THE TIMES 100 / THE BEST PERFORMING COMPANIES IN AMERICA : RISING FORTUNES : Expanding in Nursing Home Care : GranCare saw sales jump 68% in 1993. It credits an aggressive growth strategy.
Olah Starrett has seen several owners come and go during her 11 years at the Tarzana Rehabilitation Center--and some are best forgotten.
But for the 91-year-old Starrett, the proof that the facility’s current owner has staying power and a commitment to improving the quality of life at the 25-year-old facility can be seen in the sparkling-clean floors and the brightly painted walls.
“We got the place all cleaned up and redecorated,” Starrett said one recent afternoon as she led a crossword puzzle class for fellow residents in the center’s recreation room. “We have all these activities, and they know what they are doing.”
GranCare must be doing something right.
Four years ago, the Culver City-based company was struggling to make its mark in the growing nursing home, or long-term care, industry.
Today GranCare Inc., which was founded in 1989, is one of the state’s fastest-growing companies, fueled largely by aggressive expansion. Its sales jumped 68% to $508 million last year, following a hefty 73% gain in 1992.
The company that began with just eight locations has grown into one of the nation’s largest nursing home operators, running 82 facilities with more than 11,000 beds in nine states.
It has also generated healthy returns for shareholders. GranCare ranks No. 26 on this year’s Times 100 list, with a 29.9% two-year average return on shareholder equity, as calculated by Star Services, a San Francisco business researcher.
The man behind all this is Chairman Gene E. Burleson, a former hospital administrator who shrugs disarmingly when asked the reasons for his company’s success.
“I really don’t know how we did it,” he says. “I guess it’s because we kept up the vision we had when we started.”
In the late 1980s, Burleson, former president of American Medical International, a Beverly Hills hospital chain, recognized that the biggest growth opportunities in the hospital industry were in long-term care.
Demand for nursing home beds is rising as the nation’s population ages. The push to control rising medical costs is also fueling growth of so-called transitional care centers for recuperating patients who don’t require the technology of a general hospital but who still need medical attention and are too sick to return home.
To that end, GranCare spent $25 million last year to spruce up its facilities and add such transitional care features as physical and occupational therapy equipment.
“In the old days, nursing homes were places where people went to wither and die,” Burleson said. “We try to change that and celebrate people who are discharged.”
Burleson also saw the need for the company, formerly called HostMasters Inc., to expand into other areas to ensure steady revenue growth. GranCare also operates businesses involved in pharmacy distribution, intravenous therapy and home health care.
The intravenous therapy business, begun in 1992 and operated out of two nursing homes, had a mere $12,000 in revenue its first year. Burleson expects sales to hit $9 million this year.
But the main reason for the company’s dramatic growth, health care analysts say, is the company’s strategy of rapid growth through acquisitions. In the past year, the company looked at 60 deals and closed about a dozen.
Scott MacEsy, a health care analyst with Dean Witter Reynolds in New York, describes the company’s acquisition strategy as well-defined and prudent.
But MacEsy sees a possible downside. GranCare has taken on a hefty debt load in its acquisition binge: about $185 million.
“That is a significant concern for some,” MacEsy said.
GranCare faces more challenges as health care reform brings rapid change to the industry. Burleson wants to transform the company into a provider of “integrated” health services, essentially broadening its business to provide care for patients at different stages of their lives.
Another possible change: GranCare is considering moving its headquarters to Atlanta. The Southeast is the company’s fastest-growing region.
