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Edited Transcript of GEN earnings conference call or presentation 17-Mar-20 12:30pm GMT

Q4 2019 Genesis Healthcare Inc Earnings Call

FOOTHILL RANCH Mar 31, 2020 (Thomson StreetEvents) -- Edited Transcript of Genesis Healthcare Inc earnings conference call or presentation Tuesday, March 17, 2020 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

* JoAnne Susan Reifsnyder

Genesis Healthcare, Inc. - Executive VP of Clinical Operations & Chief Nursing Officer

* Lori Mayer

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

* Richard A. Feifer

Genesis Healthcare, Inc. - Senior VP of Genesis HealthCare & Chief Medical Officer of Genesis Physician Services

* 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, Research Division - MD of Healthcare Services Equity Research & Analyst

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Presentation

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Operator [1]

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Good morning. My name is Marcus, and I will be your conference operator today. At this time, I'd like to welcome everyone to the quarterly earnings conference call. (Operator Instructions) Thank you. Ms. Mayer, you may begin your conference.

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Lori Mayer, Genesis Healthcare, Inc. - VP of IR, Brand Management & Marketing Communications [2]

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Good morning, and thank you for joining us today. We issued our earnings press release yesterday. The announcement will be available on 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 differ materially 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 law, 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, 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 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 provides 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. As 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 [3]

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Thank you, Lori. Good morning, and thank you for joining us today. There's a number of members of the Genesis senior management team on the call today, including Dr. Richard Feifer, Genesis Healthcare's Chief Medical Officer; and Dr. JoAnne Reifsnyder, Genesis' Chief Nursing Officer as well as Tom DiVittorio, our Chief Financial Officer.

Before I start today's earnings call, I would like to turn the call over to Dr. Feifer, who will share the latest on the precautions we are taking to prevent and prepare our centers for the coronavirus. Dr. Feifer.

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Richard A. Feifer, Genesis Healthcare, Inc. - Senior VP of Genesis HealthCare & Chief Medical Officer of Genesis Physician Services [4]

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Thank you, George, and good morning. With the United States experiencing person-to-person and community spread in many areas around our country, we wanted to share with you the preparations and precautions we're taking within Genesis to reduce the likelihood of the virus spreading to our facilities.

It goes without saying that the safety and well-being of our patients and residents is our highest priority. Since the outbreak began in China, I have been meeting regularly with Dr. JoAnne Reifsnyder, along with our senior management and clinical leadership teams, to address current concerns about an outbreak of the coronavirus, COVID-19, in the United States and the possibility of the virus impacting our centers. Genesis executives and subject matter experts have been in regular direct consultation and collaboration with the CDC, the American Health Care Association and local public health officials. Our executive leadership team meets daily reviewing activities, updating plans, synthesizing federal and local guidance and publishing guidance to center leaders.

We are currently conducting company-wide leader calls twice weekly or more as needed to provide updates, reinforce calls to action, provide specific guidance and answer questions. Some of the specific actions we have taken are as follows: we have established internal e-mail hotlines, which are monitored in real-time to answer questions and to escalate or immediately resolve concerns. We have educated our employees on COVID-19 and our revised travel and sick policies. As our coronavirus epidemic continues to spread throughout the country, all of our affiliated centers will be restricting visitation to exceptional circumstances such as end-of-life situations. Arrangements are well underway to provide each center with mechanisms to facilitate resident-to-family member video conferencing capabilities.

We realize that these measures will be challenging to our patients, residents and families and are doing everything we can to support them through this very difficult crisis.

Upon entry to each facility, we've enhanced employee and patient screenings and precautions and all are now routed to a single well-marked entrance with appropriate self-monitoring.

Finally, all centers are receiving enough hand sanitizer dispensers and products to have one dispenser in each patient room.

With all that said, at this time, we have a single confirmed case of COVID-19 in 1 of our 387 centers. Rest assured, we are working diligently to minimize any potential spread, but we are also preparing should any more of our facilities experience the coronavirus.

