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Gaylord’s City Council, last week, decided to continue negotiating with Mick Montag over the development of a senior housing campus here.

The Council also directed City Administrator Lonny Johnson to determine if there is interest by other organizations/non profit corporations to purchase Lakeview Home, Oak Terrace and Heritage House.

Dennis Anderson of Pathways told the council and about 40 people in attendance that he would value Gaylord Lakeview Homes at the sales price range of $1.5 million to $1.8 million. The valuation is based on current operational results.

It is Anderson’s opinion that if the operational results are improved and if some operational efficiencies are realized, the value could increase to a range of $2 million to $2.5 million.

The sales price range is based on sale of all operations. If the operations were sold separately, the price would be negatively impacted, Anderson wrote in his report.

Anderson said that interim administrator Mary Nell Zellner identified $500,000 in reductions, however, he felt that $250,000 would be more realistic. He felt that staffing could be reduced to save the facility money, but felt it would be more difficult to reduce compensation.

“I can’t remember one facility with $1.6 million in the bank,” Anderson said. “Kudos to who made it happen.”

The report included 12 comments/observations about Lakeview Home.

Anderson wrote that Lakeview Home has a strong balance sheet and has done an excellent job of building a substantial reserve. The days in accounts receivable are substantially below the norm of the procession. Anderson was impressed with the physical plant, with the grounds by the lake and park, and building was clean and smelled good, and the abundance of space.

Census has historically been strong in all operating units, with the nursing home struggling a little recently. The private pay percentage in the nursing home is very strong and medicare is about the norm. The nursing home has high Medicaid payment rates.

Anderson identified that there is a lack of formalized cost control tools. Staffing at the facility is very high in most departments, exceeding the norm for the profession. The average pay rates exceed the norm for the profession, and the benefits as a percentage of wages is a little high. Public Employee Retirement (PERA) is about 5% of wages.

Anderson noted that allocations between the operating units should be revisted and nd more accurately reflect the cost. For example, Heritage House is only being charged $2 per meal and the actual cost is substantially higher.

“The facilities’ staff is in an upheaval over the uncertain future that exists,” Anderson wrote. “This is causing a negative situation and affecting the operations of the facility.”

“It is not uncommon to want to get out of it (the nursing home business),” Anderson told the council. “It has served a lot of community good. Your basic nursing home is slowly going away because the alternatives are taking care of that person.”

Anderson told the council that he believes that would be buyers interested in the facilities, if the city would choose to seek competitive bids. City Administrator Lonny Johnson said that he had received a telephone call from someone from Rochester who expressed interest in Lakeview Homes.

“I’m concerned how the process would differ if we go with a private developer vs. a nonprofit in their approach for the transfer/cuts,” Council member Roger Bruellman said. “The cuts affect our city, the quality of care and our employees.”

“You wouldn’t have to make tremendous staff cuts. Efficiencies can be gained without impacting the care that is delivered,” Anderson said.

Mayor Doug Quast said that if the interim administrator, in one week, could identify a half million in savings, he is concerned that the administration had operated the facility that poorly. “Our residency is up at the nursing with rehab. How do we structure ourselves for more residents that way? How do you handle your staff?”

Anderson explained that each department head should have cost control tools. Anderson added that the demographic study showed there is s strong need for assisted living and dementia care.

“We want to make sure we are giving our citizens the right information,” Bruellman said. “The nursing home will change immensely. We need to build private rooms to attract the public. It’s the future of nursing homes.”

Anderson added that “a lot of experienced nonprofit providers want to expand their mission.”

Recently retired Lakeview administrator John Berger said that he would never again be an administrator of a city-owned facility again due to the politics. He also said that he felt the mayor was insinuating that he did not do a good job as administrator. Berger said that 42% of the nursing homes in southern Minnesota are at risk of closing. Some are losing $300,000 – $400,000 per year, he said.

Bill Cowell said he felt that city ended up “behind the 8 ball” because it was having discussion with one buyer centered around one proposal. Cowell questioned if the city was going to create a competitive situation. “The marketing of this property would have been better if we had marketed vs. responding to a buyer,” Cowell said.

Council member Sue Jacobson said that she would “hate to see Montag leave and go elsewhere.”

“Let’s continue to negotiate with Montag,” Bruellman said. “We can’t give the house away. But in the meantime, we can still pursue other avenues.”