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Edited Transcript of GEN earnings conference call or presentation 8-Aug-19 12:30pm GMT

Q2 2019 Genesis Healthcare Inc Earnings Call

FOOTHILL RANCH Aug 14, 2019 (Thomson StreetEvents) -- Edited Transcript of Genesis Healthcare Inc earnings conference call or presentation Thursday, August 8, 2019 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* George V. Hager

Genesis Healthcare, Inc. - CEO & Director

* Lori Mayer

Genesis Healthcare, Inc. - VP of IR, Brand Management & Marketing Communications

* Thomas DiVittorio

Genesis Healthcare, Inc. - CFO, Executive VP, Treasurer & Assistant Secretary

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Conference Call Participants

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* Albert J. William Rice

Crédit Suisse AG, Research Division - Research Analyst

* Chad Christopher Vanacore

Stifel, Nicolaus & Company, Incorporated, Research Division - Senior Analyst

* Frank George Morgan

RBC Capital Markets, LLC, Research Division - MD of Healthcare Services Equity Research

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Presentation

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Lori Mayer, Genesis Healthcare, Inc. - VP of IR, Brand Management & Marketing Communications [1]

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Good morning and thank you for joining us today. We issued our earnings press release earlier this morning. This announcement is available in the Investor Relations section of our website at genesishcc.com. A replay of this call will also be available on our website for 1 year.

Before we begin, I would like to quickly review a few housekeeping matters. First, any forward-looking statements made today are based on management's current expectations, assumptions and beliefs about our business and the environment in which we operate. These statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today's call. Listeners should not place undue reliance on forward-looking statements and are encouraged to review our SEC filings for a more complete discussion of factors that could impact our results. Except as required by federal securities Laws, Genesis Healthcare and its affiliates do not undertake to publicly update or revise any forward-looking statements or changes that arise as a result from new information, future events, changing circumstances or for any other reason.

In addition, any operation we mention today is operated by a separate independent operating subsidiary that has its own management, employees and assets. References to the consolidated company and its assets and activities as well as the use of the terms we, us, our and similar verbiage are not meant to imply that Genesis Healthcare has direct operating assets, employees or revenue or that any of the various operations are operated by the same entity. Our discussion today and the information in our earnings release and in our public filings include references to adjusted EBITDAR, EBITDA, adjusted EBITDA, which are non-GAAP financial measures.

We believe the presentation of non-GAAP financial measures provide useful information to investors regarding our results because these financial measures are useful for trending, analyzing and benchmarking the performance and value of our business, but such non-GAAP financial measures should not be relied upon at the exclusion of GAAP financial measures.

Please refer to the company's reasons for non-GAAP financial disclosures and its GAAP to non-GAAP reconciliations contained in today's earnings release. And with that, I'll turn the call over to George Hager, CEO of Genesis Healthcare.

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George V. Hager, Genesis Healthcare, Inc. - CEO & Director [2]

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Thank you, Lori. Good morning, and thank you for joining us today. I will focus my comments this morning on our continued strong operating performance this quarter as well as progress in our efforts to optimize our portfolio of facilities, increase our real estate ownership and improve our overall capital structure. I will then conclude my comments with an update on our ACO's gain share reconciliation and our view -- our current view of the impact of PDPM. Tom DiVittorio, Genesis' Chief Financial Officer, will then provide more details on the quarterly results and other updates before opening the line for questions.

First, I am pleased to report that we had another strong quarter with continued improvements in same-store occupancy, earnings growth and the execution of our portfolio optimization strategy. This is the third consecutive quarter we have seen favorable trends with respect to many of the key performance indicators that drive our business. In the second quarter of 2019, we saw strong same-store occupancy growth of 80 basis points, same-store adjusted EBITDAR growth of 4.1%, as well as adjusted EBITDAR margin expansion of 80 basis points versus the prior year.