I'd be happy to answer your questions at the end of today's call, and I'd like to now turn the call back to George.

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George V. Hager, Genesis Healthcare, Inc. - CEO & Director [5]

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Thank you, Dr. Feifer. Genesis is truly fortunate to have Dr. Feifer and Dr. Reifsnyder leading our clinical operations, focused on protecting our patients, our residents and our caregivers at the bedside, during this time of unprecedented risk and exposure. Even though the coronavirus pandemic is our highest priority and is currently consuming significant resources required to effectively manage the impending risk, I would like to spend a few minutes reflecting on our achievement in 2019.

Over the last year, we have made significant headway with many of our strategic initiatives while the post-acute industry as a whole continues to improve. During the year, we saw our fifth consecutive quarter of occupancy growth. The reimbursement rate environment continues to improve. We successfully transitioned to PDPM. And we have effectively managed costs while improving outcomes. At the same time, we have remained focused on our strategic objectives to shed noncore assets while increasing facility ownership and paying down debt.

2019 turned out to be a year of continued repositioning of -- for Genesis. And I'm happy to report that the strategic changes we have made continued to generate positive results. Specifically, our EBITDAR margins grew 80 basis points in Q4 2019 as compared to the same quarter in the prior year.

Occupancy grew for the fifth consecutive quarter, with same-store growth of 30 basis points in the fourth quarter of 2019 as compared to the same quarter in the prior year.

We divested, exited or closed 44 noncore assets over the course of the year and exited the operations of an additional 5 facilities thus far in 2020.

We paid down approximately $140 million of debt.

We completed 2 creative partnerships to set the stage for future real estate ownership of 34 facilities, and we're on track to own or have the right to own 35% of our real estate by the end of 2020.

And we recognized $9 million of net income through our LTC ACO's participation in the Medicare Shared Savings Program.

In addition to facility divestitures, we have been pursuing creative joint venture structures designed to combine strong local operating experience with our industry-leading national platform that provides the benefits of scale, infrastructure and innovative clinical programs.

In that vein and as previously announced, effective February 1, 2020, Genesis sold the real estate and leasehold interest of 19 facilities located in California, Washington and Nevada into a newly formed joint venture. New Gen Health, LLC will operate these facilities under a long-term management agreement, and we will retain a 50% interest in the facilities. This model, although recently formed, is showing early success, both operationally and financially.

Lastly, I would like to discuss our continued participation in the Medicare Shared Savings Program, MSSP through our LTC ACO. This ACO focuses on improving the quality of care for our long-term residents and generating health care efficiencies already being demanded by the health care market. It presents a truly unique opportunity for Genesis and non-Genesis facilities to participate in the evolution of a value-based reimbursement system, a system that promotes patient outcome and cost efficiency, not volume.

In December 2019, we announced that our LTC ACO welcomed nearly 200 new unaffiliated long-term care facilities. Moreover, through this initiative, LTC ACO has contracted with more than 75 primary care providers serving residents of these facilities. The LTC ACO is designed to pass along no downside risk to the facilities or the participating primary care providers and requires no capital outlay in order to participate. LTC ACO expects to attribute approximately 3,000 additional lives by the end of 2020 associated with these new facilities and primary care providers. LTC ACO presents unique and meaningful opportunity for growth in the future.

In conclusion, despite facing near-term challenges regarding the coronavirus pandemic, the outlook for 2020 continues to improve. I remain hopeful and optimistic that Genesis will achieve improved patient outcomes as well as improved operational and financial results.

With that, I will now turn the call over to Tom DiVittorio.

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Thomas DiVittorio, Genesis Healthcare, Inc. - CFO, Executive VP, Treasurer & Assistant Secretary [6]

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Thank you, George. Good morning, everyone. My comments today will focus on fourth quarter operating results and trends as well as PDPM.

