How fast occupancy can return to pre-pandemic levels isn’t the only thing that Omega Healthcare executives believe will help ensure post-pandemic success and help deter facility closures industry wide. 

Government support also will be key to some operators avoiding major cash flow issues and closures, Omega CEO Taylor Pickett stressed Tuesday during a first-quarter earnings call. 

“The allocation and distribution of additional government funding, along with the communication and evolution of clinical protocols, has been critical in protecting and saving lives as we combat this unprecedented and deadly pandemic,” Pickett said. 

He noted that the company’s operators have seen occupancy stabilize and even “increase slightly” following the rollout of the COVID-19 vaccines. The real estate investment trust reported its cumulative occupancy fell from a rate of 84% in January 2020 to a low of about 73% in December. 

It hit another low (72.3%) in January 2021 before beginning to show signs of recovery in February (72.6%) and March (73.1%). The average occupancy in April was around 73.4%. 

Across the industry, average occupancy has rebounded to about 69.3% as of early April, according to the American Health Care Association. AHCA President and CEO Mark Parkinson previously suggested the measure needs to recover at about a 1% rate per month during 2021 to reach pre-pandemic levels. It has been a struggle.

Omega’s operators also reported receiving $115 million in federal stimulus funds during the fourth quarter, and $102 million in aid during the third quarter. Executives said the relief was vital for ensuring operators’ earnings remained stable during the quarters. 

Occupancy gains not fast enough?

“Although we have seen occupancy stabilize and increase slightly as vaccines have rolled out, it is not clear that the pace of occupancy recovery will be sufficient to avoid industry-level cash flow issues,” Pickett cautioned. 

“With an estimated $24.5 billion remaining in the Provider Relief Fund and the likelihood of providers’ funding requests well in excess of this amount, we expect certain providers in the industry may have shortfalls,” he explained. “Although many states have provided meaningful support, there are many states where additional support will be necessary to avoid facility financial stress and potential closures.”

Pickett added that “with no more funding,” investors may begin to see the stress start to hit operators in the back half of 2021. 

“From our perspective, we’re fairly certain that the industry will receive a piece of that $24.5 billion and that will be helpful and then it really comes back to the timing of the occupancy recovery as the offset to all of this,” he said. 

Pickett added that Omega continues to “strongly believe in the positive long-term care prospects for our operating partners, while acknowledging the possibility of near-term stress that some skilled nursing and senior housing providers may face.”