These results continue to reflect a more stable census and reimbursement environment, effective cost management and the continued success of our portfolio optimization activities. Moving on to those portfolio optimization activities, we had another very active quarter.

During the second quarter of 2019, Genesis divested, exited or closed the operations of 9 facilities. Year-to-date, through June 30, 2019, we exited a total of 19 facilities, with approximate annual revenue of $179 million, adjusted EBITDA of 14 point -- of $4.4 million and a pre-tax loss of $5.1 million. These transactions resulted in the reduction of approximately $4.3 million of annual cash lease payments.

Subsequent to June 30, 2019, we've also divested an additional 11 leased facilities and one owned assisted living facility. In aggregate, these 12 facilities generate approximate annual net revenue of $73.5 million, adjusted EBITDA of $2.4 million and a pre-tax net loss of $0.4 million. These divestitures resulted in a reduction of $1.9 million of annual cash lease payments. Over the past 3 years, our portfolio optimization initiatives have been a key ingredient in our strategy to improve the overall financial health of Genesis. Over that period of time, we have successfully and significantly reduced the scale and footprint of facilities operated by Genesis.

Today, we operate 136 fewer facilities than we did at the beginning of 2016. A 25% reduction in beds and a complete exit from the states of Kansas, Missouri, Iowa, Nebraska, Texas and Ohio. These actions and others planned are returning Genesis to its original strategic model of local market density, allowing us to focus our resources in those markets where we have strong acute care and payer relationships, solid demographics, availability of clinical skill and responsible reimbursement systems. This focused approach has, and we expect will continue to result in more consistent clinical, operating and financial outcomes. For the remainder of 2019, we expect to continue to divest, exit or close underperforming facilities or facilities in nonstrategic markets. However, we will also look to deliver transactions that set the stage for greater facility ownership in the future. Increased real estate ownership will lessen the burden of lease escalators, allow us to participate in future real estate appreciation and reduce our overall cost of capital. We are working -- we are currently working on a number of creative transactions that emphasize facility ownership. I am optimistic that we'll be able to announce some of these transactions by year-end. It is our goal to own or obtain fixed-price purchase options on at least 30% of our portfolio by the end by the end of 2020.

Moving on to our accountable care organization. For those of you who are not familiar, the Genesis ACO participated in the Medicare's shared savings program or MSSP in an upside only, gain share track in 2018 and through June 30, 2019. Under this program, CMS provides a retrospective reconciliation of performance on an annual basis. The annual MSSP reconciliation for 2018 is expected later this month. We are cautiously optimistic that we will see positive results. If we do experience a gain share, we will recognize that income in the third quarter of 2019.

Effective July 1, 2019, our ACO entered into a new MSSP risk track. Going forward, the ACO can achieve 75% of the gain share but is also subject to downside risks. With increasing confidence in our performance analytics, we believe we are managing per member per month costs well relative to our new CMS benchmark. We expect today to receive a favorable reconciliation for the 2019 performance period as well. Overall, our ACO is a unique and critically important strategic asset for the company, as we continue to capitalize on the evolution to a value-based healthcare system. We believe that the membership in our ACO can be significantly expanded, not only inside Genesis but also more broadly throughout the SNF industry as we achieve positive patient outcomes as well as positive financial results. Our ability to manage risks with a focus on patient outcomes and costs will be increasingly important in the future.

Last, I will discuss our current views around our new reimbursement system, Patient-Driven Payment Model or PDPM. As you know, CMS is set to implement this new reimbursement system effective October 1, 2019. We have been working diligently to prepare our centers and our rehab business for PDPM. We remain optimistic that the new model is a net positive for Genesis and for our patients.