Starting with the top line. Revenue in 4Q '19 of $1.14 billion declined $51 million from 4Q '18. Of this $51 million decline in revenue, $19 million is attributed to the impact of divestitures net of acquisitions and $14 million is principally attributed to lower revenue in our Rehab Services segment, driven by planned third-party contract pricing adjustments in connection with PDPM.

These revenue declines were offset by $53 million or 4.8% of same-store revenue growth, principally in our inpatient services segment. This marks the fifth consecutive quarter of organic same-store revenue growth in our inpatient business and is the highest level of growth over the 5-quarter period. This growth was led by favorable reimbursement rates across all payers, which I will drill further into later in the discussion.

Adjusted EBITDAR of $146.9 million in 4Q '19, increased $2.8 million from 4Q '18. This growth occurred despite $6.7 million of lost earnings from divestitures net of acquisitions. After taking this into account, same-store adjusted EBITDAR in 4Q '19 grew $9.5 million or 6.9% over the prior year quarter.

With respect to patient mix and occupancy, skilled days mix in 4Q '19 of 17.9% declined 20 basis points from the prior year quarter, marking the lowest rate of year-over-year skilled mix decline since 2015.

Operating occupancy in 4Q '19 of 87.8% increased 220 basis points from the prior year quarter. 30 basis points of this increase represents same-store growth and the remainder represents the impact of divesting properties having below-average occupancy. This is the fifth consecutive quarter of same-store occupancy growth, and we continue to see year-over-year growth thus far in 2020.

Now to reimbursement rates. Same-store weighted average reimbursement rate growth was strong in 4Q '19 at 4.3%, fueled by higher average Medicare payment rates under PDPM and by the recognition of a new provider tax program in the state of New Mexico that was implemented retroactive to July 1, 2019. Because the New Mexico provider tax program was implemented retroactive to our third quarter, and as noted on this call last quarter, $5 million of net Medicaid reimbursement recorded in 4Q '19 relates to 3Q '19. Adjusting for this out-of-quarter income, our same-store weighted average reimbursement rate growth in 4Q '19 was 3.7% over 4Q '18.

Looking ahead, we expect our 2020 year-over-year reimbursement rate growth to be between 3% and 3.5%.

Further drilling into PDPM. Our transition last October went very smoothly, thanks to the hard work, dedication and skill of our exceptional clinical, operations, finance, regulatory and systems professionals. We have operated 5 full months under the new system. Over that period of time and after adjusting out the 2.4% market basket increase, our average Medicare rate per patient day has consistently run about 5% higher than our average payment rate under the prior RUG system.

On the rehab side of PDPM, we successfully met our goal to offset dollar for dollar the impact of third-party contract pricing changes by adjusting our labor model and better leveraging more cost-effective modes of delivery, such as group and concurrent therapy. These actions also serve to reduce the cost of delivering therapy services in our own Genesis skilled nursing facilities by $6 million in 4Q '19 or 80% of the annual run rate savings we anticipate. As a result of our rehab team's planning and successful execution around PDPM, adjusted EBITDAR margins in our Rehab segment grew 60 basis points in 4Q '19 over 4Q '18. Although it's still early in the transition, we are increasingly confident that PDPM is a viable reimbursement model for the future, a model that more effectively accounts for the broad array of medical complexities and care needs of our patients.

And last, I'll touch on wage inflation. 4Q '19 wage inflation for nonovertime hours worked by our employed nursing staff grew 3.7% over 4Q '18. Including overtime hours and agency costs, our all-in nursing wage cost per worked hour grew 5.4% in 4Q '19 over 4Q '18. This is a 90 basis point increase in the all-in nursing wage inflation reported last quarter. This rate of wage inflation is specific to our nursing function where we continue to see the greatest wage pressure. The nursing function represents about 50% of our labor force. Wage inflation in the other half of our labor force approximated 2.1%. So in the aggregate, Genesis' overall wage inflation rate in 4Q '19 was about 3.7% or 20 basis points higher than what we reported last quarter. Although wage inflation at 3.7% continues to be above historic levels, reimbursement rates are keeping pace.

