Q3 2020 Healthcare Services Group Inc Earnings Call
Ladies and gentlemen, as the operator todays conference is scheduled to begin momentarily until that time your lines will again be placed on musicals. Thank you for your patience.
[music].
And welcome to the healthcare services group Inc., 2023rd quarter earnings Conference call.
Well at this time all participants are in a listen only mode. After the speakers presentation. There will be a question and answer session to ask a question. During the session you don't need to press star one on your telephone if your prior any further assistance. Please press star zero.
At this time I would like to handle call over to your host today, Mr., Ted Wahl, President and Chief Executive Officer.
As discussed today on todays conference call include forward looking statements about the business prospects of healthcare services group Inc. within the meaning of the private Securities Litigation Reform Act of 1995.
Forward looking statements are often preceded by words, such as believes expects anticipates plans will goal they intends assumes or similar expressions forward.
Statements reflect managements current expectations as of the date of this conference call. It involves certain risks and uncertainties for it.
Forward looking statements are based on assumptions that we have made in light of our industry industry experience and our perceptions of EXPAREL trends current conditions expected future developments and other factors that we believe are appropriate under the circumstances as with any projection or forecast. They are inherently susceptible to certain thing and changes in the circumstances. Okay services group Inc.'s actual results could be.
For materially below.
They didnt each forward looking statements as a result of various factors and the forward looking statements are not guarantees of performance, but the factors could cause actual results to materially differ from recent results or projected in the forward. Looking statements are included in our earnings press release issued prior to this call and our filings with the Securities and Exchange Commission, including the FCC is ongoing.
The investigation.
There can be no assurance that the FCC or in another regulatory body will not make further regulatory inquiries or or pursue further action that could result in significant cost and expenses, including potential sanctions or penalties, that's wallace distraction to management.
The ongoing Sep investigation indoor any related litigation could adversely affect or cause variability in our financial results.
Under no obligation and expressly disclaim any obligation to update or alter the forward looking statements whether as a result of such changes new information subsequent events or otherwise.
And presenters to me again.
[music]. Thank you Sharon and good morning, everyone, Matt Mckee and I appreciate all of you joining us for today's conference call.
This morning, we released outstanding third quarter results and plan on filing our 10-Q by the end of the week.
During the quarter, our customers and their caregivers continue to meet the challenges of the pandemic with innovation resolve and compassion.
Our H.C.S.G. heroes have been right there with them on the front line since the beginning tirelessly supporting our customers and helping to ensure the well being of America's most vulnerable.
The health and safety for our employees and the communities we serve will remain our highest priority.
Our strong financial results underscore our ability to thrive and even the most challenging environments.
We were particularly pleased with our service execution during the quarter.
As our relentless focus on customer satisfaction systems adherence and regulatory compliance the labored extraordinary operational outcomes.
Well the pandemic continues to create uncertainty around near term occupancy and cost trends. The industry is much better prepared for the fall and winter months with increased access to P. P E.
Point of care testing and enhanced operating protocols.
Additionally, we continue to be encouraged by the government's ongoing financial supported the industry, which we view as a necessary bridge from the short term challenges to a more stable operating environment and ultimately a vaccine and census recovery.
As the industry continues to adjust to that new normal we maintain our sharp focused on delivering strong.
Strong operational and financial results in Q4.
While the current environment necessitates a cautious view on growth longer term our outlook remains positive as our value proposition is more compelling than ever before.
Above all we remain committed to making decisions that best position us to deliver shareholder value.
With those introductory comments I'll turn the call over to Matt for a more detailed discussion on the quarter.
Thanks, Ted good morning, everyone.
Revenue for the quarter was $435.9 million with housekeeping and laundry and dining and nutrition segment revenues of $223.4 million and $212.5 million respectively.
Revenue included $9.3 million of cobot related supplemental billings, primarily related to employee pay premiums, which were initiated by and passed through to customers.
Net income for the quarter came in at $27.6 million and earnings was 37 cents per share.
Direct cost of services was $365.4 million or 83.8% the Q.
The Q3 decrease in direct cost of services compared to Q2 was driven by lower levels of Cecil bad debt expense as a result of our continued strong cash collections and more efficient management of labor and food purchasing as a result of consensus driven cost reductions the benefit of which was passed along to our customers as a credit to recurring billings.
