Omega: Bed Buy-Backs Unlikely to Become Trend, Demographics to Offset Home Health Diversions

A major skilled nursing and senior living landlord on Friday pushed back on a pair of recent industry storylines hinting at future declines in demand for institutional care, pointing to positive demographic shifts on the horizon.

Executives at Omega Healthcare Investors (NYSE: OHI) acknowledged the trend toward sending post-acute patients straight into home health during the COVID-19 pandemic, but predicted that patterns would return to normal once the crisis eases.

“You’ve got a lot of folks going into home health who are COVID recovery patients, so as COVID goes away, it’ll just be something that we have to watch to see if there’s continued increase there,” senior vice president of operations Megan Krull said during the real estate investment trust’s (REIT) fourth quarter 2020 earnings call. “I think it’ll likely move back into the SNF industry.”


Krull was responding to an analyst question about the Biden administration’s support for expanding home health options for seniors. Even before the new president took office, data released at the beginning of 2021 showed a persistent shift away from skilled nursing facilities toward the end of last year, with home health referrals from hospitals running at 109% of 2019 capacity — and SNFs at just 83%.

CEO Taylor Pickett framed the coronavirus-related changes to patient flows as merely a natural extension of forces that had existed prior to 2020.

“This is nothing new,” Pickett said. “The trend of moving towards home health as much as possible has been going on for years, and so to the extent the pandemic perhaps accelerated some marginal patients, I don’t think that’s problematic, because it’s a trend that we’ve seen.”


Pickett also pointed to the fact that many current residents of skilled nursing facilities require around-the-clock care that may not be able to shift efficiently into the home.

“In fact, the costs would be meaningfully higher in the home setting. So I appreciate the commentary around it, but I think it’s all on the margin, and we’ve seen it for a long time,” he said. “If it meant 1% of occupancy — and I have no clue what it means — you’re going to get that back very rapidly with demographics that are already here.”

There was some chatter around a recent story out of Ohio, where state officials and lawmakers are mulling a $50 million program that would offer operators $10,000 apiece to give up nursing home bed licenses as more seniors look for in-home options instead.

With an estimated surplus of 11,000 beds in the market, Buckeye State Medicaid officials are hopeful that operators will take them up on the offer, both for the upfront cash injection and the longer-term reimbursement and care benefits that come with lower capacity.

Omega chief financial officer Robert Stephenson framed the $10,000-per-bed price tag as in line with an active market for available nursing home licenses in the state, and emphasized that the Ohio plan takes regional differences in supply and demand into account when targeting beds for elimination.

“Beds in Ohio have traded for many, many years,” he said. “You’ll see beds move around county lines and where there’s demand. So there’s been a market for beds in Ohio.”

Stephenson also raised the specter of officials reducing bed capacity in the short term, only for demand for nursing home services to increase as the baby-boom population continues to age over the coming decades.

“You take beds out of service, it’s very expensive and tough to put them back in service, so I don’t know that we’ll see that as a trend,” he said.

The Hunt Valley, Md.-based Omega touted a 99% rent collection rate for the fourth quarter of 2020 and January 2021 — minus the facilities operated by the troubled Daybreak Venture, which are subject to a previously negotiated forbearance and transition agreement — and the $78.4 million purchase of a six-SNF, one-assisted living facility portfolio in Virginia.

The REIT also made a major expansion play with senior living heavyweight Brookdale (NYSE: BKD), picking up 24 facilities from Healthpeak Properties (NYSE: PEAK) for $510 million last month.

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