To recap the results, we're very pleased with continued strength in the top line performance metrics of our inpatient business. We remain optimistic that occupancy, skilled mix and reimbursement rate trends will fuel organic growth in the future. This, along with our unique investment strategies and portfolio optimization, the expansion of our ACO and the strength of our ancillary platform position us well for long-term growth.

With that, Marcus, please open up the call for any questions.

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Questions and Answers

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Operator [1]

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

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

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Maybe, first, just to talk about the COVID-19 situation a little bit more. Is -- I know with the 2017-2018 flu season, when we look back on that, I think you guys had about 90 facilities where you went to an admission hold on those. It doesn't sound like that's in play yet at this point. What makes you do that?

And then the flip side, of course, is there's some discussion about acute care hospitals trying to free up capacity and one thing that sometimes is seen is they will discharge a patient to a post-acute setting quicker than they might otherwise do. Are you seeing any of that phenomenon in your facilities at this point?

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George V. Hager, Genesis Healthcare, Inc. - CEO & Director [3]

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Well, let me take that and I'm going to turn it over to Rich. I'll give you a start on that, A.J. Look, I think as far as the admission ban facilities from the normal flu, I think that has, for the most part, run its course this year. The impact of, I'd say, normal flu admission bans are not anywhere near the level we saw in '17 and '18, obviously at this point in time.

As it relates to COVID, we obviously have the one facility and the one patient. That facility obviously has an admission ban. So we're not seeing any material impact on census. As we sit here today, obviously, we're going to make -- we're going to continue to monitor the situation very closely. We will have, obviously, a -- this -- the impact of the virus still is yet to be seen -- the full impact of the virus, both nationally and clearly at the Genesis level as well.

I'm going to turn the call over to Dr. Feifer, so he can address kind of what situations -- and Dr. Reifsnyder, what situations caused us to put in place admission bans?

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Richard A. Feifer, Genesis Healthcare, Inc. - Senior VP of Genesis HealthCare & Chief Medical Officer of Genesis Physician Services [4]

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Yes. In all cases, we are working closely with the local departments of public health on sensitive questions and important questions like that. And so in the one case and the one center that has a COVID-19 patient right now, the Department of Health requested an admission ban, and of course, we followed that requirement. And that's how we'll be managing this going forward. The goal for the Department of Health and for Genesis is to keep virus from coming to centers and also spreading outside the centers. So we'll be working in lockstep with DOH on all questions like that.

With regard to the other part of your question, which is hospitals potentially wanting to discharge patients to create capacity, we are definitely seeing that and hearing that and are working very closely with local hospital partners. And to the extent that the patients that are being transferred do not represent a risk and the center that we would receive them into does not have COVID-19 patients, we are very eager to work with them to support that.

JoAnne, would you look to add anything to that?

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JoAnne Susan Reifsnyder, Genesis Healthcare, Inc. - Executive VP of Clinical Operations & Chief Nursing Officer [5]

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No, I think that covers it, Rich. Thank you.

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Albert J. William Rice, Crédit Suisse AG, Research Division - Research Analyst [6]

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Okay. The other thing I was going to ask about is staffing. As you face a situation like this, do you maintain the current level of clinical and nonclinical staffing? Is there any reason, maybe nonclinical, you don't have quite as many people there? Or on the clinical, do you need to staff up a little bit? Give us your thoughts on that.

And I guess, Tom, as you think about the broader environment with people getting -- hourly workers getting laid off in other areas, does that help you in any way? Maybe it's too early to see that in terms of your staffing costs?

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

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Rich, why don't you -- Rich and JoAnne, you want to take at the center level that question on staffing. And then Tom will follow up.