Overall, our goal remains to manage direct cost at or below 86%.
Housekeeping and laundry and dining and nutrition segment margins were 11.1% and 9.2% respectively.
As you know it was reported at $37.3 million or 8.6% after adjusting for the $3.2 million increase in deferred compensation actual SDMA was $34.1 million or 7.8% and we expect that you need to remain in the 7.5% to 8% range in the near term as those costs are largely.
Fixed but continue to ultimately target asked you and I have 7.5%, excluding any cobot or FCC related costs with the primary pathway to leverage that existing and topline growth.
Investment and other income for the quarter was reported a $4 million, but again after adjusting for the $3.2 million change in deferred compensation actual investment income was around $800000.
We reported an effective tax rate of 25.6% for the quarter and expect our tax rate for 2020 to be in the 24% to 26% range, including Watsi benefits.
Cash flow from operations was $49.2 million. This includes an $18.7 million decrease in the accrued payroll offset by $17 million increase in deferred payroll taxes under the care Zac and because we previously called out the quarter to quarter impact of the 2020 payroll accruals for Q4, we're expecting a pay.
Overall accrual of 12 days ultimately that payroll accrual only relates to timing, but the impact washing out through the full year.
Additionally, we expect an incremental $15 million or so for payroll accrual in Q4, resulting from the payroll tax deferrals under the cares act to be paid back at the end of 2021 and 2022.
This amount is now classified under other long term liabilities rather than other current liabilities.
Yes, so for the quarter was 58 days down two days from the previous quarter.
And we are pleased with the ongoing strength of the balance sheet and the ability to support the business, while continuing to return capital to our each CSG shareholders, we announced that the board of directors approved an increase in the dividend to 20.5 cents per share payable on December 24th 2020, the cash.
The cash flows and cash balances support it and with the tax rate in place for the foreseeable future. The cash dividend program continues to be the most tax efficient way to get free cash flow and ultimately maximize return to shareholders.
This will mark the surety seventyth consecutive cash dividend payment since the program was instituted in 2003 and now the 69 consecutive quarterly increase which is now 17 year period that included four three for two stock splits we.
We recognize the dividend is important to our shareholders and we have increased it in line with our performance track record with those.
With those opening remarks, we'd now like to open the call up for questions.
If youd like to ask a question at this time. Please press Star then the number one on your telephone keypad, if youd like to withdraw your question press. The pound key first question comes from Andrew Wittmann with Baird.
Oh, great. Thanks for taking my questions I guess guys given that the gross margins.
We're up here, so significantly would be probably helpful to drill into that a little bit more and I was wondering if you could just quantify the benefit from bad debt.
And how much the comments on more efficient use of labor was driven by.
Any contribution from the excess managers I know that you started to kind of get that either.
Good utilization of your managers better last quarter was there more pull through of that.
Or what are the other kind of key drivers and qualification of any of those if you could put it what I'm bad debt in particular.
Hey, good morning, Andy Yeah, and I I, there was certainly some pull through with with some of the management capacity as we've talked about last quarter, but really to the overall I think we've called out our laser focus on customer service and experience in the past and you know as part of that ongoing focus.
It includes managing the services as efficiently as possible, especially in light of the census pressure that many of our customers are facing so I think that maybe the simplest way to to walk through the margin drivers would be first and foremost just calling out what I think is a powerful testament to our operational team and that unwavering.
It meant that they have to our operational imperative customer satisfaction systems at here is regulatory compliance and budget to actual performance that has been and will continue to be a tailwind to our overall results.
Operationally and otherwise beyond that if you were to use Q2 as a baseline if you pull out about $17 million or so of cost and the $17 million or so of revenue.
That would put you right around 85% cost of services.
And then again with Q2 as that baseline once you factor in the 3 million and you asked about the change in the bad debt at quarter to quarter about 3 million less of Cecil bad debt expense as a result of those continued strong cash collections, Matt highlighted now you've got a pretty clear idea of how we landed below that target well below that target.
86%.
Got it.
That's helpful and then I guess.
