$156M in CARES Act Funding Helps ManorCare, ProMedica Offset $136M Revenue Drop Amid COVID

The senior care division of non-profit hospital system ProMedica took a serious revenue hit amid the COVID-19 pandemic — like many other post-acute and long-term care providers — but significant federal relief helped the HCR ManorCare owner offset the strain.

The Toledo, Ohio-based ProMedica’s senior care business line, which includes its HCR ManorCare skilled nursing and assisted living assets, saw a drop in year-to-date patient service revenue of $135.7 million during the first six months of 2020, the company reported.

The non-profit cited declining census and increasing expenses, common negative trends for operators in the senior care space during the ongoing pandemic, as the primary drivers of the drop.

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“The temporary suspension of all non-essential surgeries, procedures, and patient visits adversely impacted revenue during the quarter,” ProMedica observed. “ProMedica also incurred additional costs to ramp up for an expected surge of COVID-19 patients and to provide necessary personal protective equipment (PPE) to all locations.”

But system-wide, the network pulled in about $240 million of stimulus relief authorized under the CARES Act recovery package, $156 million of which directly supported ProMedica’s senior care operations.

“The CARES Act stimulus funding helped offset the negative impact of lost patient service revenue,” the company concluded.

All told, the senior care division recorded $121.6 million in operating income for the first two quarters of the year, up $81 million from the same six months in 2019.

The senior care business line accounted for about 46% of the hospital system’s total revenue over the first half of 2020, dwarfing ProMedica’s insurance arm (29%) and provider division, which consists of hospitals, ambulatory clinics, and physician groups (25%).

ProMedica’s results were generally in line with the larger financial trends in the post-acute and long-term care space, with CARES Act cash helping to keep operations afloat during the COVID-19 crisis.

The Department of Health and Human Services (HHS) has distributed billions in aid to post-acute and long-term care providers, with nearly $10 billion in targeted relief for skilled nursing facilities and billions more in available cash based on prior Medicare and Medicaid reimbursements.

The major real estate investment trusts (REITs) in the space, historically an early predictor of financial strain at operators, have generally reported that the federal stimulus support staved off any significant problems with nursing home tenants’ ability to pay rent — at least in the near term.

For leading publicly traded provider The Ensign Group (Nasdaq: ENSG), the stimulus cash was ultimately unnecessary; given another record quarter of financial performance, Ensign elected to return all $110 million in CARES funding that it had received.

On the opposite end of the spectrum, $186 million in federal funding helped Genesis HealthCare (NYSE: GEN) avert financial disaster during COVID-19, but the company recently announced that “substantial doubt” about its future exists even if it were to receive more federal aid from potential forthcoming stimulus packages.

ProMedica acquired ManorCare’s operations in 2018 as part of a larger deal that saw Welltower Inc. (NYSE: WELL) purchase the associated real estate in an 80-20 joint venture with the health system.

ProMedica now operates 168 skilled nursing facilities, along with 50 Alzheimer’s and dementia care properties and a 110-market hospice operation.

Welltower CEO Tom DeRosa earlier this month described the COVID pandemic as “the most challenging period in the company’s history,” but emphasized that the needs-based nature of skilled nursing and senior care makes the portfolio ripe for future success.

“Our communities are a critical component to the care continuum,” he said. “It is imperative that seniors have access to residential settings in which professional care is offered to meet their everyday needs, including safety, nutrition, hygiene, and medication management. It is important to remember that this is a needs-driven asset class.”

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