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JoAnne Susan Reifsnyder, Genesis Healthcare, Inc. - Executive VP of Clinical Operations & Chief Nursing Officer [8]

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Sure. Thank you, George. So the -- we are currently, as I -- as Rich said, restricting all visitors from the outside except in compassionate care, extenuating circumstances like end of life. We are allowing, and in fact, requiring all of our team members and employees who are center-based to come to work as we consider them all essential to the operation of the centers. We have staffing plans in place for every center and we are monitoring that every day, and we'll step up and are staffing up as necessary.

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Richard A. Feifer, Genesis Healthcare, Inc. - Senior VP of Genesis HealthCare & Chief Medical Officer of Genesis Physician Services [9]

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JoAnne, if I may add. We're also very closely following the guidance issued and the requirements issued by CMS just a few days ago to limit staffing to essential health care personnel. Those who are essential for the care of the residents. Anything that is discretionary or not time-sensitive is being deferred.

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Albert J. William Rice, Crédit Suisse AG, Research Division - Research Analyst [10]

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Okay.

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Thomas DiVittorio, Genesis Healthcare, Inc. - CFO, Executive VP, Treasurer & Assistant Secretary [11]

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And A.J., on your staffing question, I think it's a little early for us where we are in the cycle here to say that we're seeing hiring opportunities as a result of other workers being displaced in their businesses, but I think it's an excellent observation. It's certainly something that's crossed our mind as well. And I think it could pose a very important opportunity for health care providers across the country who, in recent times, have had difficulty with scarcity of staff just given the robust job market. So I do think there's an opportunity there.

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Albert J. William Rice, Crédit Suisse AG, Research Division - Research Analyst [12]

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Okay. And maybe last question real quick on -- this is the second quarter. I know in the 10-Q last time and now in the 10-K, it's talking about some lease covenants that you're in renegotiation. Can you just explain to us? It doesn't sound like there's particularly urgency about it, but what is going on with that? And when do you think you'll get that addressed?

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Thomas DiVittorio, Genesis Healthcare, Inc. - CFO, Executive VP, Treasurer & Assistant Secretary [13]

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A.J., for the number of very large material master leases that we have and large credit agreements, we're in compliance with all of those agreements, and we fully expect that we'll remain in compliance. I think there's, for instance, 1 lease involving 2 facilities. That is, again, compliance, and quite frankly, has not been in compliance for quite some time. And rather than just fixing the problem, the landlord just continues to issue us waivers. We've been collecting waivers for the past 3 years.

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Operator [14]

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

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Chad Christopher Vanacore, Stifel, Nicolaus & Company, Incorporated, Research Division - Senior Analyst [15]

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So just staying with the COVID-19 outbreak. If there is an outbreak in your community, what kind of protocols you have in place to take care of the residents that are already there?

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

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Rich?

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Richard A. Feifer, Genesis Healthcare, Inc. - Senior VP of Genesis HealthCare & Chief Medical Officer of Genesis Physician Services [17]

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Sure. Of course, every situation is going to be somewhat different. But we're working closely with the Department of Health in each case: to understand the nature of the outbreak, the likelihood of spread or if it has spread within the center beyond the initial case because an outbreak is defined as one case. But right now, even before the possibility of a case getting to the center, we are on heightened guard. We're following the most stringent, the most protective, the most rigorous measures that have been suggested at either the federal or state or local level. For example, residents are not leaving their room for social gatherings or meals, any discretionary visitors are not coming in, even discretionary health care workers are not coming in. Symptoms are being monitored and temperatures are being taken for all residents in all of our centers twice daily. So that continuous surveillance, should we have a problem, we pick it up quickly before it spreads within the center. We're reducing the transfer or the movement of staff and providers between centers so that we do not inadvertently see a center become affected before a staff member potentially developed symptoms. And so these are just examples of the guidance that have come out from CDC, CMS and the American Health Care Association and we are following all of them to the letter. JoAnne, did I miss anything?

