More than half of Diversicare Healthcare Services (OTC: DVCR) facilities are seeing spikes in COVID-19 cases, which CEO Jay McKnight attributed to the delta variant during the company’s second quarter earnings call.
The Brentwood, Tenn.-based nursing home operator had “virtually no” cases as of its first financial quarter earnings call in May, McKnight said.
“We do not have a methodology to test for the delta variant, but given the information widely available in our markets, we feel safe in assuming our increases are due to the delta variant,” McKnight added during the call. “At this point, anecdotally, it appears that the severity of these cases has lessened, meaning that our vaccinated patients, residents and team members who were COVID positive so far are not getting as sick.”
McKnight said he’d like to see higher vaccination rates for staff and residents, adding that the company’s stats are in line with geographic industry averages. About 76.85% of nursing home residents in Tennessee are vaccinated while staff member vaccination lags behind at 48.63%, according to data updated by the U.S. Centers for Medicare & Medicaid Services (CMS) on Aug. 5.
Diversicare hasn’t mandated the vaccine for its 61 facilities, but continues to advocate for vaccinations in its communities and organize vaccination clinics for residents and team members, McKnight said. The SNF operator has facilities in nine states.
McKnight said Diversicare sees “some of the highest professional liability cost per bed in the country,” but the operator can’t predict future liability costs due to the pandemic.
Stimulus Funds, COVID Expenses and Occupancy
Diversicare has $10.5 million left in deferred stimulus funds, which McKnight expects to use during the remainder of the year and into the first half of 2022. To date, Diversicare has received $51.6 million in Provider Relief Funds (PRF), Diversicare CFO Kerry Massey said during the earnings call.
“A portion of our federal stimulus had to be used by as early as June 30 of this year, all of which was utilized. Without additional stimulus grants, the second half of our year could be financially challenging,” McKnight noted.
Diversicare used about $8.5 million in federal stimulus money and $100,000 in state grants as “other income” during the quarter, along with $5.8 million in state Medicaid rate add-ons. A significant portion went toward COVID-related staffing, including hero bonuses, special pay, overtime and agency fees.
About $6.4 million in COVID expenses were incurred during the second quarter ending June 30, McKnight said. Diversicare is working with state and national organizations to push for additional stimulus dollars and existing grants.
Diversicare reported a $10.8 million drop in patient revenues year-over-year due to a 5% decrease in occupancy, compared to the second quarter of 2020. This resulted in fewer Medicaid, private Medicare and hospice patients, McKnight said.
Operational revenue was $111.3 million for the second quarter, down $7 million from the prior year’s period, Massey added, referring back to the pandemic’s negative impact on Diversicare’s average daily census. Approximately $1.8 million in favorable Medicaid rate variances helped to mitigate losses.
Net income from continuing operations was $2.9 million, or 43 cents-per-share in the second quarter, up from $1.8 million or 28 cents-per-share in Q2 2020.
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