By Nona Tepper

Northwestern Medicine may have found the one hospital market where investment in long-term care hasn’t paid off: affluent north suburban Lake Forest.

Northwestern-owned Lake Forest (Ill.) Hospital recently applied to permanently shutter its long-term-care unit, Westmoreland Nursing Center, citing increased operating costs, failure to adequately fill 84 beds and flood damage from mid-July.

In its application to the Illinois Health Facilities & Services Review Board, which decides on healthcare projects to prevent duplicating services, Lake Forest Hospital noted that it originally planned to close the long-term-care facility by the end of the year, but that heavy rain damaged the nursing home and forced early transfer of patients. The board received the hospital’s application to discontinue 660 N. Westmoreland Road on July 28.

Although the number of aging baby boomers has swelled in recent years to the fastest growing population in the U.S.—there were 49.2 million in 2016, up 40% from 2000—people are more likely to end up in assisted living facilities or rely on home health professionals for care, said Jason Lundy, partner of the health practice group at law firm Polsinelli. Only the sickest patients now end up in nursing homes, he said. What’s more, patients 65 and older tend to find these accommodations more comfortable.

This trend has meant nursing home services are not as profitable for hospitals. “I don’t think hospitals generally see long-term nursing as an area where they’re going to make a profit or substantial revenue,” Lundy said.

All of Lake Forest Hospital will be vacated by early spring and replaced by a new $378 million healthcare center, slated to open at the same location and be fully operational by March. A new long-term-care facility is not included in Lake Forest Hospital’s plans.

Northwestern spokesman Chris King claimed the absence of an updated nursing home on a “new healthcare model.”

“We determined the regulatory and financial resources required to maintain an independent custodial care facility on the Lake Forest Hospital campus would no longer be feasible,” King said in an emailed statement.

Illinois has the second-lowest Medicaid reimbursement rate in the nation, according to federal data. King said he was unsure what portion of Westmoreland’s long-term residents were Medicaid patients. But, “in Illinois if the resident mix is not a sufficient number of Medicaid and private payers to offset costs, that makes it difficult for nursing homes to operate” because they are not guaranteed payment, Lundy said.

Lundy called Westmoreland’s 84-bed offering “much larger” than what most modern hospitals have today. In its application, Lake Forest Hospital admitted that patient stays at Westmoreland have decreased by nearly 50% since 2002. Since 2012, annual occupancy at the nursing home averaged 61 percent, far below the Board’s occupancy standard of 90%.

“Lake Forest Hospital believes there is an abundant supply of long-term care beds in Lake County,” the application reads. “Given the calculated excess of 326 beds and (Lake Forest Hospital’s) low census, this project will not have a material impact of any safety net services in the community.”

Meanwhile, in an effort to save money and accommodate patient preference, Northwestern announced an investment in a new home health training programin early August.

“Out with nursing homes, in with home health care” originally appeared in Crain’s Chicago Business.

An edited version of this story can also be found in Modern Healthcare’s Aug. 21 print edition.