The company that jointly owns with Mercy Health partners and operates Hearth and Home at Harding and Hearth and Home at El Camino in Springfield and Hearth and Home at Urbana sees the proverbial light at the end of the tunnel after a disappointing Initial Public Offering.
Started in 1988 by Gary Wade, who continues to serves as President and Chief Executive Officer, Mike Williams, who retired from the company and now works at the Ohio Masonic Home, and the late Jerry Fuson, the original business model was to manage nursing homes for other parties. Starting out as a subsidiary of Sanders, Shifman and Brannick accounting firm in Springfield, their first client was a Troy nursing home owned by the Upper Valley Medical Center.
AdCare has grown to where it owns some senior centers outright, is part owner of others and manages facilities for other parties.
Two milestones in the company’s history were a merger with Passport Retirement of Columbus that gave AdCare entry into the assisted living sector and taking the company public in 2006.
David Tenwick, company chairman and a former oil executive, began a second career owning and operating assisted living homes. When lenders said he needed a partner to serve as operations manager in order to obtain loans, he suggested merging with AdCare. Technically, Passport acquired AdCare which kept the name in a straight-up deal.
The decision to go public had a three-fold purpose, said Andy Wade, the Vice President of Business Development and a Kenton Ridge High School and University of Michigan graduate. The funds would be used to grow the company, address balance sheet issues and make the people who had earlier invested in the company liquid.
It didn’t work as planned.
“We came out of the process with not near the kind of capital we expected ... and that put us behind for a couple of years,” he said.
Gary Wade said projections were the company’s IPO would raise $11 million. Instead it raised $7 million. What made it worse was as a public company, filings and other requirements increased AdCare’s monthly expenses by $40,000.
“We were able to take care of the balance sheet, we were able to make (private investors) liquid, but we didn’t have any money to grow. So we were stuck again,” Gary Wade said.
Three years later, there are signs that the light they’re seeing in the tunnel is not an oncoming train.
“Most recently, we have dug ourselves out of that hole and we are poised for really good growth,” Andy Wade said.
The company finished its third consecutive profitable quarter. It’s looking to expand outside of Ohio and into surrounding states. It has signed contracts to manage properties in Texas for a company that plans on building facilities there. That could be 18 months to two years out.
Some decisions that enhanced quality of care but not the bottom line had to be addressed. For example, AdCare started out building 20-unit assisted living facilities.
“The idea was to make them as home-like as possible,” Andy Wade said.
The problem was that economies of scale made it difficult to be profitable. They now see units numbering 45 as more workable, still smaller than many competitors who have 50 to 100.
As a small player in a field of giants, there was stiff competition. When market research identified an area for growth, and AdCare would enter the market, one of the big players would follow. Instead of AdCare and their competitor each filling their 20 to 25 unit, neither did well.
“So we lost quite a bit of money there,” Gary Wade said.
Once the market sorted itself out, he said they could get rates to where they needed to be in order to make a profit.
“Our real niche has been providing quality care. It’s been such a focus that we sometimes almost neglected our own profitability,” said Andy Wade.
That focus made them successful at turnarounds, stepping into facilities that were having financial difficulties or quality of care issues.
The future looks brighter to the point that their home office — even with its annexes to facilitate previous growth — is at capacity. It’s a good problem to have.
Tim Bucey, communication specialist for the Greater Springfield Chamber of Commerce