Five Star Sees Opportunity in Rehab Services

It’s no secret that Five Star Senior Living (Nasdaq: FVE) is in a bit of a slump right now, and that’s especially evident in its ongoing battle with sagging occupancy rates.

But one place where things look brighter for the company is its rehab and wellness services. In July, Five Star formally unveiled its full plan to expand its ancillary services beyond the walls of Five Star communities, and things look to be going smoothly on that front.

The company logged $5.6 million in ancillary revenues for the second quarter of 2017. While that’s just 2% of the company’s gross revenue, it represents a 12.3% gain from what Five Star saw in the same time last year. The Newton, Mass.-based firm also added four new outpatient rehab clinics during the second quarter, bringing its total number of outpatient clinics to 85.

On the senior living side, for comparison, Five Star’s earnings were flat for the quarter. The company logged senior living revenue of $279 million for the second quarter of 2017, which was approximately unchanged from the same period in 2016.

Overall, Five Star recorded a net loss of $6.5 million for the second quarter of 2017, compared to a net loss of $7.7 million for the second quarter of 2016.

Rehab to riches?

On the skilled nursing side, Five Star as of late has focused on going after “a higher-end, shorter-term rehab resident,” COO Scott Herzig said during the company’s Aug. 2 second-quarter earnings call.

The company recently completed a sizable short-term rehab renovation project at its Meadowood Campus in Bloomington, Ind., as part of its ongoing Rehab to Home initiative, which launched in 2015. Five Star also recently completed a Rehab to Home unit in Scottsdale, Ariz.

Rehab to Home’s purpose is to provide short-term rehab to seniors who will be discharged quickly. The units are spa- or hotel-like with amenities including room service, Wi-Fi, and private bathrooms. Therapy is provided seven days a week.

So far, betting on Rehab to Home appears to have been a good move.

“Every place that we put those [Rehab to Home] units in place, we’ve seen an increase with our client base,” Herzig said. “They have definitely helped us be competitive, especially when you consider that many people in the [continuing care retirement community (CCRC)] side of the business come into our communities, knowing that they at some point will be in the skilled side of the house. They’re great marketing tools.”

Across the industry, other CCRC providers also have started to rethink the way they offer services, and one thing is for certain: Long-term skilled nursing beds aren’t so trendy right now.

Five Star has also seen a decline on the skilled nursing side of its CCRCs, which is in line with expectations, Mackey said during the earnings call.

“I think long-term, you’ll probably see a lot of those traditional SNF units, to some extent, go away,” Mackey added. “I think the units we’re positioning right now to Rehab to Home, as you look to the future of this industry, are really going to be competitive going forward.”

Written by Tim Regan

Photo via Flickr / PROslgckgc

Tim Regan

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