Jennifer Francis & Katie Potter hedshots

A new strategic plan will see Five Star Senior Living exiting the skilled nursing business completely, and the management of 108 communities transitioning to other operators, as the company shifts its focus to larger senior living communities, the company announced Friday.

“We believe that this shift in our focus is critical to the future success of Five Star and better positions us to expand our senior living management business and continue to diversify revenue sources in the future,” Five Star President and CEO Katherine “Katie” Potter said in a statement. “More specifically, the implementation of this new strategic plan will showcase the operational strengths of Five Star to current and potential partners and customers in the future.”

As part of the repositioning plan, the management of 108 senior living communities, representing approximately 7,500 units, will be transitioned to other operators under amended management agreements with real estate investment trust Diversified Healthcare Trust.

“The changes in the management arrangements with Five Star are being made to improve the operating performance of DHC’s [senior housing operating portfolio] business in the future,” DHC President and Chief Operating Officer Jennifer Francis said in a statement. “More specifically, we believe the transition of management of our 108 smaller communities to a diverse group of best-in-class operators will enhance their performance, and we have already initiated discussions with many potential new operators.”

Five Star also will close and reposition the skilled nursing units in all continuing care retirement communities that Five Star will continue to manage for DHC, representing approximately 1,500 living units.

As of Dec. 31, the company operated 37 CCRCs and nine skilled nursing facilities, according to a company filing with the Securities and Exchange Commission.

The transition of management of the 108 senior living communities to other operators, as well as the closing and repositioning of the skilled nursing units in the CCRCs, is expected to be completed before the end of the year. After that, Five Star’s focus will be on larger independent living, assisted living and memory care communities as well as stand-alone active adult and independent living communities.

For DHC, Five Star will continue to operate 144 senior living communities with a total of approximately 20,200 living units, including managing 120 senior living communities with approximately 17,900 living units.

“We also expect that the results for the 120 communities that Five Star will continue to manage for DHC will improve, because these communities are larger and service [lower need] residents, which are areas of operational strength for Five Star and where it plans [to] focus its business in the future,” Francis said.

Additionally, Five Star will operate its existing owned and leased portfolio of 24 communities, which have a combined unit total of approximately 2,300 living units. Five Star also plans to continue to expand its rehabilitation and wellness services business. As of Dec. 31, the company operated 37 inpatient clinics providing rehabilitation and wellness services, including in 32 of its CCRCs and in five of its SNFs, according to the SEC filing.

“The implementation of Five Star’s new strategic plan allows us to build on our operational strengths at larger senior living communities and stand-alone active adult and independent living communities while continuing to evolve our choice-based, financially flexible rehabilitation and wellness services offerings to meet the changing needs and preferences of older adults,” Potter said.