Let's take a brief look at the estimated impact to our business. On the skilled nursing side, there are 2 areas of financial impact. First, we will -- our revenues will be impacted by any changes to our average Medicare payment rate. And second, the cost of providing service will be impacted by any changes and the cost of operating our rehabilitation therapy function. We currently estimate that PDPM will be flat to slightly positive to our Medicare rate per day. And that is before taking into account the 2.4% market basket update set for October 1, 2019. On the cost side, with respect to the cost of providing therapy in our skilled nursing facilities, while we do not expect there to be any change in the amount or the quality of therapy provided, we do expect that the cost of providing therapy to our patients will drop by about 10% to 12% as more cost-efficient modalities such as group and concurrent therapy will be utilized as clinically appropriate. We expect the same level of therapy cost reduction will also be passed along to our third-party skilled nursing customers in our rehab segment.

Moving on to our rehab segment. We do expect that PDPM will be dilutive to revenue as we pass on those cost efficiencies to our rehab customers. However, we believe that through the utilization of more cost-effective modalities, we will be able to reduce our cost of providing services to match the decline in revenue. We are also aggressively working to revise contracts with our third-party customers, and we have received very positive feedback to date. So in overall -- overall, our conclusion is that PDPM will be a net positive for the company. Tom will provide a little more detail on the impact of PDPM in a few minutes.

Looking forward to the back half of 2019, we are projecting stable operating trends for the business. That should be enhanced by the positive results of our ACO, the expected positive impact of PDPM as well as continued portfolio optimization transactions that will improve our capital structure and reduce our overall cost of capital. As always, I would like to thank our leadership team and the tens of thousands of caregivers, nurses, CNAs and therapists across the country that are providing incredibly compassionate care to the frailest of our elders.

With that, I'd like to turn the call over to Tom DiVittorio. Tom?

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Thomas DiVittorio, Genesis Healthcare, Inc. - CFO, Executive VP, Treasurer & Assistant Secretary [3]

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Thanks, George. Good morning, everyone. I will start with the operating results and trends for the quarter and then touch again on PDPM before we take questions.

Starting with the top line. Revenue in 2Q '19 of $1.15 billion declined $127.3 million or 10% from 2Q '18. Of this $127 million decline in revenue, $116 million is attributed to the impact of divestitures, net of acquisitions and $26 million is attributed to lower revenue in our rehab services segment, following the cancellation of low-margin therapy contracts. These revenue declines were offset by approximately $15 million or 160 basis points of same-store revenue growth in our inpatient Services segment. The third consecutive quarter of such growth and the greatest level of growth over the 3-quarter period. Adjusted EBITDAR of $156 million in 2Q '19 decreased $7.3 million or 4.5% from 2Q '18, $13.5 million of this decline in adjusted EBITDAR is from the impact of divestitures net of acquisitions, implying same-store adjusted EBITDAR growth of $6.2 million or 4.1%. This is the fourth consecutive quarter of same-store adjusted EBITDAR growth. This growth was driven by our inpatient segment, offset by modest earnings contraction in our ancillary businesses, principally related to the exit of low-margin third-party contracts and the ongoing divestiture of Genesis facilities.

With respect to earnings margins, our leaner cost structure, improved labor efficiency and successful divestiture strategy expanded EBITDAR margins 80 basis points in 2Q '19 to 13.6%. Adjusted EBITDAR less total cash lease payments equaled $50.1 million. This measure exceeded consensus estimates by approximately $8 million. With respect to patient mix and occupancy, skilled days mix in 2Q '19 of 18.2% declined 70 basis points from the prior year quarter. Of the 70 basis point decline in skilled mix, approximately 30 basis points is due to growth in our long-term care census, with the remainder due to lower skilled patient admissions. Regarding skilled patient admissions during the quarter of -- second quarter of 2019, we experienced a 2.3% decline in skilled patient admissions as compared to the second quarter of 2018. This is the lowest rate of year-over-year decline since the first quarter of 2017 and compares to an average skilled patient admission decline of 4.3% over the prior 4 quarters. The average length of stay of Medicare and Medicare Advantage skilled patients discharged to home remains flat for the sixth consecutive quarter.

