Hammered by the pandemic, post-acute care company Genesis Healthcare Inc. said that it is in active talks with its financial backers about several potential restructuring options and warned that it could be forced to seek bankruptcy protection.
Kennett Square, Pa.-based Genesis (NYSE: GEN) reported a third-quarter loss of $62.8 million, or 55 cents per share, after reporting a profit in the same period a year earlier.
Skilled Nursing News reported on Genesis CEO George Hager Jr.’s comments during an earnings call with investors and analysts Nov. 9. “We have initiated discussions with select capital partners to analyze a number of restructuring alternatives,” Hager said. “We will continue to work diligently to protect our patients, residents, and staff; improve the operating performance of the business; and pursue opportunities to improve the financial position of the company.”
Genesis owns subsidiaries that, on a combined basis, comprise one of the nation's largest post-acute care companies providing services to more than 350 skilled nursing facilities and assisted/senior living communities in 25 states nationwide. Genesis subsidiaries also supply rehabilitation therapy to approximately 1,100 healthcare providers in 44 states, the District of Columbia and China.
In the press release announcing the results, Hager commented on the need for further government aid. “While we are grateful for federal and state financial support received and committed to date, the stimulus funds recognized in the third quarter of 2020 fell nearly $60 million short of the company's COVID-19 related costs and the estimated impact of lost revenue. Given the persistence of the virus, its intensification as we approach the winter months and the slow pace of recovery in occupancy, the company remains reliant on adequate and timely government-sponsored financial support to meet its obligations to patients, residents, caregivers and stakeholders."
Genesis is far from alone in terms of skilled nursing home operators struggling financially. Skilled Nursing News also reported that Sabra Health Care Real Estate Investment Trust (REIT) recently joined other landlords in changing its accounting for nursing home tenants Genesis HealthCare and Signature HealthCARE, writing off $14.3 million of non-cash rent receivables associated with the operators.
The REIT cited concerns about Genesis and Signature’s operational futures in the wake of COVID-19 strains in announcing the write-off as part of its third quarter 2020 earnings release.
As Skilled Nursing News noted, “much of the financial focus around the long-term stability of skilled nursing facilities has been around flagging occupancy, which has remained low amid decreases in elective surgeries, consumer reluctance to pursue institutional care, and resident deaths.”
On a more positive note, LTC ACO, the first long-term-care-sponsored Accountable Care Organization (ACO) in the United States and a subsidiary of Genesis, recently received a positive reconciliation and settlement under the MSSP for the 2019 performance year and as a result, generated shared savings for the second consecutive year.
During 2019, Genesis managed approximately 5,800 Medicare fee-for-service beneficiaries under the MSSP with annualized Medicare spend of more than $160 million. In 2019, the MSSP required the LTC ACO to save at least 2.8% of the total Medicare spend under management to share in up to 62.5% (50% applicable to the first half of the year and 75% for the second) of the savings with Centers for Medicare and Medicaid Services (CMS).
In August 2020, CMS notified Genesis that it reached the minimum savings rate in program year 2019 set by CMS required for gain share. In October of 2020, the LTC ACO received MSSP shared savings of approximately $18.8 million and income of approximately $17.0 million net of participating provider distributions, of which $10.3 million was recognized as income during the quarter ended September 30, 2020.
Also during the quarter ended September 30, 2020, Genesis recognized $3.1 million of estimated MSSP shared savings income for the 2020 program year.