Matros: Home Health Shifts ‘A Good Thing’ Ahead of Looming Capacity Crunch, But Nursing Homes Still Vital

Whether or not home health providers can maintain the volume they siphoned away from skilled nursing facilities during the pandemic has emerged as a top question for policymakers and financial analysts alike.

A permanent shift from SNF to home could portend financial and operational chaos for a sector already battered by COVID-19, the thinking goes, while simultaneously benefiting both seniors — who generally prefer to remain at home — and the rapidly expanding home health care marketplace.

But one real estate investment trust (REIT) leader struck a contrarian note on Tuesday, framing any long-term changes in discharge patterns as a positive for nursing homes, patients, and society at large.


“Frankly, we think it’s a good thing if home health can take more patients, because we do have a demographic crisis looming,” Sabra Health Care REIT (Nasdaq: SBRA) CEO Rick Matros said during his company’s fourth-quarter earnings call. “We have a declining supply on skilled, and there are already access issues that are going to be exacerbated throughout the country in terms of skilled nursing. So we actually, as a society and a country, need home health to be taking more than they’ve taken historically, from an acuity perspective.”

That said, Matros emphasized that the SNF-to-home health diversion pipeline had been occurring for decades prior to the start of the COVID-19 pandemic, and pushed back on the idea that home-based care could ever fully replace brick-and-mortar nursing homes for certain patients.

“The paradigm isn’t going to change,” he said. “There are huge acuity differences between the settings. In home health, you’ve got, by definition, interim visits by nurses and therapists, and in skilled nursing facilities, it’s all 24/7. It’s very intense.”


Home health agencies picked up lighter-acuity patients from SNFs during the pandemic, Matros asserted, and the CEO predicted that referral trends will normalize to an extent after the COVID-19 crisis eases.

Concerns about access to skilled nursing care could even eventually grow over the coming years as lawmakers move to eliminate multi-resident rooms in the wake of the pandemic, Matros noted.

“Before the pandemic, the industry was projected to be essentially full by somewhere in the middle of the decade, so that’s going to exacerbate that problem,” he said.

Both Matros and Sabra chief investment officer Talya Nevo-Hacohen pointed to positive signs in the Irvine, Calif.-based REIT’s skilled nursing portfolio. Occupancy declined 1,200 basis points from the start of the pandemic to the end of the year, but that trend bottomed out in December for the company’s top seven SNF tenants, Matros said — with a 210-basis-point increase from New Year’s Eve to February.

“We projected that skilled would be back around the first quarter of 2022, or pretty close to back, so we’ll see if we can actually beat that,” Matros said.

Nevo-Hacohen in particular focused on macro-level declines in cases at facilities that have undergone vaccine clinics, noting that the early success in nursing homes — which received first priority — could portend even more good news as the vaccine rollout gradually expands.

“After the launch of the vaccines, deaths in skilled nursing began to decline and have continued to do so dramatically, while deaths in the general population spiked, and have plateaued since,” she said. “With skilled nursing as a leading indicator of the impact of the vaccine in congregate living, we have reason to be optimistic.”

Among the other positive indicators, in Matros’s view: The company has collected 99.9% of its forecasted rents, and does not expect to extend any deferrals moving forward, while skilled mix — or the proportion of higher-reimbursed Medicare patients — improved 530 basis points over the course of the pandemic, which he described as a “very important mitigant” for operators.

That said, executives at Sabra echoed the general sentiment that the year ahead remains full of unknowns — including the fate of major operator Genesis HealthCare (NYSE: GEN), which formally announced questions about its ability to continue as a going concern last year.

Sabra, along with multiple other REITs, converted Genesis to cash accounting, leading to a $14.3 million write-off in the third quarter of last year.

“Genesis is out there,” Matros said. “We’re not sure how that’s going to resolve.”

Regulatory reform also looms large in 2021. Matros welcomed the nominations of Xavier Becerra to lead the Department of Health and Human Services (HHS) and Chiquita Brooks-LaSure to serve as the administrator of the Centers for Medicare & Medicaid Services (CMS), and noted that about $33 billion of federal aid remains available for distribution — a figure that could increase as hospital systems and other providers return unnecessary funds, he added.