LTC Properties Upbeat on Genesis Leases, Predicts Decline in Home Health Diversions from SNFs

Executives at LTC Properties (NYSE: LTC) on Friday struck an upbeat tone about some of the top pressure points for health care real estate investment trusts (REITs) amid the ongoing pandemic, including a troubled tenant and the significant shift of patient volume to home health.

Genesis HealthCare (NYSE: GEN), the nursing home giant that spurred a wave of REIT write-downs last year after announcing doubts about its future, remains current on its lease payments for the six facilities in LTC’s portfolio, the company disclosed in its fourth-quarter 2020 earnings report.

While there have been predictions of restructuring coming to Genesis — based on both warnings from the company itself and the January departure of longtime CEO George Hager — LTC CEO Wendy Simpson said she was unaware of any imminent changes coming to the operator.


“We’re not aware of any discussions that are going on for restructuring or anything like that,” Simpson said on the company’s earnings call Friday. “So if you’re asking: Are we part of a discussion of a restructuring, or a reorganization? We haven’t been invited into — if there are any — those discussions going on.”

LTC co-president and chief financial officer Pam Kessler noted that LTC had already revised its lease with the Kennett Square, Pa.-based Genesis in August 2019, while co-president and chief investment officer Clint Malin pointed to the fact that five of the six buildings are located in New Mexico — which has implemented Medicaid rate increases in recent years.

“We don’t believe that we’re part of their problem,” Kessler said.


Occupancy across the Westlake Village, Calif.-based REIT’s entire skilled nursing portfolio declined from 70% to 66% between September 30 and January 31, Malin said. While LTC was hesitant to make long-term predictions about census over the coming months, the REIT joined its peers in trying to throw cold water on the narrative that home health diversions seen during the pandemic would ossify into a permanent change.

With a projected buildup in demand for elective surgeries postponed during the pandemic, Kessler foresees a bump in acuity among hospital discharges as those procedures come back — and patients require around-the-clock recovery care that can’t be delivered at home.

“I think it’s too early to determine if the discharge patterns have been permanently altered,” Kessler said. “Right now, the conventional wisdom is it will trend back to normal pre-COVID.”

The October 2019 introduction of the Patient-Driven Payment Model (PDPM) for Medicare reimbursements has also set up the industry for a return to volume over the long-term view, Malin argued, with operators already adapting to a landscape that rewards their ability to take on more complex patients.

“Skilled should be seeing, by and large, more complexity in general,” Malin said. “I think those are probably not viable discharges going into home care.”

Executives at fellow health care landlord CareTrust REIT (Nasdaq: CTRE) expressed a similar sentiment about home health diversions.

“Home health has historically been a very close second to skilled nursing for Medicare post-acute discharges,” CareTrust COO and president David Sedgwick said during the REIT’s earnings call last week. “And given the circumstances of COVID, I don’t think anybody’s surprised that home health has bounced back faster than skilled nursing. But I’d say that the narrative around home health permanently taking share from patients from skilled nursing is mistaken.”

LTC collected 98% of its rent due in 2020, with just 0.6% delinquent; the REIT had previously announced a plan to halve rent escalators in 2021, with a planned revenue hit of $540,000 for the first quarter.

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