After several years of declining occupancy, operations seem to be stabilizing at the largest skilled nursing provider in the country.
It has not been an easy past few years for Genesis Healthcare, or for the entire skilled nursing sector. But we always thought there would be some light at the end of the tunnel, and that nursing facilities would not go away, despite predictions of that for two or three decades.
Genesis had seen its occupancy decline pretty steadily for several years. But in the 2018 fourth quarter, census actually increased by 90 basis points from the year-ago quarter, to 85.6% based on operating beds. Genesis also posted sequential and same-facility increases.
The company will not be making a GAAP profit anytime soon, but it did post a 12.1% EBITDAR profit margin. Unfortunately, those profits were wiped out by interest and lease expense.
A 12% operating margin is not that bad in this environment, and should get better for them when PDPM is implemented. Sounding like a broken record, again, it is all about the capital structure and what you paid for your properties.
Good commentary as always Mr. Monroe. Interested in the statement that PDPM should improve their operating margins. Why? They have built-in advantages in terms of infrastructure to stay on top of the updated regulations as they happen, as well as the opportunity to have good implementation infrastructure from a project management perspective. These are only very small pieces of how a company will perform under PDPM. The evidence at an operational level indicates significant headwinds to improved margins for them in the upcoming system. Perhaps this statement is the viewpoint from an investor’s perspective, meaning that Genesis has every resource available to make the changes necessary to be successful under the new payment model, as opposed to an actual prediction?
Yes, from what I have heard and read, they will be better prepared than others. The one concern is that they do have a large therapy company and I am not sure what the PDPM impact will be on that, presumably negative, but it is not as if (hopefully) patients will be getting less needed rehab under PDPM, just that it won’t be a driving factor for reimbursement. We shall see…