Skilled nursing occupancy troubles hit Five Star Senior Living (Nasdaq: FVE) in the fourth quarter, bruising the company’s earnings.

The Newton, Mass.-based senior living operator saw a $2.7 million decrease in skilled nursing revenue, mostly from its leased standalone skilled nursing facilities. Occupancy at the leased SNFs dropped to 78%, down 220 basis points from the fourth quarter of 2016.

Still, the news wasn’t entirely bleak.

“Our standalone leased skilled nursing communities are still profitable for us and continue to cover rent by over two times,” Five Star president and CEO Bruce Mackey said on the call.

Rehab and EHRs

The company has undertaken several initiatives related to its skilled business, including the Rehab to Home program at Five Star’s continuing care retirement communities (CCRCs). Five Star completed such a unit in Scottsdale, Ariz., in the third quarter, and Mackey said the program is seeing results.

“We have seen our Medicare census increase from an average of 17 residents per day prior to project completion to just over 20 residents per day after the project completion,” he said on the call. “Another Rehab to Home project we completed before this was at a leased CCRC in Bloomington, Ind., and we have seen very similar results. We achieved these gains in spite of an extremely difficult skilled operating environment right now.”

Five Star will keep evaluating skilled units where management believes Rehab to Home — which is designed to provide short-term rehabilitation for seniors who will be discharged quickly — is a good fit.

The company also started an initiative to convert all of its skilled nursing units to an electronic medical records platform last year. All freestanding and CCRC units have been converted, and assisted living units will be next, COO Scott Herzig said on the call.

“Being electronic with our medical records allows us to more easily share our outcomes with key referral sources, improves communications with physicians, reduces medication and transcription errors, and is vital to participation in all of the organized healthcare programs,” Herzig said.

Net loss

For the fourth quarter of 2017, Five Star reported a net loss of $1 million or 2 cents per share, compared with a net loss of $5.6 million, or 11 cents per share, in the fourth quarter of 2016. Senior living revenue for the period fell 0.6% to $279.2 million, compared with $281 million in the year-ago period.

Occupancy at Five Star-owned and leased senior living communities fell to 82.6% in the 2017 fourth quarter, down from 83.9% in the year-ago period.

For the year, Five Star reported senior living revenue of $1.12 billion, a drop of 0.1% from 2016. Five Star’s net loss for 2017 was $20.9 million, or 42 cents per share, compared with a net loss of $21.8 million, or 45 cents per share, in 2016.

“As we have discussed in the past, government reimbursement rates continue to be under pressure, resulting in lower margins,” Mackey said on the call. “Efforts led by accountable care organizations and managed care programs are resulting in decreased length of stay, lower reimbursement rates and, in many cases, are requiring people to bypass a stay at the skilled nursing facility and go home for care at a lower-cost alternative.”

Written by Maggie Flynn