Adverse effects from the coronavirus have forced Genesis HealthCare to raise “substantial doubt” about its ability to operate in the near future.
Genesis executives detailed their concerns during a second-quarter earnings call early Tuesday morning. They reported that lost revenue and higher expenses from the public health crisis created a $213 million crater from March to the end of June. On the flip side, Genesis has received about $228 million of support from the governmental bodies.
“We’re very grateful for the federal and state financial support received thus far,” CEO George Hager said during the call.
“But as this pandemic continues, and in some areas it intensifies, additional and timely support is needed to continue funding the higher cost of labor and the significant precautions and protocols we have put in place to keep our patients, our residents and our employees safe,” he added.
Genesis added that — without taking into account future government funding and other mitigating plans — that it’s unlikely the company will be able to “generate sufficient cash flows to meet its required financial obligations, including its rent obligations, its debt service obligations and other obligations due to third parties,” according to its second-quarter earnings release.
“The existence of these conditions raises substantial doubt about the Company’s ability to continue as a going concern for the twelve-month period following the date the financial statements are issued,” it wrote.
“Because the pace of business recovery cannot be predicted and the continued timely receipt of adequate government financial support cannot be assured,” Tom DiVittorio, Genesis senior vice president added, “we determined that such conditions raised substantial doubt about the company’s ability to continue as a going concern.”
Executives added that occupancy levels are down more than 11% — declining from 88.3% to 77% from the first to the second quarters. Its operating occupancy in the month of July was 74.8% — an increase of 60 basis points from June. Hager noted that although occupancy appears to have hit bottom, the pace of recovery in new admissions has still been very slow.
They also noted that 241 of Genesis’ 361 facilities have reported one or more positive cases of COVID-19 among residents since mid-March. About 80% of those cases have occurred in just five of the 25 inpatient states it operates in — New Jersey, Connecticut, Massachusetts, Pennsylvania and Maryland.
“The adverse effects of a depleted occupancy base and higher expenses necessary to safely operate our facilities are expected to moderate, but persist,” DiVittorio explained.
“These conditions have and will continue to result in operating losses and the depletion of liquidity levels until such time as our occupancy and expense levels return to pre-pandemic levels. Until such time, we remain reliant on timely receipt of federal and state resources to fund operating losses and to ensure the company can continue to meet all of its financial obligations,” he said.