Sabra CEO: ‘Old Testament’ Almost Over As Genesis Exodus Wraps

Sabra Health Care REIT (Nasdaq: SBRA) on Thursday expressed optimism about the Centers for Medicare & Medicaid Services’ (CMS) new skilled nursing payment model and stressed its focus on executing its divestiture programs — particularly its sale of facilities operated by Genesis Healthcare (NYSE: GEN).

Under the new model, incentives shift from short-term rehab to complex nursing, Sabra CEO Rick Matros said on the company’s first-quarter earnings call. While therapy rates will be lower, nursing rates will see corresponding increases.

“We expect to see significant changes in behavior on the part of our operators as they start emphasizing nursing patients and not just rehab patients,” he said.


Matros also applauded CMS for overhauling the now-scrapped Resident Classification System, Version I (RCS-I), saying the shift shows how collaboration between the operator community and CMS has “increased dramatically,” Matros added.

“We’ve never really seen this level of collaboration between CMS and the industry before,” he said.

The earnings report saw Sabra pull in $62.5 million in net income for the first quarter, as compared to $18.8 million during the same time last year. The Irvine, Calif.-based real estate investment trust (REIT) closed on a notable acquisition of Care Capital Properties over that span.


Exodus on schedule

The REIT’s current pipeline consists primarily of senior housing properties, as Sabra sets its sights on the execution of its divestiture program and the execution of small deals, Matros added.

That includes selling off Sabra’s Genesis assets in its so-called Genesis Exodus; six facilities leased to Genesis HealthCare, Inc. (NYSE: GEN) were sold a total price tag of $20.5 million. Of the remaining 40 Genesis facilities the REIT plans to sell, 25 are under contract, with total sales proceeds projected at $254 million. Another 15 facilities have letters of intent.

Sabra expects to retain eight facilities leased to the troubled skilled nursing operator; those facilities generate annual cash rents of $10.4 million.

“[Genesis] actually reported a pretty good quarter this morning, but that said, we’re getting pretty close to the point where our Old Testament is done with,” Matros said.

Sabra’s stock closed at $20.13, up 2.18%, or 43 cents per share.

Written by Maggie Flynn

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