Genesis’s Hager: Testing Access Has Improved, But ‘By No Means Do We Have the Resources We Need’

As the U.S. fights to get the COVID-19 virus under control, nursing homes have emerged as a key front lines in the battle.

But one of the largest skilled nursing and senior care operators in the country still struggles to secure sufficient testing.

Skilled Nursing News caught up with George Hager, the president and CEO of the Kennett Square, Pa.-based Genesis HealthCare (NYSE: GEN) to talk about how the nursing home giant is dealing with the challenges of obtaining tests and personal protective equipment (PPE) — as well as how it’s assessing its value-based care initiatives, as well as its rehab arm in China, in the midst of the COVID-19 pandemic.

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This interview, which was recorded on May 5, has been condensed and edited for clarity.

Testing for COVID-19 is really the cornerstone in combating this illness, so what has Genesis seen in terms of tests and how is it sourcing them?

Testing has been, from from my perspective, the biggest issue, because so much of this virus is carried asymptomatically. Whether it’s through new admissions coming into centers from hospitals, whether it’s employees going home, caregivers going home at night and coming back — it is very, very hard to identify when someone is carrying the virus without proactive testing of both staff and residents.

Early on, testing was very problematic — access to testing. Both the testing kits themselves, as well as materials are needed — just the swabs were in short supply. And the turnaround time was anywhere from five to 10 days depending on market, depending on the lab that you were using.

So without a doubt, the biggest challenge in fighting the virus was the the lack of adequate resources around testing, and clearly the inability to turn around testing in a timely fashion. Things have improved, no question about it. But still an issue, especially in certain markets.

Some states have been very proactive. I would point to Massachusetts, West Virginia, Rhode Island, that have gone to whole-facility testing. They’ve deployed resources, whether it’s through their national guard, or whether it’s through local contracted labs, to facilitate more aggressive and proactive testing.

We also have one of our three labs that we use. I’ll point out Aculabs, who was the first to acquire the accelerated testing equipment. We use Aculabs in Pennsylvania, New Jersey, and that has improved the turnaround time for testing. But that’s only a portion, obviously, of our portfolio. Most of our testing is still done through submitting samples ultimately, to either LabCorp or Quest — principally LabCorp in our case.

Turnaround times are still — unless you’re in one of these more aggressive testing environments like West Virginia or Massachusetts — well, well north of two days. And there’s still an issue of supply of testing. Regardless of what you hear, there is an issue around supply of testing and testing equipment, the test kits themselves, and the supplies needed to conduct the tests in skilled nursing.

When you say there’s the issue of supply, what does that look like? Is it that equipment is being made at the rate needed, or that it’s not being released to SNFs?

It might be worthwhile to take a minute to look at how we would traditionally have lab samples done and tested in our in our centers. Typically, if we needed lab work, we would call the lab. The lab would send the technician in to take the sample, and then the sample would go back to the lab to run the test and provide results. In the case of COVID-19, our labs, — which were principally Trident, Aculabs, and AHA — didn’t have the equipment. Two of those three still don’t have the equipment that I’m aware of, as we’re talking today; only Aculabs does.

They still have to come out. They have to get the sample, bring the kit out, unless we’ve gotten the kit from some other source. They then take the sample, typically — we can take the sample — the sample then goes back to the lab, and then that sample ultimately finds itself to LabCorp or Quest, other than in the case of Aculabs, who has relatively recently purchased their own equipment.

First of all, unlike some hospitals, we definitely don’t have our own labs. And for the most part, until very recently, the labs that we do use didn’t have the capability to run the test. Those samples were ultimately sent to national labs to run the test. So you can imagine the logistics and turnaround time. You have a supply issue, and a logistical issue, and a capacity issue — all of which are improving, but by no means do we have the resources we need to test, to really identify where the virus exists and prevent the spread.

Let’s go on to PPE; what are some of the shortfalls in terms of equipment and how are you trying to source it in this of high demand across the health care spectrum?

We jumped on this thing pretty early. It’s one of the benefits of our scale, you know; we have a lot more procurement channels than most smaller regional operators. Early on, we sourced over two million masks from seven to 10 different smaller niche suppliers, at a premium cost. But I’d say when it came to masks and protective eyewear, we were ahead of the game, and that was not problematic for us.

Gowns clearly been a problem, continue to be a problem. But we’ve done some creative things there. We have used, literally, a manufacturer of sewing machines in Massachusetts, and they have — with downstream partners of theirs who utilize their equipment — been making disposable gowns. I think it’s Merrow in Fall River, Mass., that has converted from their manufacturing capacity into manufacturing gowns. So in addition to using traditional sources, we have gone outside. We put a $2 million purchase order, $600,000 that was paid in advance, for them to gear up and start producing these gowns.

You have the traditional sources; we’ve gone outside those traditional sources, including the one I just referenced, to access gowns. Gowns continue to be in short supply. As a stopgap emergency measure, we acquired vinyl raincoats that could be turned around and used in an emergency situation. On a very limited basis, we did have to utilize some of those.

So we’ve tried to be creative where we needed to be, and we’ve used both traditional and nontraditional sources. I would say gowns right now are the biggest issue.

Stepping back a bit from the COVID-19 situation, as much as that’s possible, I wanted to talk about rehab. How is Genesis handling this in the wake of the suspension of elective surgery, especially given that these surgeries are going to resume? How are you dealing with the gap between the suspended surgeries now and the moment they resume? There’ll obviously be different timelines in different states.