Operating occupancy in 2Q '19 of 86.6% increased 250 basis points from the prior year quarter. We estimate that 80 basis points of this increase represents same-store occupancy growth and the remainder represents the impact of divesting properties having below-average occupancy. On the topic of wage inflation versus reimbursement rate growth. 2Q '19 wage inflation for nonovertime hours worked by our employed nursing staff grew 2.9% over 2Q '18. Including overtime hours and agency costs, our all-in nursing wage cost per worked hour grew 3.8% in 2Q '19 over 2Q '18. This is a 50 basis point increase in the all-in nursing wage inflation as compared to what was reported last quarter. This rate of wage inflation is specific to our nursing function, where today, we see the greatest wage pressure. The nursing function represents about 50% of our workforce. Wage inflation in the other half of our labor force approximated 2%. So in the aggregate, Genesis' wage inflation rate in 2Q '19 was about 2.9%. By comparison, the weighted average reimbursement rate growth we received from our payers over the same period was about 3% or 10 basis points higher than wage inflation.

This is the third consecutive quarter where reimbursement rate growth outpaced wage inflation. Staying with the topic of reimbursement rates, as we look ahead over the next 6 to 12 months the 2.4% net Medicare market basket increase set for October 1, along with deposit -- with a positive Medicaid outlook in many of our states should support weighted average reimbursement rate growth for Genesis of between 2% and 3%. To summarize our operating performance and trends this quarter, we remain very pleased with the steady performance of both our inpatient and rehab segments, and we remain very encouraged by the improving business landscape that we continue to see. A landscape that shows inpatient occupancy and revenue growth, flat lengths of stay and reimbursement rate growth that approximates wage inflation.

Before we move to Q&A, I would like to add to George's comments on PDPM. We continue to make excellent progress in our evaluation, planning and readiness for the October 1 transition. Our education, training and communication activities have been in full swing for months and will continue up to and beyond October 1. With less than 2 months ago, there is still much work to do, but we are on track with all of our project plans. We are very fortunate to have tremendous depth among our in-house clinical, operations, finance, regulatory and systems professionals. They have positioned us to be as ready as any provider in the country. Clinically speaking, PDPM will in no way impact the types of patients Genesis admits or the care that is provided to them. Where clinically appropriate, some Medicare Part A patients may benefit from participating in group and/or concurrent therapy sessions similar to the treatment protocols for our managed Medicare Advantage plan patients and commercial insurance patients. As George mentioned, financially speaking, we continue to see PDPM as flat to a slight positive to our SNF average Medicare payment rate, even before taking into account the 2.4% market basket update. We also believe we will be able to offset dollar-for-dollar any lost revenue related to amended contract terms with our third-party rehab customers. So for Genesis, the most significant financial impact from PDPM comes from the 10% to 12% reduction we anticipate in the cost of providing therapy services to the patients in our captive skilled nursing facilities. This 10% to 12% cost reduction, which, again, is driven by the use of more cost-efficient modalities, equates to approximately $30 million of reduced operating costs annually. As we think about the near-term impact of transitioning from RUGS to PDPM, it is reasonable to expect some learning curve and implementation bumps over the first quarter or so. But at this time, we do not expect any material, near-term, adverse financial impact caused by the PDPM transition. Net-net, we continue to see PDPM as good for our patients and accretive to Genesis.

With that, Myra, we're ready for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our question comes from the line of A.J. Rice from Crédit Suisse.

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Albert J. William Rice, Crédit Suisse AG, Research Division - Research Analyst [2]

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First of all, just maybe to pick up on Tom's comments there. So you're thinking, as you transition to PDPM, you -- it'll really take about a quarter to make that switch for your least captive facilities. And I mean, do you sense that -- I'm sure there's an aspect of it that CMS has to have systems ready to go and everything like that. Do you feel like all of that's on track? And then, you said you're looking at contracts for your third-party customers. How -- is that also probably a quarter or 2 of transition? Or how long do you think that will be before you transition that book?

