By Rob Morris on July 8, 2011
Residents and families are being notified that the only skilled nursing facility on the Outer Banks will close Sept. 1.
The notice was dated July 6, the same day the Nags Head Board of Commissioners met in closed session after the town and the longtime operators of Colony Ridge, once known as Britthaven, failed to come to terms on a deal to keep the facility open.
Nags Head is scheduled to take ownership of the property Oct. 1. In 1981, the town secured a $3.1 million tax-free bond with the understanding that the operators, now Principle LTC Management, would pay it back. The town would then get the deed.
“Unfortunately, because the facility will be closed,” the notice said, “you need to prepare for the fact that your residency with Britthaven will be terminated September 1, 2011.”
Principle had offered to buy the property and invest in improvements. But the town said it wanted to retain ownership and offered to lease it back to Principle for $10 a month. Principle would also invest $1.5 million in improvements under the town’s plan.
With time running out, they could not to find workable middle ground this week.
In dispute is the certificate of need, which is probably more valuable and important than owning the property. The hard-to-get certificate virtually guarantees the holder exclusive rights to operate a nursing home in the area. Without it, the facility could not be operated as a nursing home.
The town contends that the certificate of need conveys with the property, while Colony Ridge says it should be held by the operator.
It appeared that the issue might be headed to court.
Without it, Colony Ridge runs the risk of investing in improvements, then being replaced when the lease runs out. If the town does not hold the certificate, it would lose influence over ensuring a reasonable level of care and maintenance as well as determining who will operate the nursing home.
The town’s goal was to work out a deal with Colony Ridge so that care could be provided without interruption during the transition.
But Colony Ridge continued to challenge the town on the certificate of need unless it could be offered some guarantee of a long-term lease that would provide an acceptable return on the investment it would take to bring the building up to date.
The condition of the 30-year-old nursing home has been a major concern. Mayor Bob Oakes said Wednesday that it suffers from “functional obsolescences,” such as four residents sharing one bathroom.
“There’s a need for investment in the facility,” Oakes said. “We had hoped to work with Britthaven to improve the facility while it was still being occupied.”
There are 60 residents in the facility now, Town Manager Cliff Ogburn said. That includes Alzheimer patients.
Ogburn said Friday that the town was limited by law to a 10-year lease if it wanted to charge $10 a month. Otherwise, it would be subject to an upset bid and leasing at market value, which can range from $11 to $13 a bed per day, he said.
With 144 beds, that adds up to $578,169 a year, Ogburn said, compared to $120 under the 10-year lease.
Principle said it would agree to the 10-year lease only if it was given the certificate of need, Ogburn said. Owning the certificate would put Principle in control of the facility and provide leverage in any negotiations for leasing beyond the 10 years. As an alternative, Ogburn said, the company wanted the security of a 15-year lease with the option to renew it twice for a total of 45 years.
A representative of Principle could not be reached.
It is not known if the nursing home will re-open if the closing goes as planned. If the town is granted legal ownership of the certificate of need, it could find another operator.