That’s a really, really good question. We’ve probably taken a little different tack than, I would guess, many of our competitors, even though I’m not sure what a lot of our competitors have done. We have substantially kept our rehab company intact — operating, to a great degree, business as usual, with with a little bit of modification.

One of the first thing that happens, obviously, the productivity of the therapist goes down because you can’t cohort patients in the gym and rehab gym anymore. Virtually all therapy is being done in the room, so that creates a productivity or efficiency issue. And you’ve eliminated all group/concurrent therapy since you can’t congregate patients together; we’re keeping patients as separate as we possibly can.

You were staffing expecting 15+%, group/concurrent mode therapy, and that’s been eliminated. And also the therapy, to a great degree, is not being provided in the gym. So you still need to provide the level of care — which which we are — and so that’s one thing that has required the staffing levels to go up.

The reality is, in many of the hotspot markets, we’ve just redeployed therapists to do things that they can do to support the staffing needs, in both our own buildings and our contract buildings. We furloughed a few people, I would say, but the people that were furloughed principally were not in our contracts in skilled nursing, but more in assisted living. And certain assisted living providers, in an attempt to keep the virus out, did not view the therapist as an essential worker, and we were not allowed in the building.

So to the extent we weren’t providing any service in the assisted living sites, we either redeployed some of those therapists, or furloughed some therapists around that part of our business — which is a smaller part of our business. But other than that, we to a great degree try to do business as usual, and expecting that this will come back, and utilizing the therapy resources in different ways, both in our own facilities and in our contracts.

One thing I wanted to ask about was Genesis’s rehab and post-acute arm in China. What have been the effects of the pandemic on the operations there, given that it was the first place where the pandemic took hold?

Interesting question. I got back from China, I think, January 12. We were there to pre-celebrate the Chinese New Year, which started at the end of the month of January, with our staff, and obviously things were starting to heat up at that point in time.

As we heard about what was happening in Wuhan, the first thing we did is we recalled all of our expat staff in mid-January, and brought them back to the U.S. We also terminated any travel inside the country for many our staff that provided services in multiple sites immediately, and that occurred in January.

In fact, as we sit here today, the majority of what we do was in more of an outpatient rehab, or rehab-type site, and much of that is still not operational as we sit here today. Once again, our presence in China is not that big. We do operate one facility that is similar to our PowerBack, that was reopened in mid-April for admission.

China does things a little differently than we do; I know at least some of our employees in our PowerBack center were actually used by the government to actually do random testing. They just randomly pulled cars and trucks over and used health care professionals to test for fever, et cetera, as a way to try to prevent the movement of the virus within the country. They effectively took some of our employees and just used them for that need, as the building was prevented from taking admissions.

We’re not terribly big over there; most of what we’re doing is still shut down because of the virus on the outpatient rehab side, with the exception of our outpatient facility in Hong Kong — that’s still operational — and our PowerBack Center, which is located just east of Beijing.

I’m sure that’s exactly what those employees thought they’d be doing when they started working in a rehab center.

I have some interesting pictures. In January east of Beijing, it’s really, really cold up there. Standing out on the highway doing random medical tests was not exactly what they expected to be doing.

My last question for you is related to the LTC ACO, which was bringing back some really promising results for Genesis as of last year and was a major growth focus at the start of the year, in terms of enrolling new facilities. The world is in a very different place now; what does this do the LTC ACO and what is the future of it given the current situation?

Look, I still very much like the ACO [accountable care organization] and the I-SNP [Institutional Special Needs Plan]. I think the care-in-place model is the right model for the long-term-care patient, to the extent that care and services can be provided inside the skilled center without transportation into the emergency room. I think that when that’s clinically appropriate, it’s a much better option for the patient, to not have to be transported. So I love the model.

As we think about what’s really happening now, we don’t have much visibility to the actual utilization. I would say two things. So you think about membership, which in the ACO model is through attribution with the physicians of the long-term care population. And then the other issue is: what are the medical loss ratios, what are the cost trends as a result of virus?

On the membership side, I think you have to expect that in the near term, it’s going down just because the census levels of the skilled nursing industry are down because of the virus. I don’t think it’s going to be necessarily terribly material. But there will be, I think, a lull and a reduction in membership.

As you know, we’ve been building membership not only inside our own centers, but also in third-party centers who have chosen to participate in the ACO. So I think we have a little bit of growth there from third-party centers, but overall, the impact on ACO membership will decline to some degree just because of declining census. That’s to be expected.

On the cost utilization side, clearly if someone is COVID-positive and they’re required to go back to the hospital, from that perspective, you might see an increase in acute utilization in your long-term care population to some degree. But I think that would be offset, because to the extent it is at all possible to defer outpatient treatments, I think all of the other elements of the health care system and utilization of those elements will probably be down.

What we don’t have visibility to today is: Will the increase in utilization be offset, or more or less offset, by the reduction in the other utilization of the other elements of delivery system — outpatient, diagnostic, pharmaceutical? You can go down the list of all the things that would would drive utilization.

I think all in all, the increased impact on cost is probably going to be pretty neutral. I think one will offset the other. So I’m not that concerned about that on the cost side for the ACO. I think once this industry returns to whatever new normal is, I think the opportunity for I-SNPs and ACO utilizing care-in-place models — I think you’ll continue to see growth in those over time. So we’re still keeping our fingers crossed. We’re still optimistic there.

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