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Thomas DiVittorio, Genesis Healthcare, Inc. - CFO, Executive VP, Treasurer & Assistant Secretary [3]

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A.J., this is Tom. So I'll take the first part of the question. I think George will cover the rehab question. As far as -- we'll be very ready, as ready as we can be October 1. We fully expect that CMS on the system side will be ready. We'll be ready from a technology point of view. But this is such a monumental change. This is a 20-year change in how you code and score your patients ultimately for clinical documentation and for billing. So it's a big switch. And there is a learning curve there. So it's tough to say. I think the analysis that we've done, where we're talking about flat to slightly up on the rate and the annual impact to our ability to reduce costs in the -- from providing therapy services in our own facilities. That's certainly, sort of, a run rate basis. It's tough to tell, will it take a quarter or a 1.5 quarters for us to really get our momentum there, and how much friction we'll see. But the upside opportunity here is so big that we just don't see any real situation where it has a negative effect even in the transition period. I just think we'll work up toward that run rate level of opportunity that we described.

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George V. Hager, Genesis Healthcare, Inc. - CEO & Director [4]

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A.J., I'll address the rehab side. We've been working with our third-party rehab customers for the same length of time that we've been dealing with the transition and planning for our own internal facilities. I think it's one of the advantages we have as a contract therapy provider, is we have the benefit of all the learnings from our brethren on the skilled nursing side, which is a great advantage to our rehab customers. But we think we're going to come out of the gate running. I don't think we'll necessarily have all the costs out effective 10/1. We've already started streamlining the cost structure. We already started educating and training our therapy staff, especially on the appropriate clinical aspects of utilizing more cost-efficient modalities.

We also have the benefit, A.J., on 2 other fronts. When we went into the bundled payment program for those 2 or 3 years, there was tremendous learning and we used these same techniques much more aggressively in those bundled payment facilities. And the great outcome from that was we did effective research. And we found that the use of group concurrent therapy was actually equal, if not more efficacious to the outcome of the patient than providing one-on-one therapy. So our therapists have good experience that we will actually spread throughout our entire portfolio from our participation of bundled payment. And as Tom said in his comments, we also have been using these techniques in providing services to our Medicare Advantage and commercial insurance patients for some time. So we do -- that will also ease in the disruption of any transition to the service model from the therapy perspective. So those cost reductions that Tom mentioned are real, and they will happen very quickly. Many of them are already in progress.

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Operator [5]

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Your next question comes from the line of Chad Vanacore from Stifel.

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Chad Christopher Vanacore, Stifel, Nicolaus & Company, Incorporated, Research Division - Senior Analyst [6]

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Tom and George, you had said on PDPM, you expect net improvement. But alluded to cost mitigations on the rehab therapy side, are those primarily labor? Or are there other major savings there that we should consider?

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George V. Hager, Genesis Healthcare, Inc. - CEO & Director [7]

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It's primarily labor, Chad. I mean, when you look at the labor in our rehab business, we have over 200 FTEs that are agency therapists that we're paying premiums for. And -- so obviously, you have opportunities to reduce your cost structure, but it's virtually all labor. Once again, if you're providing therapy in group concurrent sessions, where clinically appropriate, an individual therapist can obviously touch and treat more patients at the same time, therefore, requiring a reduction in the number of therapy hours required to operate the gym versus current modes of operation.

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Chad Christopher Vanacore, Stifel, Nicolaus & Company, Incorporated, Research Division - Senior Analyst [8]

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Got it. And then just thinking about your exiting Ohio, can you give us some more details about how you view the marketplace there and why the exit?

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George V. Hager, Genesis Healthcare, Inc. - CEO & Director [9]

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Chad, Ohio for us, all those assets were acquired in the Sun transaction in 2011. And quite frankly, the quality of the asset that we inherited was below average. And as we looked at the marketplace, we did not have any real density in any of the major markets in Ohio, Cleveland, Dayton, you can pick your cities. But no real density. And as we looked at the market, even though the reimbursement system is okay in Ohio, it was just not a market that we thought with limited amounts of capital to invest that we wanted to go after and expand and really grow our density, or really put a flag in the ground in one or several of the major markets. It's a pretty crowded state. There are a lot of strong operators in Ohio. And we thought it was -- we were best to exit, recycle our capital and reduce our leverage.