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JoAnne Susan Reifsnyder, Genesis Healthcare, Inc. - Executive VP of Clinical Operations & Chief Nursing Officer [18]

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I would just add that if we have a confirmed COVID case, we would add additional isolation measures of that individual if that person remains in the center. That person would be placed in a private room and we put the proper isolation precautions in place and then do enhanced and continued monitoring of other residents and staff as well.

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Chad Christopher Vanacore, Stifel, Nicolaus & Company, Incorporated, Research Division - Senior Analyst [19]

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Okay. And have you -- to date, have you limited care workers from going from facility to facility?

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Richard A. Feifer, Genesis Healthcare, Inc. - Senior VP of Genesis HealthCare & Chief Medical Officer of Genesis Physician Services [20]

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We have...

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JoAnne Susan Reifsnyder, Genesis Healthcare, Inc. - Executive VP of Clinical Operations & Chief Nursing Officer [21]

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Yes.

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Richard A. Feifer, Genesis Healthcare, Inc. - Senior VP of Genesis HealthCare & Chief Medical Officer of Genesis Physician Services [22]

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Reduced to 10 possible, so limited, yes, caregivers going from facility to facility. In some environments and for some care workers and some specialties, for example, it's necessary. But we've reduced that, and we've also put in place a requirement that health care workers do not go from a facility that does have cases to a facility that doesn't so that we do not inadvertently spread in that manner.

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Chad Christopher Vanacore, Stifel, Nicolaus & Company, Incorporated, Research Division - Senior Analyst [23]

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Okay. And then just, Tom, you were talking about PDPM your experience to date. How does -- has your experience been in gains compared to what you had thought last quarter? And then how much of that gets offset by what we're seeing in terms of labor inflation?

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

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Well, look, what we had said publicly was

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PDPM on the rate side to be flat to slightly positive. We're being a little bit conservative there because the last time we reported, Chad, we only had about a month under our belt. A lot of moving pieces there. But as the months we're on, our Medicare rate remained very steady at this plus 5% level and I think it really just speaks to the medical needs and medical complexities of our patients, and that's what we would expect to see with this new reimbursement system. So we're happy with where the rates landed. They're not too far off of our models. We were being a little conservative in our projections there.

As for the staffing costs, look, it's very difficult to predict that. You've seen that it's been moving in a particular direction now for quite some time. I think it's mostly the nursing function where we see it. The rest of the business, including on the ancillary side, is running at 2.1%.

And look, I think A.J. brought up a very, very interesting point and observation. We don't really know what we're going to see in the next couple of weeks in terms of availability of staff. There may be some folks coming into the workforce that can really help us and other providers like us. And so I think the inflation side on labor cost just remains to be seen.

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Operator [25]

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Your next question comes from the line of Frank Morgan with RBC Capital Markets.

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Frank George Morgan, RBC Capital Markets, Research Division - MD of Healthcare Services Equity Research & Analyst [26]

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I guess I have to ask my COVID question. We've been asked this question by investors and so I know it's out there in people's minds. But in terms of just overall admissions, what percentage would you say are actually discretionary? I mean obviously, Ventas put a press release out today saying they're seeing a slowdown in their senior housing business. But how would you describe the overall discretionary nature of a general long-term care patient or specifically a Medicare admission?

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George V. Hager, Genesis Healthcare, Inc. - CEO & Director [27]

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Frank, I'll take a first crack at that and then obviously ask Rich and JoAnne to weigh in. We've never probably used the word discretionary for admission into one of our centers. I would use the word discretionary potentially to describe maybe certain elective surgical procedures where the patients -- at the patient's discretion potentially when actually to have that procedure where that acute or surgical procedure would require a post-acute admission for therapy, et cetera, post surgery. And I do think that -- I don't think -- well, I don't think we have any good accurate data on elective surgery versus non- as far as admission volume. I would venture to guess that the vast majority of admissions into post-acute care from hospital setting is from a nondiscretionary type of activity.

