Genesis Posts $89M Loss in Fourth Quarter, Pledges Sunnier 2018

Genesis HealthCare, Inc. (NYSE: GEN) lost $89.2 million in the final quarter of 2017 and $579.0 million over the course of last year — numbers that the company continues to blame on the overall skilled nursing landscape.

“As health care reform continues to transform the delivery of health care by changing reimbursements and holding providers accountable for costs and quality of care provided, the industry continues to experience declining total occupancy, skilled mix, and length of stay,” Genesis CEO George Hager said on the company’s quarterly earnings call early Friday morning.

Those dismal results represent serious declines over the previous year: The Kennett Square, Pa.-based skilled nursing provider had net income of $22.5 million in the fourth quarter of 2016 and lost $64.0 million over that entire year.

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In explaining the quarterly stats, Hager pointed to all the usual suspects, including nurse wages that are rising faster than government reimbursements and a near-term demographic lull.

“Population growth is at an all-time low, as an 85-year-old today would have been born in the middle of the Great Depression,” Hager said.

That has contributed to a decline in census at Genesis facilities: Occupancy stood at 84.7% in the fourth quarter, a drop of 40 basis points from the same time last year, and the lowest figure over the last seven quarters, according to chief financial officer Tom DiVittorio.

Hager and DiVittorio still presented a more upbeat outlook for 2018, pointing to the leading national provider’s recent financial restructuring plan and $555 million asset-based loan. As 2018 develops, the company will make further moves to improve its liquidity, including working with landlords to restructure leases with below-market coverage, refinancing bridge loans, and potentially buying back leased facilities.

“I expect that 2018, again, will be a busy year of transactional activity that will position our portfolio of facilities with greater concentration in our core markets,” Hager said.

Those comments echo statements Hager made Thursday at the Barclays Global Healthcare Conference, where he emphasized the benefits of Genesis’ nationwide scale and laid out a plan to potentially strengthen its density in certain core markets.

On the earnings call, Hager also threw his two cents into the pot regarding the timing of the upcoming “silver tsunami,” or the highly anticipated wave of aging baby boomers who will eventually need skilled nursing services.

“We are seeing moderation in the pressure, easing of the pressure on census,” Hager said. “I do think that by the end of ’18 and clearly sometime in ’19, we’re going to begin to see demographics marginally impact demand — while we continue to face length-of-stay pressure and pressure from continued value-based initiatives.”

That response places Hager on the slightly more optimistic side of the spectrum: On their quarterly earnings calls earlier this year, officials from Omega Healthcare Investors (NYSE: OHI) definitively said the wave will arrive by 2019, while Sabra Health Care REIT (Nasdaq: SBRA) CEO Rick Matros cast doubt on whether the wave is coming at all.

Earlier this week, Avalere Health vice president Fred Bentley told Skilled Nursing News that the tsunami will remain offshore until 2021, when the first group of baby boomers turns 75.

Genesis stock dropped slightly in the wake of the pre-open earnings call, falling $0.04 per share — or 2.76% — to $1.41 in early trading.

Written by Alex Spanko

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