Derek Prince

Scott Tittle
We'd like to welcome Derek Prince, the CEO of HMG healthcare to our first podcast. Derek, welcome!

Derek Prince
Thank you. Glad to be here!

Scott
Great. Hey, we've known each other for a long time, and we now realize we have a lot of close mutual friends and contacts and love of racing also. But for our listeners, why don't you tell us a little bit about your background? How did you get into long-term care and a little about HMG?

Derek
Sure. Again, thanks so much  for having me on the program. For a long time my personal motto has always been to take care of people. Going all the way back to high school, I served on many youth service organizations. And so taking care of people goes all the way back for me into the high school years. Once we got past high school, getting into college – my undergraduate degree is in gerontology with an emphasis in long term care administration. So, there are several of my peers that kind of ended up or accidentally found long term care as a profession whereas I actually was always intending and wanted to be there. So I got my degree, and I was also a certified nursing assistant. I had my certification, and I was able to get some frontline experience as a CNA. Then eventually I went back and got my MBA to make sure I had the business background to actually run an organization on our own.

We purchased HMG. It was originally 10 leasehold entities based down in Houston, in Texas. That was back in 2012. I've got two partners, Wayne Culp and Laurence Daspit. And then, fast forward over the course of time, in the 10 years,  we've grown that to now 37 properties in Texas and in Kansas. It's not just a leasehold anymore. It's a blended portfolio, where we actually own some of the assets in the real estate as well. So, we'd like to say that it was slow, measured growth, but if you would've asked me back in 2012, if we would ever get past, you know, 15-18 properties, I would've said that we will never get past that. And yet we've been as large as 40. Now we're sitting at 37. So, maybe it wasn't as slow and as disciplined as I originally thought it might be.

Scott
Yeah. Well, that's one incredible background you have to lead a company that size. Say a little about, you know, just having started out as a CNA, I'd imagine that informs you incredibly well as a leader of a company that size. Say a little about your experience and how that's made you a better leader.

Derek
It sets up so many things. Just the perspective of a frontline, direct care worker and my experiences at the time with mainly middle aged African-American women, which as somebody from west Texas had really never experienced them, African American culture. And even though, you know, coming from a single mother background, the stuff I was exposed to as nursing assist CNA, it's unparalleled. And it bases a lot of my leadership today and what we do and how we take care of not only our patient population, but how we take care of our team members is based on, on several of the stories and, and several experiences I had with those individuals. I mean I talked to our team all the time about different stories that I was able to hear and have personally experienced with these ladies. And again, it shapes almost everything. Every day I think about some of those experiences. So, it's probably other than my mom's influence, maybe the most single largest impact that I've had on the way we run the organization.

Scott
Yeah. Well, I've been to enough meetings with you over the years to hear your passion as a leader, for the profession and for your love of the resident staff. And I do not doubt that has to come from all the frontline work you've done over the years. And so thanks for sharing! I wanna get into a little bit, you carry several hats. You wear several hats in leadership roles, not only in your company, but also at the Texas Healthcare Association and also at the American Healthcare Association Board of Governors. You're the first Texan to be on the HCA board in about 20 years. So congratulations there! Maybe talk a little bit about what's happening in Texas. What are some of the priorities you are faced with at the TXHCA and there at the Texas legislature?

Derek
Sure. Well, in Texas, it's no secret, funding is gonna always be the biggest legislative priority that we have. Texas is notoriously underfunded when it comes to long term care. And quite honestly, Medicaid, almost all of our Medicaid programs in Texas have been underfunded. So, our legislature meets every other year on odd years. So as we are preparing right now, going into session funding is always a paramount importance. Senate hearings are occurring right now. We've already been testifying at those houses. We've had several meetings with Chairman Frank, who is the chair of appropriations on the house side. So funding is paramount. Just like everybody else across the country, right behind funding is, I would say, the staffing conundrum that we're in. I'm trying to figure out how the legislature truly for the first time, I think, understands not only in healthcare or long term care that we have such a staffing crunch really across the state. And Texas has always been proud in saying we're a pro-business state. We drive a lot of people that want to come to the state for various reasons. And now they're figuring out we've got a big problem with staffing. So it is getting some traction. So I would say funding and the staffing are the biggest priorities here in Texas right now.

Scott
Now. I want to talk about staffing just in a minute, but say about your Medicaid rates. Our listeners can understand it. What is the average daily rate for a skilled nursing facility in Texas right now?

Derek
Right now, I think we're sitting at somewhere around $150 a day. According to the agency's own numbers, we're roughly on a cost basis, and these are their numbers. We're $125 a day underfunded according to their recent numbers. And in Texas, I will say during COVID, we were very appreciative with what Governor Abbot did. And it's connected with the public health emergency and with the additional FAP moneys that the government allotted to each one of the states. Governor Abbot was instrumental in making sure that we got through the PHE. We've been receiving $19 and 63 cents a day for all of our Medicaid population, which is really unheard of here in Texas. That was able to happen. And I think a lot with the Association's work and making sure everybody understood what was going on.

