ProMedica Senior Care is on a better path more than a year after Welltower (NYSE: WELL) bolstered its joint venture with the senior housing and care operator — but agency labor remains a challenge.
The Toledo, Ohio-based health system this year has reported significant losses in its senior care division — which includes skilled nursing assets — thanks to COVID-related declines in admission volumes, elevated costs and lower than expected stimulus funds from the federal government.
Still, Welltower CEO Shankh Mitra said the company had “significantly narrowed their operating losses” in the second quarter of 2022, and that it has nearly halved use of agency labor.
“The improvement that they’ve seen has happened really in the last four or five months,” Mitra said Wednesday during the company’s second-quarter earnings calls with investors and analysts. “They have significantly narrowed their losses as occupancy has gone up and agency labor has come down.”
Looking forward, he 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, Mitra 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.”
Net operating income (NOI) for Welltower’s same-store post-acute care portfolio grew 2.8% in the second quarter of 2022. Looking ahead to 3Q22, the Toledo, Ohio-based real estate investment trust (REIT) expects NOI growth for the portfolio of approximately 2.5% to 3.5%.
While post-acute care once made up as much as 20% of the company’s annual NOI between 2015 and 2020, today it’s a far smaller part of the company’s strategy. As of the second quarter of this year, the REIT had just 93 properties in its post-acute/long-term care portfolio.
That trend continued in the second quarter of this year as the company shed two more properties previously leased to Genesis HealthCare, which along with the sale of a senior housing operating property generated proceeds of about $21 million.
Now that the company is substantially exiting its operating relationship with Genesis, its exposure to post-acute care is “immaterial,” according to the REIT’s 2Q22 investor presentation.
Mitra also detailed some of the unexpected stress the company has felt in its long-term care portfolio over the years, noting that there was “no way for us to predict a global pandemic, or a day when almost every hospital system in the country will lose money” when it brought HCR ManorCare out of bankruptcy by acquiring it with ProMedica in 2018.
Welltower’s stock price grew 0.79%, ending the day at $83.31.
Written by Tim Regan
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