My follow up question is on a free cash flow I think last quarter. You mentioned that you thought you'd come in about $15 million to $20 million you did better than that saw the tia so it.
58, you haven't done that in the fifties here for a while so thats. Good was there anything besides the AR collections, there that drove the upside to the quarter and the cash flow performance from versus what you're expecting earlier.
No that was really the primary driver you know we came in nearly 20 million higher on the cash collection side than we than we maybe otherwise would have expected you know our goal continues to be to collect what we built each and every quarter here. We are five of the last six where we've done just that again largely due to.
To the leadership and the work of the financial services team and implementing the weekly payment initiative, which has been transformational to this part of the business now here, we are today with over 60% of our customers paying us at a frequency of greater than monthly and then certainly in this environment, Andy having timely conversations with clients.
Peculiarly over the past couple of quarters as some of them have found themselves may be in stronger cash positions than they have in years past with some of the funding. Although again, we're committed to continuing to follow the path that we've been on in.
In terms of contract integrity, and ensuring the customer lives up to not just the operational side of that contract integrity, but also the financial one.
Okay. Good I'll leave it there guys. Thanks.
Take care.
Next question comes from AJ Rice with credit Suisse.
Hi, so.
Just trying to understand again on the gross margin, which seems to be the main place of the outperformance in the quarter. When you think about moving forward.
The lower level of bad debt portion about but certainly not all of it.
You bet.
The drivers that.
Led to that level.
Uptake and gross margin are going to stay in place as you go into the fourth quarter think about next year.
Yes, I think with respect to kind of the segment margins AJ you know.
I would kind of call out the dining margin there some of the specifically some of the contract restructurings that we did in the back half of 18 into 19, and we'll continue to evaluate on an ongoing basis, but those adjustments have made us a bit lighter a bit nimbler and have provided a real strong base from which to grow and we have outstanding leaders on the registered.
One side of the business have really taken our R&D team and services to a whole other level, which contributes not only to client satisfaction and patient resident outcomes, but also to the bottom line. So the reality is we are less focused on some of the quarter to quarter variability and really taking that long view, making decisions and taking steps that really best position.
The company for the future and we'll continue to have that discipline. So as to the sustainability of those margins will continue to drive efficiencies continue to assess the impact of coal bid and census, and although one quarter. It certainly does not a trend make our goal is to always managed services as efficiently as possible. So 86 remains the target but.
We're of course committed to identifying ongoing opportunities for improvement as well.
Okay, I guess I'm, just trying to figure out.
You know you have.
Sort of a bandwidth where you're sharing some of the upside with your customers and all and I've tried.
Your margin within a target range Im just trying to figure out.
Is there something about that has changed and we're now going to operate specialty license sales guys carried a higher level of profitability that has been through in the past or is there something about the dynamics of what's happening in the business and then make and so forth that that have allowed you to step up on this quarter, but.
We should expect sub.
Moderation as we go forward I guess I don't I'm not sure I understand where you're landing on that or is it too early to tell.
It's too early to tell one quarter does not a trend make I think is what Matt said and I couldn't agree more with that we've we've done a lot of work, particularly on the dining side over the past couple of years Mac called out the contract restructurings.
That we've done all the revamping of our registered dietician team.
Now the leadership that we have in place there. So there's a lot that goes into it not the least of which is execution.
But too early to tell we'll be in a position maybe after another quarter or so to be able to have more confidently say, yes, we will be able to sustain these margins, but again, we're committed to it. We're committed you committed to always identifying opportunities and you know we couldn't be.
We couldn't be more pleased with where we came out.
Today, and then in terms of.
Your your comment about sharing really that any efficiencies that we've identified.
As there are passed along to customers you're also we're always.
We're always looking for ways to manage the services more efficiently.
For that right to make to make us a more attractive partner on either the housekeeping or dining side. So as census recovers when census recovers the hope would be that weve not only identified efficiencies on the way down but on the way up may be we're able to do things, even more effectively or efficiently than we were prior to.
So again too early to tell but in terms of sustainability to a precise number or percentage, but certainly we are on the right path from an operational and financial perspective.
Sure.
Yes, you mentioned.
The importance of the program.
Or cares Act money.
Relative to the underlying customer base supported.
