Five Star’s Skilled Nursing Business Continues to Struggle, Occupancy Tumbles
Five Star Senior Living’s (NYSE: FVE) standalone skilled nursing assets continued to cause headaches for the provider, which saw occupancy and revenues again take a tumble in the first quarter of 2018.
Occupancy at the Newton, Mass.-based Five Star’s standalone skilled nursing facilities dropped to 75.7%, or 410 basis points lower than at the same time in 2017, while overall revenues associated with skilled nursing operations fell $3.2 million — or 4% — among comparable communities.
Five Star CEO Bruce Mackey placed the blame in part on the company’s largest standalone SNF, a 200-bed facility outside of Milwaukee that lost the ability to admit new patents “for a significant period” due to a clinical problem.
“The issue has been resolved, and we are working to stabilize this community,” Mackey said on a Tuesday call with investors and analysts. “This occurrence was unfortunate as we take pride in our clinical operations.”
The first quarter results were even bleaker than the 220-basis-point occupancy drop seen during the fourth quarter of 2017 as compared to 2016.
Mackey also pointed to a worse-than-normal flu season as a reason for Five Star’s precipitous occupancy decline among its 30 SNFs, along with general drops in skilled nursing census around the country. In particular, Mackey said the National Investment Center for Seniors Housing & Care’s (NIC) new statistics, showing a growing gulf between the fortunes of urban and rural SNF operators, reflected Five Star’s current reality.
“This report showed pronounced differences in occupancy trends between urban and rural communities, with rural occupancy rates declining more sharply,” Mackey said. “With the majority of our standalone SNFs located in rural markets, this occupancy trend is noticeably affecting us.”
The CEO touted an agreement to sell a Los Angeles-area standalone skilled nursing community as part of the company’s long-term strategy in the space.
“This will be the first skilled nursing community that will be sold since 2016, and we plan on being opportunistic with sales of these communities in the future,” Mackey said.
Five Star is also exploring the continued renovation of skilled nursing units at its continuing care retirement communities (CCRCs) into its short-term “Rehab to Home” model, with a 22-unit wing just approved by local authorities in Ohio and 29-unit project in Delaware set to open in early 2019.
Written by Alex Spanko