I would consider that a success, but again, as we go through PHE, it's set to be extended. Looks like we got notification earlier this week, informally, that it's gonna be extended. But once that goes away – you pull that $20 away, we go into this next session. We're gonna be in a really big, again, using the same word, conundrum because the costs are exorbitant right now, specifically with the staffing situation. We've got a lot of work to do this session.

Scott
Well, I know you and Kevin Warren are doing a tremendous job there in Texas. And what a great leader Kevin is. He led you all through these difficult times. Say a little bit about your workforce’s challenges, just being in two states. And I'd imagine being in both rural and urban markets, what are you seeing in terms of your the staffing challenges in all directions there?

Derek
I've never seen anything like it in my entire career. I'm, we're looking everywhere. We're not sure where all of the workers went. We’re really not sure. So we're having to get somewhat creative with the recruitment and more so, even on the retention side, you know, we try to break it down into two approaches. We've got a current situation and how do we solve absolute today's needs? And then how do you solve ongoing long-term? And we're very fortunate. I mean, I always looked at it going back to the direct care days. What kind of culture do you set up? And I think one of the things that everybody needs to understand, and I learned early on, whether it is growing up through the administrator, going through regional corporate structure, and now being fortunate to be an owner. Initiatives only are gonna get traction.

If you have a C-suite or an owner who's really gonna drive that process and in culture. And so we've been fortunate enough to put certain cultures in for our immediate needs. We've done things such as our employee of the year, we purchase a car for people. We do back to school initiatives, where we buy everybody's school supplies for all of our direct line employees for the elementary kids. Not once they get past elementary, they get a little more choosy on those school supplies. So we do it for our elementary school kids. We have our healthcare mad genius program where we bought one of our facilities. I think every CNA in the facility has a Louis Vuitton bag because they've acquired above and beyond points to be able to purchase bags, AirPods.

So small things like that, where you're not able to necessarily go with higher wages, but there's extra add-ons and extra incentives. On a cultural standpoint, we have a foundation where if somebody gets in trouble, that our employees fund and our vendor partners help to set fund where people run into problems, we're able to assist them in trying times. So those type of things, we really have to make sure as we bring people on and onboard say, these are things that are gonna be really more germane just to HMG. These are the things that we offer you here. Whereas if you're going out in an agency and really being an army of one, you may not get that support.

On the long term front, it took me 10 years to pull it off, but we've established HMGU where we've partnered here in the Houston area with our community Long Star College, where we were able to utilize their accreditation. And so, but we're able to take our students CNAs that want to get to LVNs that want to get to an RN. We use their platform, their educators, there's no out of pocket expense. There's no upfront tuition, reimbursements, not new, but for a lot of our teams, they're not on their disposable income. They can't afford to put money up front to go through it. So we've got 20 students that are in various parts of HMGU working on getting through that. We can work with their schedule, help them. We've got counselors in our organization to help them, we've got counselors dedicated to them at school level. So our first class is, we started that in this January of this year, we've got our application process out now. We started down here in Houston, we're expanding to the Dallas Fort worth market in the fall for our next round in January.

And so we're really pretty excited about it. And then the last part of that is on a long term plan. We've got, we're working on our foreign visas. We've got 15 individuals in the Philippines that are in various states of working on passing the NCLEX exam, passing their English exam and getting their first round of visas set up. We've got an immigration attorney that we're working with getting done. And then we've also got, you know, 10 to 15 Nepalese people that are here that are looking for sponsorship that we're trying to get in. So we're having to attack it on all different fronts. It's, again, something that I've never seen before.

Scott
Yeah. Well, it sounds like you're doing all the right things, Derek, and I know what a great leader you are and a great company you run. And that's a real tribute to you to think about not only helping people through these difficult times right now, but think about their futures and their careers as well. And you know, one question I meant to ask how many employees do you have, and then say a little bit about if you've had to rely a little more on agency staff and your markets and what that experience and challenges have been.

Derek
Generally speaking, we employ, including our contract employees, about 2,400 employees right now, in various states where that's full-time worker contract workers. It doesn't include our PRN staff. We have seen a massive increase in utilization of staffing, just from a dollar standpoint, pre-COVID. We never really had to utilize agency staff. And we had a building that was in the very Northern part of Kansas where it's just such a rural market to try to find certain staff. It was, we just couldn't do it. So we had to utilize agency. And in the worst case scenario, we might have to spend $50,000 in a month. And then if you go back here into April, we spent 2 million on agency in a month. In May, we spent about a million and $1,000,005. The good news is that we're slowly starting to pull that down.