The census is sounds like it's still somewhat crash you do you have a sense of.
How industries do a year ago customer base long term care facilities relative where would they were faced with the UK.
Good quarter, how much of a rebound that occupancy rates or whatever.
Customer bases seed and then I know that was partly the question of the gating factor of getting back on a growth trajectory is a they were dealing with the prices that they weren't really to make major changes that outsourcing dieting.
Or even though you said on the housekeeping and it sounded like there was a little bit of your side I wanted to see how people Baird.
We got to this pandemic how are we at that point now where you feel like you've got assessors are still going to be a couple of more quarters before where.
We're at a point, where you really sort of see how you're the underlying customer base looks coming out of all of this.
Yeah, I think in terms of occupancy pretty wide range of what we're seeing.
The end and we've seen some areas of recovery other areas of continued pressure.
The data that we're seeing within our customer base and obviously within the industry are suggesting a 10% to 15%, but you have some areas. Some geographies that are unimpacted, others that are more pronounced, particularly in the northeast and mid Atlantic.
And then theres different differences between segment the long term care segment of the patient population are resident population and then the acute the post acute side with the patient population.
So there is variability there in terms of how page I think you were asking about revenue I think in this environment.
It's difficult to forecast revenue for the next month, let alone the next quarter or year I think heading into Q4, we're thinking of revenue really in two categories and you alluded to them now our existing business and new business opportunities for existing business again in this environment census is unpredictable.
But if there is continued census decline or erosion, we're committed to being as flexible as possible and reducing our labor and supply costs and then passing along those efficiencies to our customer and I think Conversely.
Winning if census recovers depending on the timing, our staffing and supply costs will increase again as will our revenue.
The second category for us heading into the quarter would be the new business and how that impacts revenue and.
Pretty straightforward as to why it's more difficult to add new business. In this environment now the reality is the industry has strict rules for visitors. Some operators are reluctant to make any changes for fear of disruption.
And in some of those geographies I referred to earlier that are less impacted where demand for our services is literally through the roof, which is which it is in many parts of the country. The current environment necessitates that we take that more cautious view and we're going to continue to be disciplined.
In that regard so.
Really the revenue puts and takes that are in play so until we cross that bridge ultimately from where we are today to stabilization and then ultimately the vaccine and census recovery I think revenue is going to be more difficult to forecast. It doesn't mean, we're not going to grow and it doesn't mean, we're not going to take advantage of opportunities that.
As they present themselves, but theres just other factors that are different than years past that impact we may be in any given quarter the topline.
Sure maybe one last question just on your cash in marketable securities.
That up nicely year to date, you're at about 200 million.
Is this environment just better to have.
More cash on the balance sheet or does it make you think in terms of.
Maybe share repurchase or up in the dividends. It anyway. There is just some thoughts about that.
Yeah, we're going to continue to evaluate our capital allocation strategy, which we do on an ongoing basis, but I would say organic growth A.J. remains number one on that list followed closely by the dividend, which we believe after organic growth is the most tax efficient way to return value to shareholders.
Again, I know we've talked about this before there is no payout ratio per se. So nothing within kind of our dividend program would preclude us from increasing the dividend further but we are staying true to that Guy who is guide post of consistency and sustainability of the dividend over the long term and here we are.
This quarter 70 consecutive and counting so we have explored.
No and we will continue to explore some of the other one the other alternatives that are out there, but again for the moment heading into Q4 and next year deeply committed to continued organic growth and the dividend.
Alright, Thanks, a lot.
Thank you A. J.
Next question comes from Sean Dodge with RBC capital markets.
Thanks, Good morning.
Ted you mentioned the deployment of most of the spear managers now where are you from a new manager development standpoint, or are you continuing to recruit and train new wind is that kind of business as usual there were given the uncertain state of things you pause a lot of activity for the time being.
No that's business as usual and again, we continue to deploy managers within the existing business and in those new business opportunities.
We we bring onboard and again it that's why I wanted to at least share some of the insights into revenue and what impacts revenue in this environment that's different than other environments, namely census, so we could be adding business, but because we're providing existing customers with census related relief. It may.
Not be reflected in the topline, but it doesnt mean were not growing.
Got it Okay and then.