As we look at COVID, clearly, if people can avoid access into the health care system, i.e., if their acute intervention is in any way discretionary, I think they're going to try to defer that action until this pandemic somewhat runs its course. So there potentially has a negative impact downstream to us as far as discretionary and elective procedures are concerned and the admissions coming our way from those elective activities.

But I don't think it's, by any stretch, the majority of what we see. Our doors continue to be open. We're not bound by any kind of admission restriction. We are seeing normal levels of patient flow and patient activity as we sit here today. Obviously, it's something we're going to continue to monitor. Richard, JoAnne, anything to add there?

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Richard A. Feifer, Genesis Healthcare, Inc. - Senior VP of Genesis HealthCare & Chief Medical Officer of Genesis Physician Services [28]

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I could add something, while we don't have specific data on the percent that are elective or not, so I cannot give you a number, what I can acknowledge is that in recent years, the proportion of our admissions that have been elective has frankly gone down and the proportion that have involved complex medical situations has gone up. Those more straightforward elective cases, as you know, have increasingly been going to ambulatory rehabilitation type of programs and models. And so we have been seeing more and more complex medical cases, and those are the ones that we likely will continue to see during this crisis.

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Frank George Morgan, RBC Capital Markets, Research Division - MD of Healthcare Services Equity Research & Analyst [29]

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And I guess that's a good segue into the comment Tom made about the rate growth attributing that to your patient population. Maybe just any more color you can share on that, and how sustainable do you think the 5% is? And do you think this is something that CMS actually thought would happen?

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Thomas DiVittorio, Genesis Healthcare, Inc. - CFO, Executive VP, Treasurer & Assistant Secretary [30]

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Well, I'll say, Frank, that the rate that you see in the fourth quarter has really held up here in January and February, and I'm assuming through March as well. So it seems like it's more consistent, quite frankly, from month to month than I thought was possible, maybe even more stable than our RUGs rate for that matter. So I do feel like the rates that you're seeing in these numbers in this release are reflective of the medical needs as they score of our patients under PDPM. Other providers may have very different results.

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George V. Hager, Genesis Healthcare, Inc. - CEO & Director [31]

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Yes, Frank, I think obviously, the COVID issue is going to, I think, impact the thinking of reimbursement rates for skilled nursing. There's no question there is incremental cost for Genesis' and the rest of the industry to implement the programs and the protocols that Dr. Feifer and Dr. Reifsnyder have discussed on this call. So hopefully, any thoughts around reimbursement rate will consider the impact of the virus on this industry.

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Frank George Morgan, RBC Capital Markets, Research Division - MD of Healthcare Services Equity Research & Analyst [32]

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One final one and I'll hop. Just if you have -- under this new system of PDPM, how do the cases that are kind of respiratory-like, flu-like cases compared with some of the average rates, and I'll hop off.

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Thomas DiVittorio, Genesis Healthcare, Inc. - CFO, Executive VP, Treasurer & Assistant Secretary [33]

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Yes, Frank, I don't think we're prepared to talk about rates at a diagnosis level on this call. But I can tell you that as you look at just a general comment, the more medically complex the needs are of a patient, and quite frankly, the less intensive rehab needs of that patient are, the higher the rate.

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Operator [34]

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At this time, sir, we have no further questions.

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George V. Hager, Genesis Healthcare, Inc. - CEO & Director [35]

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Well, just in conclusion, obviously, we are in a time not only in this industry but in this country where our lives are changing dramatically. I can assure you people following the company, all the stakeholders, not only our investors but the patients we serve and our employees, we are doing everything humanly possible to protect everyone's interest, first and foremost, the interest of our patients and our employees and their safety.

We will continue to work diligently. And I can probably tell by the energy level of some of the voices, our clinicians, Dr. Reifsnyder, Dr. Feifer, are working 24/7. There is no rest at this point in time in managing the risk of the situation, and we appreciate your support. And we continue to commit to the highest quality and service we provide. Thank you, everyone.

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Operator [36]

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This concludes today's conference. You may now disconnect.