Genesis touts 'strong' second quarter as CEO says skilled care admissions may be reaching bottom, ripe for rebound
The largest player in the skilled nursing space touted “strong” second quarter financial results, with leaders also expressing optimism that census declines might finally be hitting bottom.
Those were a few of the key takeaways an investor call Wednesday morning with Genesis Healthcare. Although the Kennett Square, PA, company tallied a $39.6 million net loss in the past quarter, it was still a positive swing from the $65.2 million loss during the same period a year earlier, CEO George Hager Jr. said.
In addition, when looking at earnings without other factors — i.e., before interest, taxes, depreciation and amortization — the company actually pulled in $131.2 million, a roughly $5 million uptick, compared to the same quarter last year.
“This was a very, very positive quarter for the company and gives us a lot of optimism looking to the backend of '18 and moving into '19 where our expectations are that the demographics will begin to balance the demand side with the supply side, and we hope to see firming up occupancy as well as skilled admissions,” Hager said.
Genesis has made a big push lately to unload what it calls underperforming, non-core facilities, and officials said Wednesday that trend will continue. Already this year, the company has sold or divested 19 properties. Hager said he plans to divest, sell or exit another 44, including all 24 that it operates in the state of Texas.
Those divestitures, along with lower year-over-year occupancy, did help to tug down Genesis' numbers, officials acknowledged. The company's $1.27 billion in quarterly earnings represented a $68.9 million dip from the same quarter the previous year. Officials noted that the swing was partly attributable to the impact of divestitures, along with a “lower-year-over year occupancy and skill mix.”
Hager said he believes that Genesis may be seeing a bottoming out of occupancy declines, thanks in part to the growth of an aging population. Operating occupancy sat at about 84%, a decline of 50 basis points from the same quarter the prior year. That's a slowdown from 100 basis points declines in each of the last two years.
“We are seeing the admission declines narrowing. We do think that we are bottoming out on the skilled admission declines,” Hager said. “We're not quite at the bottom yet. Obviously we still saw declines, but when we look at overall census levels, we look at what we're seeing early in the third quarter through typically seasonally soft periods, [and] we're starting to see the census levels turn.”
Hager also added that recent Centers for Medicare & Medicaid Services' changes to the 5-Star Quality Rating System have been favorable to the company. Overall, its average staffing star rating leaped from 2.7 to 3.3 stars. In addition, its overall quality star rating rose to more than 4 stars.