The enormous financial and clinical fallout from the COVID-19 pandemic has upended the skilled nursing world with particular force, but one major senior housing and care real estate investment trust (REIT) CEO believes that the situation could have been worse.
In fact, it’s a credit to the Patient-Driven Payment Model (PDPM), which took effect last October, that providers in Sabra Health Care REIT’s portfolio have been able to rise to the challenge, according to CEO Rick Matros —something that might not have been the case had the old Resource Utilization Group (RUGs) system still been in place.
“RUGs incentivized operators to admit short-term rehab patients only,” Matros said on the company’s first-quarter earnings call on Thursday. “Since we’ve had PDPM in place, we expanded the kinds of patients that have been admitted to the facilities to include a lot of nursing conditions, more complex nursing care, and that has positioned our portfolio to be stronger going into the pandemic.”
But the suspension of elective surgeries across the U.S. has affected Sabra’s skilled nursing occupancy, which was down 460 basis points from February “month-to-date” through the last week of April, Matros noted.
This was the direct result of the suspension of elective surgeries across the country, he explained.
“The occupancy drop is almost entirely due to the cessation of elective surgeries,” he said. “When we take the facilities that are positive [for] COVID and exclude them from our census, we see almost no difference, because the drop from elective surgeries is such a huge proportion.”
The Irvine, Calif.-based Sabra reported net income attributable to common shareholders for the first quarter of 17 cents per share, compared with a net loss of 44 cents per share in the year-ago period. Total revenue for the first quarter was $149.34 million, compared with $136.77 million in the first quarter of last year.
Tracking COVID-19 and funds
Sabra currently has 80 facilities with positive cases of COVID-19, among 22 of its 70 tenants, and the REIT has taken several steps to keep track of cases in its portfolio. This includes:
- A weekly census tracker for Sabra’s top 10 operators, with a census report from all operators submitted every two weeks.
- A weekly report from all facilities with COVID-19 positive test results
- Weekly tracking of the number of positive COVID-19 cases in every county and province where Sabra has facilities
“This has allowed us to get some sense of how things might progress in the counties in which we have operating facilities,” Matros said.
Sabra also keeps track of how its tenants are making use of the various relief programs at the state and federal levels. Specifically, Sabra’s operators have accessed $320 million in assistance under these programs, including:
- $60 million from the $100 billion Public Health Care and Social Emergency Fund
- $10 million from sequestration suspension
- $20 million from FMAP [Federal Medical Assistance Percentages], with Sabra hoping “that will improve”
- $150 million from the advanced Medicare payment program
- $50 million from the employer payroll tax delay
- $30 million from the Paycheck Protection Program
Most providers have not gone for the advanced payment option, however, because “it has to be paid back in relatively short order and … some of the lenders are asking providers to pay down their line when they access that money,” Matros said.
Some lenders are being flexible, but the constraints have limited the number of Sabra’s operators accessing that program, which the Centers for Medicare & Medicaid Services (CMS) has since suspended — and in addition, they might feel able to use the other options that don’t require repayment to ride out the storm.
“Most of our operators haven’t availed themselves of that piece,” Matros said about the advanced payment program. “It’s just for a decent-sized operator, getting three months of Medicare in advance is a huge number, so that $150 million looks larger than it is in terms of the number of operators it’s really impacting.”
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