Genesis Healthcare (NYSE: GEN) reported its financial results for the first quarter of 2020, and provided the first look into the depth of the COVID-19 pandemic’s impact on its operations.
The Kennett Square, Pa.-based Genesis — which operates almost 400 skilled nursing, assisted/senior living, and behavioral health centers located in 26 states — saw a significant skilled nursing occupancy decline from the three months ending March 31 to the end of April: Specifically, census fell from 88.2% for the first quarter to 81.9% for the month ending April 30.
The company projects operating occupancy for the month ending May 31 to be about 76%.
The occupancy declines had begun in February as hospitals started canceling or rescheduling elective surgery procedures, and were further accelerated by self-imposed admission bans in Genesis facilities that reported positive COVID-19 cases.
Out of 361 Genesis facilities, 187 have reported one or more positive cases of COVID-19 among patients, residents, and staff. That represents a drastic change from its fourth-quarter earnings call held on March 17, when the operator had just one confirmed COVID-19 case.
More specifically, 133 of Genesis’ centers have an admission ban, Dr. Richard Feifer, senior vice president at Genesis and chief medical officer at Genesis Physician Services, said on the call.
“Each day we’re learning that others can come off of that selectively, so that trend is actually improving,” he added.
In terms of determining whether a building can be cleared for admissions, Genesis’s practice has evolved along with knowledge of the pandemic, Feifer said in response to analyst questions. Originally, there would be no new admissions until there was “a total clearance of the virus,” with no new cases in a center, which Feifer described as “being very conservative.”
“As time has gone along, and we’ve learned that it is possible in many cases to actually control the spread within one of our centers, what we look for then is that the virus is confined to either one or just a few units within the center, and that confinement is limited to not too many cases — and we look for no further spread,” he explained.
Once the outbreak is controlled, Genesis then looks to open admissions to the COVID-19-free unit to prevent exposure to new admissions, though Feifer emphasized that each case is handled differently, he noted.
Genesis reported net income of $33.5 million, or 24 cents per share, compared with a net loss of $15.26 million, or 15 cents per share, in the first quarter of 2020. Net revenue for the first quarter was not “materially impacted by COVID-19,” due to changes in payer mix and about $6 million in COVID-19-related Medicaid reimbursement relief from several states where Genesis operates; those helped offset the revenue losses from occupancy drops, according to the company’s earnings release.
That said, Genesis CEO George Hager expressed optimism that some other states would add to that Medicaid support, citing Pennsylvania and New Jersey specifically.
“There’s still some activity that we’re expecting in a number of states, some of our big states,” he said. “There’s pending legislation in the state of Pennsylvania — I think it’s been passed by one body of governance in Pennsylvania, not passed by the second body or signed by the governor at this point … We’re hopeful we’ll see some support from the state of New Jersey going forward.”
The elevated operating expenses from the pandemic, which Genesis estimated jumped about $21 million for the month ending in April, will likely continue to be significant.
These incremental costs would not have been incurred if not for the pandemic, Genesis chief financial officer Tom DiVittorio said; the expectation is that Genesis will see similarly elevated costs in May.
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