The fourth quarter of 2016 was a tough one for Genesis Healthcare, but it appears 2017 will not be any better, according to both management and those in the industry. Metrics were down nearly across the board. Average occupancy fell 40 basis points from the third quarter to 85.1% (that is also 90 basis points down from Q4:15), and the weighted average revenue per day dropped $2 per patient day. The latter was largely caused, according to management, by reduced funding in the state of Texas, particularly in its Upper Payment Limit program.

Those factors, among others, resulted in an adjusted fourth quarter EBITDAR of $156.6 million, which was down 2.7% year-over-year and well off consensus estimates. Genesis’ estimates for 2017 (revenues between $5.4 and $5.6 billion, adjusted EBITDAR between $675 and $710 million) were also off of analysts’ estimates. Genesis expects to divest 18 underperforming assets that generate $110.2 million in revenue and -$3.1 million in adjusted EBITDA, and restructure its bridge loans payable to Welltower into four separate loans.

These disappointing results and projections for Genesis, the largest post-acute care provider in the country, highlight a number of concerns for the skilled nursing market in 2017, despite coming off record-high average prices of $99,200 per bed in 2016, according to the Senior Care Acquisition Report, 22nd Edition, to be published next month. The industry is facing a changing payor system, rising labor costs, decreasing patient days and occupancy, more complex care and aging real estate, to name a few. We reported on record-high prices for skilled nursing in 2016, but it is looking less and less likely, especially after this announcement, that we will report the same for 2017.