When you look at June, it dropped half of that again. So I think we're around $750,000, trending this month. Well below that. So we're starting to do that. I don't wanna throw judgment on agency staffing or staffing. I mean, everybody serves a purpose. Everybody has to do something, but, you know, as well as I do, if we don't have consistent staff, we don't have people. If it's just straight contract work, that consistency of care, that quality, it drops off. And it makes me for one extremely nervous. If I don't have our team in there, making sure that, that true taking care of people and our quality is done there. So it's been challenging. I'm very proud of our team on working to get the workforce back a stable workforce back in the building, obviously pre cost reasons, but also for the care component.

Scott
Well, let's pivot a little bit in your role on the HGA board of governors, and he stayed though with kind of staffing and, and the workforce crisis says a little bit about what you think this present Biden's proposal on having a national minimum staffing ratio would mean for your operations.

Derek
Well, I understand what he's saying in concept and of course everybody, none of us that are in the profession would say, we don't need to have enough staff to take care of the people. Where I get a little bit jaded in that you have certain minimums, you know, we're highly regulated at as a profession to begin with. And it's my personal opinion. And that staffing levels don't necessarily having a certain level of staff, just like I mentioned previously with an agency, just because I have somebody there doesn't mean they're necessarily providing quality care. And so we're already looked at, and we're already not for lack of a better term, judged on our outcomes. I think that we are our survey processes, our five star rating, all of these things that are already out there, people are already coming in and is the goal to have higher staff, or is the goal to have better outcomes.

So just putting those out there to say that I know in principle, it sounds great, but I don't think that always equates to quality care. Exacerbating the problem as you start saying that, okay, two things go along with it. One how specifically, or in Texas, or really across the country, how do you pay for it? I understand that you want more, well, then there has to be compensation for it. It has to be funded. And then the second part on top of that, right now, in all professions, but specifically in healthcare, they're true or not. I mean, even the government will tell you at the federal level and almost all state governments will give you the Delta between how many nurses, CNAs, and what that shortage is in each state. And then collectively as a country, if the people are actually not there to put in, even as we're trying to replenish and put the plans in place, we're doomed before it even gets started, we couldn't hit those numbers, even if we try.

Scott
You know, I'm looking at I've been following certain states that have a minimum staff ratio at the state level. States like New York that have continued to extend out the effective date of those executive orders, recognizing that the people just aren't there, you know? And so you hope that CMS takes notice of efforts like that at a certain state level as well. Right?

Derek
And to your point, I do think that CMS, more so than even the administration, has figured out through, the communications that we've had, through American healthcare association, I do believe that CMS is starting to get the picture like, okay, I understand. I don't think the administration is gonna back off if you have the president stating even one sentence like he did inThe State of the Union address. And, and it keeps going to this, it's gonna be very difficult to back off of these type of things. And with it, the advocacy groups that are out there. But I do think that there's ways to put parameters on it, to go if you hit this, is it funded? If this, if there's not any workers there, it defaults away because we can't actually hit that. It'll be interesting to see where it goes. It does concern me overall, but again, going back to what I said previously, the metric that I wish we would go back to is just quality outcomes. If you go to quality outcomes, how you're getting there? If you're better trained, better efficient, having the certain things in there, and the quality outcomes are there, having a specific number of staff to me seems to be irrelevant. Are you getting the care done? And is it being done appropriately?

Scott
Yeah. Well, let's pivot a little bit on the payment side, on the national level. I know CMS came out with a proposed rule that would ultimately result in about a 4.6% Medicare cut at the end of the day. And I know HCA led the charge on getting as many comments as possible through the public comment period, which I think resulted in over seven or 8,000 individual comments. Say a little about what you think that could mean for your operations and what the expected hopeful outcome could be. Maybe the CMS would look to phase that in over a couple years.

Derek
Yeah. I agree with you. I think the association and the stakeholders and the comments that were submitted to CMS over that was amazing. It goes to show the effectiveness of Mark Parkinson and the American Healthcare Association on how they're able to get the shareholders to get their points across. You know, we all knew anytime you change, it's been a while since we've had a payment system and we know with budget neutrality, it always throws a kink in it. So we knew at some point it was gonna happen and then COVID hit in the middle of it. And everybody understood. There's no way in the midst of this situation that we can do anything with the payment. So that's why we've been kicking. This can go down the road for several years.

You know, I'm a realist and I understand that there's not an unlimited money supply chain when it comes to things and we are dependent on taxpayer dollars and it has to be funded. So I do recognize that we have to look at that and go, yes, if it has to be budget, are they gonna take it back? It's just very unfortunate on the timing with escalating costs, everything going the way, to add staffing in particular. I'm very hopeful that we get the phase in in three years. If they take the 4.6 back all in one lump sum, we'll have to deal with it at time, but it's just very unfortunate and it couldn't come at the worse time.

