Omnicare parent CVS Health beat analyst estimates on Tuesday, but the company said it’s seeing continued struggles in its long-term care pharmacy business.
It’s been about three years since the company acquired the long-term care pharmacy services leader for $12.9 billion. CVS officials described continuing headaches in the nursing home market, echoing comments made on CVS’ previous earnings call.
“We continue to see challenges in the skilled nursing facility space as the market continues to experience bed loss in these facilities,” Eva Boratto, executive vice president, controller and chief accounting officer said during Tuesday’s conference call with investors.
She noted that, in the long term, CVS has “put our plan for growth into action” for its Omnicare line in the assisted and independent living markets.
Retail long-term care operating expenses were slightly above the chain’s expectations, driven, in part, by wage growth and tax reform,. Operating profit in its long-term care segment declined 6.3% during the quarter, to $1.5 billion
Overall, the Woonsocket, RI-based chain reported a third-quarter net income of $1.39 billion on revenues of $47.3 billion, slightly exceeding expectations. In August, CVS had blamed the “deteriorating” skilled care sector for its previous $2.6 billion quarterly loss.
LTC Properties on alert for possible financial troubles with Senior Care
In the wake of Sabra Health Care terminating leases with its largest operator, another California-based REIT is turning a keen eye toward that same operator in the event that it might also fall into default.
Officials with LTC Properties said Tuesday they are closely monitoring their facilities now occupied by Senior Care Centers for potential signs of stress, in light of Monday’s announcement by Sabra.
Clint Malin, chief investment officer, said he and CEO Wendy Simpson met with Senior Care’s ownership group last week in Orange County “to get a better understanding of where they’re at.”
Simpson said they have also reached out to some of their other Texas operators, since news of the Sabra sale became public, to see if they have any interest in the jettisoned properties.
“They are not in default in anything relative to our leases,” Simpson said during a call with investors Tuesday. “It is a situation that we are totally on top of and we’ll take action probably a little quicker than we would, should they default on anything. Because at this point, I don’t think cooperating with them for a long-term solution may be the right answer, if they have these significant problems with the Sabra assets.”
Officials with the Westlake Village, CA, real estate investment trust also noted that they have unloaded a small handful of facilities as they look to “recycle capital” in circumstances where they don’t see growth potential. Those included the sale of two SNFs in Alabama, with 265 beds total, for $17.5 million, and another 60-bed nursing facility in Florida.