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Chad Christopher Vanacore, Stifel, Nicolaus & Company, Incorporated, Research Division - Senior Analyst [10]

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All right. And then just thinking about the new JV that you have with Next Healthcare. Can you just update there? How is performance going?

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George V. Hager, Genesis Healthcare, Inc. - CEO & Director [11]

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So that JV is working great for us, obviously. We are taking advantage of reduced lease rates and ultimately, looking forward to when we can exercise the purchase option on those facilities. And that is -- we have actually 2 Next partnerships. I believe those purchase options are exercisable in 2022 and 2023. And upon exercise of those purchase options, we will achieve significant reductions in the cost of capital operating those facilities. So we are very, very optimistic about our ability to replicate that type of transaction as a means by which we can reacquire significant amounts of our real estate. And you heard our goal -- our goal for 2020 is to own at least or have a purchase, a fixed price purchase option on at least 30% of our beds.

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Chad Christopher Vanacore, Stifel, Nicolaus & Company, Incorporated, Research Division - Senior Analyst [12]

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Okay. With that, when you say you can replicate the transaction, are you talking about with Next or with other owners?

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George V. Hager, Genesis Healthcare, Inc. - CEO & Director [13]

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With Next and/or other owners. The model is replicable. I mean Next provided the equity capital that we partnered with. But I think that, as we've looked at the market, there is significant demand for the ownership of real estate. So I think sourcing equity capital tied to real estate transactions has been not problematic. There is still a good deal of capital and demand related to the ownership of real estate.

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Chad Christopher Vanacore, Stifel, Nicolaus & Company, Incorporated, Research Division - Senior Analyst [14]

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All right. One more for me just on the cash flows. It looks like you had $162 million use of cash for investing. Your cash balance is down $45 million and debt looks like it's up $60 million or so. So can you help me out with what's going on there?

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Thomas DiVittorio, Genesis Healthcare, Inc. - CFO, Executive VP, Treasurer & Assistant Secretary [15]

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Chad, I'll have to go back and take a look at the specifics there. It -- off the top of head, I don't have an answer for you. So I will follow up with you.

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George V. Hager, Genesis Healthcare, Inc. - CEO & Director [16]

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Tom, I think maybe the increase in debt is a function of a credit from the consolidation of the Next JV. So we're actually consolidating the debt of that partnership, Chad.

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Thomas DiVittorio, Genesis Healthcare, Inc. - CFO, Executive VP, Treasurer & Assistant Secretary [17]

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That was in last quarter's balance sheet. So -- but Chad, you're focused on the cash flow statement and cash outflows in the investing section, right?

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Chad Christopher Vanacore, Stifel, Nicolaus & Company, Incorporated, Research Division - Senior Analyst [18]

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That's right.

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Thomas DiVittorio, Genesis Healthcare, Inc. - CFO, Executive VP, Treasurer & Assistant Secretary [19]

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Okay. Yes, I'll follow up with you and get you the details on that.

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Operator [20]

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Our last question comes from the line of Frank Morgan from RBC Capital Markets.

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Frank George Morgan, RBC Capital Markets, LLC, Research Division - MD of Healthcare Services Equity Research [21]

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First, a clarification. Is the 30% ownership number that you're talking about, is that incremental? Or is that -- would that be the total once you do exercise that?

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George V. Hager, Genesis Healthcare, Inc. - CEO & Director [22]

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That would be the total, Frank. We're -- probably with the transactions that we've announced to date, somewhere in the 20% range.