Scott
Yeah. Well, thanks for sharing those thoughts. And, again, I know through your roles in Texas and at the national level you are doing a tremendous job on the advocacy front. So thanks for all the work you're doing. Kinda just a couple last questions. I know you, like me, are an optimist and curious to see what you think about the future of the sector, if there's some reason for optimism, despite this low point that we're facing on workforce, reimbursement, and regulatory issues.

Derek
Absolutely. Well, I think you always have to be on it. If you're taking care of people person, and you're wanting to do that, I think you always have to look at the glass half full and you have to have optimism otherwise, why would we be doing this in the first place? So, I think there are some encouraging signs. You're always gonna have problems. You're always gonna have to depend regardless of the administration, regardless of what state you live in. And it's a very difficult profession, so we're always gonna have this, but as I look to see what is happening, you know, we continue to see the demographics that keep moving back. And ever since even I was in high school, and now I'm 52 years old. We've been talking about the baby boomers aging, and it's gonna happen this time.

It's gonna happen at this time. And so with the advances in healthcare technology, that number continues to get pushed back. But I think with that being said, the demographics for, as people continue to age, we're hitting to the point where people are truly gonna be utilizing what the services that we have. And there's a myriad of options. We see people with home health and home options. And, of course, I certainly understand that. I own and operate nursing homes, it’s been my entire career, even, even prior to having a career, I was in nursing homes, volunteering and doing things. But with that being said, I don't wanna be in a nursing home. Nobody wants to be there, but if I need care in a nursing home, then I want a provider like myself to actually take care of people.

So I think we are still the method of providing that care to our aging population. And, from a government standpoint, I think we're able to do it in the most cost effective way, given everything that's out there. I've worked seven ways this Sunday, I've done tremendous due diligence on what the costs are. And we do it. We get the best outcomes with the least amount of cost. And so that part of it, again, I'm like, we are gonna have, we will be part of the solution. It's a necessity, and nobody else knows how to do it like we do. So I do think that's the case. And I think as we continue forward. I think we're gonna be able to get more people that want to do this, that have that take care of people mentality. And so, yeah, I'm optimistic.

Scott
Well, thanks for sharing those thoughts, Derek. I get so inspired in these conversations on our first podcast, because I get to speak to amazing leaders like yourself. And I'm so thankful that you're out there doing the work you're doing because I think about the future sector and so glad that you are out there. I think we all learned that one of the positive things come out of COVID or so we're still dealing with COVID certainly is just the sheer grit of the sector, the leaders, the staff, the family members, the residents, I mean, this has been an incredibly difficult time and people are still out there fighting hard to make sure we're providing high quality care. And you're at the top of the list. So Derek can't take enough for what you do. One last question, I just kinda have a fun question for all of our guests. Is there a book you're reading right now? You'd love to recommend to our listeners kind of what's on your nightstand or somebody you'd like to hand out to your families or friends?

Derek
Yeah. Well, I don't know that I would recommend it. I'm a big historian buff, and my uncle is in healthcare. He just recently retired and upon retiring, he gave me a collection of books, a series of books by Robert Carro on the times, “The Years of Lydon Johnson. Means of Ascent”. And there's four different books, and I'm trying to read those books. I'm in the Ascent book right now. And the reason he did it, he knows that he and I had a conversation and you know, which presidents, you know, what do you think is your favorite president? You know, he's a buff like I am. And, and when I mention to him, you know, there's the obvious choices, right? You know, George Washington and Lincoln, and these things are maybe TR or, you know, the real popular.

But I told him, I said, honestly, I think LBJ is one that has more impact. And he, it's funny, you mention that. I tend to agree with you because we're in healthcare, given everything that we depend on with Medicaid and what he was able to do from that standpoint and taking care of people. So in reading about him, and the way he did it, and he was such a masterful politician, plus he's obviously a Texan. And so I'm getting into that. I don't know that everybody would find it as entertaining as I do. So I'm, that's what I'm reading currently.

Scott
I think in these times, it's always important to kinda look back to leadership in the past, right. To help get through these difficult times. And, I recently picked up “Profiles in Courage” again. I've read it several times and I think it's always kind of interesting and fun to think back at difficult times in our country's history where people have risen up and made some really difficult decisions. So thanks for sharing some thoughts there, and Derek, thanks for being on our first podcast today. It really means a lot to us and our team here that you've spent some time with us and talked a little bit about what's on your plate and your optimism for the future. So thank you so much for being here!

Derek
No, thank you so much for having enjoyed it.

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