Omega Healthcare Investors (NYSE: OHI) collected 99% of its contractual rents for the third quarter of 2020, but stressed the ongoing importance of government support for the long-term care sector as critical to operators’ ability to treat and care for residents during the COVID-19 pandemic.
“We reiterate that the timely and significant government support provided to the industry throughout the pandemic has been critical,” Omega CEO Taylor Pickett said in a press release announcing the results. “This support has saved lives, allowing operators to fund increased personal protective equipment (PPE) and labor costs, to protect and care for this particularly vulnerable segment of our society.”
The Hunt Valley, Md.-based real estate investment trust (REIT) reported a net loss of $93.8 million, or 40 cents per common share, for the third quarter, compared with net income of $142.9 million, or 63 cents per common share, in the year-ago period. For the third quarter, Omega reported revenue of $119.2 million, compared with revenue of $233.2 million in the third quarter of 2019.
Omega announced in September that it received going concern disclosures from both Genesis HealthCare (NYSE: GEN) and Agemo Holdings LLC — the legal name for its portfolio of buildings operated by Signature HealthCARE — and that this would lead to an approximately $140 million write-down in the third quarter.
Ultimately, the real estate investment trust (REIT) made a write-down of primarily straight-line receivables and lease inducements of approximately $142 million, and the revenue for Genesis and Agemo/Signature is now being recorded on a cash basis, Omega CFO Bob Stephenson said on the earnings call.
The REIT had one additional operator report a going concern disclosure, but that entity only leases two facilities with Omega, so the effect is largely immaterial, an Omega spokesperson told Skilled Nursing News via email on Monday.
Omega’s occupancy – the REIT has an operating asset portfolio of 957 facilities with over 96,000 operating beds – hit a low of 75.1% in August for its core portfolio, but had recovered slightly by October, up to 75.6%. Before COVID-19, occupancy had been at 84% in the core portfolio, COO Dan Booth noted on the call.
“Operator performance … was significantly affected in the second quarter of 2020 and will continue to be affected in the foreseeable future,” he said.
In addition to the occupancy issues, labor costs and PPE have been significant challenges, with per patient day operating expenses going up $25 from January to June of 2020 for the core portfolio, Booth said. However, as of August, the most recent time available, the expenses had dropped about $2 per patient day.
“While too early to confirm an absent of a significant COVID spike, we expect PPD expenses to decline in the coming quarters based upon our ongoing conversations with our operators,” Booth said.
Even though acute care hospitals are doing more elective surgeries, Pickett said the people undergoing these procedures are more likely to be healthy patients who had postponed them in the early months of COVID, not the kind of patients that would go into a post-acute facility for rehabilitation.
“So a lot of the elective surgeries, they’re not being discharged to SNFs, they would never have been in the past and they’re not now,” he said. “I think sort of the last piece of the hospitals having elective surgeries come back is this elderly population, who’s – quite frankly – wary of going into an acute care setting, and ultimately, perhaps, the skilled setting.”