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Frank George Morgan, RBC Capital Markets, LLC, Research Division - MD of Healthcare Services Equity Research [23]

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Got you. And I'm just curious, the occupancy improvement you've seen. I mean, clearly, that looks like a lot of that's coming in the nonskilled part of the business. But beyond that, are there any geographic regions where you're seeing this? Or would you characterize it as broad-based? Just any color there on what's -- where you're seeing that.

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Thomas DiVittorio, Genesis Healthcare, Inc. - CFO, Executive VP, Treasurer & Assistant Secretary [24]

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Frank, I would say that it's relatively widespread. Some markets may be a little bit stronger than others with -- some of our western markets showing some good occupancy growth this period. And maybe our New England states, some of our markets in our New England states maybe being on the other end of that scale. But overall, it's fairly widespread.

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Frank George Morgan, RBC Capital Markets, LLC, Research Division - MD of Healthcare Services Equity Research [25]

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And I'm just curious because it seems like in the last few quarters, just a phenomenon of more Medicaid has started to happen. Is that conscious, a conscious strategic decision? Or is it just a function of -- that's the part of the market that's growing the most? Or like, it just seems like it sort of happened to all of a -- in the last couple of quarters. So any color about that?

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George V. Hager, Genesis Healthcare, Inc. - CEO & Director [26]

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Yes. Frank, it's absolutely intended and conscious. Yes. We -- if you look at the continued pressure in the industry around admission volumes as well as some length of stay pressure, even though that's somewhat moderate. Our view was that, that incremental bed, even if it's a long-term care patient-funded by a state Medicaid program, the incremental margin on that patient is still very, very substantive. So we have approached a different philosophy than what this industry employed for the last couple of decades. And that is to develop clinical specialties, grow clinical specialties that are focused on the long-term care patient. Those specialties that are focused on patients with chronic illness, chronic disease, especially diseases like dementia, Alzheimer's, where you're principally looking to care for a long-term care patient. So absolutely intentional, and we will look to continue to grow total occupancy. And once again, that incremental patient, from a financial perspective, the incremental margin is very, very significant.

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Frank George Morgan, RBC Capital Markets, LLC, Research Division - MD of Healthcare Services Equity Research [27]

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Got you. My last one. As you think about all the changes from PDPM on your contract business, does this change your strategy in any way of maybe trying to accelerate or grow your Part B business?

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George V. Hager, Genesis Healthcare, Inc. - CEO & Director [28]

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That's a good question, Frank. I mean I'd like to think that one of the benefits of having the industry-leading contract therapy company as a captive subsidiary in Genesis, is that I think we've had an ability to staff our gyms adequately for both ourselves and our third-party customers. And we have tried to -- to make sure that those gyms have adequate resources so that those patients, those long-term care patients that can benefit by therapy services that are funded under the part B program are delivered as clinically appropriate to that patient population. So I don't -- I've heard comments, as you have around possibly opportunities to increase Part B therapy. It's not something that we are really, really focused on. We're focused on with our customers, both internal and external, trying to operate to gym as efficiently and as effectively as we can but ultimately with a focus on outcomes. We need patients achieving the same level of improvement in our Modified Barthel Index Score or MBI scores that will allow us to discharge patients more quickly without risk of readmission.

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Operator [29]

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As there are no questions at this time. You may continue.

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George V. Hager, Genesis Healthcare, Inc. - CEO & Director [30]

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Appreciate everyone's continued interest in Genesis. And Tom and I and the team are very optimistic as we look forward into the back end of 2019. I think we've all been looking for the bottom. I think our 3 consecutive quarters of growth tell us that we hopefully have bounced off the bottom here and looking for a lot of our strategic investments around ACO -- around the ACO, our physician service practice, GRS as well as the impact of PDPM to be -- provide a little tailwind to the business going forward into the back end of '19 and into 2020.

We'll be available for any questions throughout the day. Thank you again.

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Operator [31]

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Thank you again for joining us today. This concludes today's conference call, and you may now disconnect. Have a great day, everyone.