ProMedica Reports $105M in Senior Care Division Operating Losses for Q2

ProMedica reported a $105 million operating loss in its senior care division for the second financial quarter of 2022, a deep cut compared to a $56.3 million operating loss during the same quarter last year.

That’s coupled with the Toledo, Ohio company’s major leadership changes and 150 nonclinical employee layoffs within the last couple of months. It is not immediately clear how many of these employees fall under ProMedica’s senior care division.

The eliminated positions represent less than one half a percent of the workforce and are primarily related to pilots programs and pioneering processes outside of its core business, as well as corporate services, according to Tausha Moore, ProMedica’s director of public relations.

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“The COVID-19 pandemic has caused hospitals and health systems across the nation to experience billions of dollars in losses. ProMedica has been no exception, as we have been working to manage staffing shortages and rising expenses,” Moore said in an email.

Still, ProMedica Senior Care President Angela Brandt told Skilled Nursing News in a May interview that she was seeing incremental improvement on the hiring side as the company continues to create new, less “contentious” staffing agency relationships.

Outsourcing administrative duties and ridding itself of traditionally structured eight to 12 hour shifts are some of the ways ProMedica has improved staff recruiting and retention, Brandt said.

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The company is evaluating different ways to operate more effectively and efficiently, Moore said, and seeks to strengthen ProMedica’s financial position while building stability and sustainability. She said ProMedica doesn’t have an update on layoffs or future restructuring efforts beyond what was included in the quarterly report.

ProMedica disclosed unaudited results of operations and its financial position in a quarterly report ending June 30.

Total operating loss was $155 million for the second quarter; the company saw a $8.7 million total operating loss in Q2 2021. For the first six months of 2022, ProMedica experienced a $281 million operating loss.

Leadership shakeup

Moving ahead this year, ProMedica welcomed Louis Robichaux as its interim CFO who replacedSteve Cavanaugh. Robichaux has more than 30 years of experience in the health care sector, previously serving as senior managing director at Washington, D.C.-based consulting firm Ankura.

Arturo Polizzi took on the role of president as well, while continuing as ProMedica’s COO.

The company has reportedly replaced two other executive positions – Debi Brobst replaces Murry Mercier as interim chief information officer, and Justin Skiver replaces Matt Kang as chief financial strategy officer for the senior care division — although the positions weren’t mentioned in the quarterly report.

ProMedica Chief Philanthropy Officer Gary Cates will have added responsibilities as part of the leadership update, overseeing government relations, social determinants of health and community relations.

The not-for-profit health care organization serves communities in 28 states and employs more than 44,000 people, according to the report. ProMedica business lines consist of its senior care division with 332 facilities, its health plan Paramount and physician group made up of 11 hospitals and one joint venture hospital.

Broken down further, ProMedica’s senior care division has 158 SNFs, 57 assisted living facilities and 117 hospice and home health locations. The company acquired HCR ManorCare in 2018, rebranding the network of long-term care facilities to become ProMedica Senior Care.

Compounded losses

The company pointed to ongoing SNF divestitures since last year as the primary reason for senior care division revenue decline during the quarter. ProMedica reported $662 million in net patient service revenue for its senior care division – the sector experienced a decrease of $15.7 million, or 2.3% compared to 2Q 2021.

Still, Welltower CEO Shankh Mitra said in a recent earnings call that ProMedica has “significantly narrowed their operating losses” during the quarter, nearly halving its use of agency labor.

Looking forward, Mitra was upbeat on the portfolio, as its low cost basis is helping the company keep rents for residents below market-rate. ProMedica on average charges about $7,000 per bed, which is almost one-third of what its competitors are charging, he noted.

“We’re not losing our sleep over that income, or that return from that portfolio,” he added. “That’s all I’m going to say.”

As part of its current master lease and joint venture agreements with Welltower (NYSE: WELL), the companies agreed to divest a portfolio of SNFs currently owned by Welltower and leased to ProMedica in 2021, according to the report.

The divestiture transaction is not fully completed; there are four facilities remaining held for sale as of June 30. ProMedica acquired two assisted living facilities and nine SNFs last year as well, which are included in the master lease and joint venture agreements with Welltower.

Meanwhile, senior care expenses increased by $32.6 million, or 4.4% compared to 2021. Agency costs related to the workforce shortage was to blame for the surge in expenses, according to the report.

“The Senior Care division recorded $3.4 million of CARES Act and other government stimulus funding as other revenue during the second quarter of 2022, which was insufficient to cover incurred COVID-related costs of $23.4 million,” ProMedica said in the report. “The Senior Care division recognized stimulus revenue of $2.6 million in the prior year second quarter.”

The senior care division made up 46% of total revenue for the quarter, with providers making up 37% and Paramount 17%.

Coupled with SNF sales, ProMedica is still reeling from Paramount membership changes as well; a steep $404.9 million drop in membership revenues and medical expense decrease of $321.3 million is primarily due to the sale of its Paramount Advantage Medicaid business during the first quarter, according to the report.

The major Medicaid contract was worth $50 million and resulted in 200 employee layoffs during the first quarter.

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