Market Tax Credits.

COVID’s impact on Heritage

“As we’re all aware, COVID has played a major impact on congregate living facilities, especially nursing homes, throughout the whole country and throughout Minnesota, so there’s no unique circumstance there. It’s been a struggle,” De La Hunt said. “They’ve been battling with COVID running through the nursing home in November, December. And it had quite an impact. We lost quite a few residents.”

Due to the pandemic, there is no interest in moving into senior living housing, he continued.

Christensen added that restrictions prevent loved ones from visiting residents.

“For good reason, but it doesn’t make it palatable for many people,” De La Hunt said.

Furthermore, hospitals aren’t doing outpatient surgeries and that has reduced the number of short-term stays at Heritage, “which constituted probably 30 percent of their patients,” he continued. “It just up and disappeared.”

While “fighting the pandemic inside your walls,” half of the staff was out for quarantine or isolation, De La Hunt said. It was a Catch-22, he continued, because they couldn’t cut staff to reduce expenses while there was a staffing shortage.

The census is down, De La Hunt said. With a vaccine available, there’s hope Heritage administration can adopt strategies that work in this new situation.

“It’s really been a tough scenario,” said De La Hunt, praising management and the Heritage Living Center Board (HLCB) for “working diligently to come up with solutions to the problem. There’s no quick answer to these things. It’s an incremental process that you have to take a day at a time.”

He urged commissioners to do their homework. He pointed out the county is ultimately responsible for Heritage’s debt service.

“We’ve obviously bonded a lot of debt service for the remodel. My understanding is the bond issues are revenue bonds, backed by the revenue generated by the enterprise fund and also backed by the county,” he said.

The next question is whether the county is obligated to support operation needs, said De La Hunt. He referenced a board resolution which stated the county was willing to contribute $2 million at year seven “for the purpose of refinancing.” It also stated that cash flow analysis revealed the need for this additional equity.

“The question is, is the board still committed to these funds?” he asked.

County commissioner Dan Stacey asked if management and HLCB have been proactive or maintaining the status quo. Ecumen manages the Heritage campus.

Prior to COVID, De La Hunt said they changed the model from a 64-bed model and rolled it down to a 48-bed model, which was expected to save $1 million per year.

“Did it?” Stacey asked.

De La Hunt said the pandemic upended those plans, so they only went into full effect about a month ago.

Christenson said she believes Heritage staff, board and management should determine cutbacks. She agreed that the county is obligated to pay the bond, but not operational funding. “At this stage of the game, I’m not willing to ask the taxpayers to finance that,” she said.

Stacey expressed dissatisfaction with the way Heritage has been run.

Christenson noted that other counties are getting out of the business of running a hospital or nursing home. “It’s a competitive market. It served counties well at one time. It no longer is. It affects our credit rating, as a county,” she said.

The competitive landscape changed, De La Hunt agreed, but said 80 percent of the problems have been caused by COVID. The pandemic is devastating businesses, no matter how well managed, he added. “A pandemic has wreaked havoc on that enterprise fund.”

County commissioner Tom Krueger agreed that if the county starts subsidizing Heritage’s operations, it will take away Ecumen’s motivation to get creative