You'd you'd tax before that some of the adjustments we've made to services for some clients that were experiencing big declines in occupancy.
Where do you stand with that now you mentioned continuing to be flexible there has there been more of that and some of the regions that are experiencing spicing cases.
And maybe the ones that you've adjusted early on are are any of those recovering. If you step then is kind of the early adjusted facilities back up to more of a normalized.
Normal.
I guess density.
Yes, one factors, Jon that I'd point to as a significant driver it may be obvious in some regards but geography right. There is a key.
Key differences in different parts of the country and providers Ted had mentioned in the northeast in them and let mid Atlantic and even the Pacific northwest or a state like Minnesota have been significantly impacted by cobot, whereas other geographies like the southeast and southwest although there's been some ebbs and flows continue to show improvement and increased elective procedures.
And sensus is moving in a positive direction. The other component of course, the Ted alluded to was the difference within even if it's specific facility in true long term care resident population and that sort of elective procedure elective surgery related post acute patient within the walls of that facility and most customers.
We have a mix of both long term residents and short term rehab patients, but typically are more weighted in one direction or the other.
And overall, though we'd like to see it we likely will see additional near term occupancy pressure until a vaccine right. I mean, that's the most significant milestone that lies ahead, but ultimately do expect a recovery industry wide as it relates to sensors because of course, the demographic trends and the needs based nature.
Of this industry so as it relates to healthcare services group in our billings, Sean It's a mixed bag really heavily dependent upon everything that I just touched on primarily geography, but also specific kind of patient mix within the walls of the facility. So while we do see some ongoing downward adjustments in some geographies.
And there is some timing related issues, there as well right from the time that a customer experiences a census dip to the time, we're able to adjust our cost structure and then ultimately pass that.
Along to the customer by way of a billing adjustments there can be a bit of a lag would suggest that we may see some ongoing.
Pressure and that downward direction, but at the same time in other geographies, we'll likely see ongoing recovery, which we are in fact seeing in some areas to date, but again, perhaps with a bit of a lag as it relates to ultimately us adjusting our cost structures and corresponding billing to customers.
Okay.
Very helpful. Thank you again.
Next question comes from Ryan Daniels with William Blair.
Hey, guys more proof that improve and thanks for taking my question.
So you said kind of the management recruitment is pretty much business as usual I was wondering as far as recruitment goes has anything changed there in that dynamic dynamic have you seen little bit harder to find talent or maybe potentially easier just wondering if anything's changed there.
If you're speaking specifically about kind of management level recruiting Nick which again its for US we're back to business as usual, which just to remind everybody means that all of those recruiting and targeting efforts are happening at the local levels, which is a good thing right. That's the model that we've built thats, what weve relied upon for years.
So in as much as there is a need in a particular geography, that's more pronounced than another they will take the appropriate steps to appropriately recruit interview now more than ever provide as much as a of a transparent view into our world as possible, but we're not hearing of challenges in hiring.
Folks into the management training program I think you have to.
Assigned part.
Part of that dynamic to the overall labor environment right I mean, it's still a challenging labor market in many parts of the country slower recovery in some geographies than in others. So in as much as that serves us well and creates a larger expanded pool of candidates thats been beneficial, but I would say yes.
We have not seen any significant challenges in hiring the management employees and that trickles down to the line staff employees as well where obviously.
Usually important for us in normal course.
And certainly even greater importance during a pandemic for us to be able to fully staff Everett facility and staff at appropriately adjusting up and down as is appropriate based on census, and we've been.
We've been fortunate that we've been able to track.
Tracked higher and retain employees is aligned staff levels as well.
Great. Thanks, and then kind of going on Dsos. So I guess, how much would you say this.
This improvement in Dsos, and I guess, the lack of any sort of.
Issues with some of their clients related to kind of remains system.
And then as that sort of dries up.
Would you expect kind of a.
Recommencing of what was kind of happening prior to all parts of the virus.
Yes, Im not sure I understand your question I know we've collected what we've built five of the last six quarters and we have over 60% of our customers paying us at a frequency of greater than monthly the vast majority of which are weekly so.
Most of this.
We're causing and if you look at the trends prior to this year and into the first quarter. It was evident the direction, we're going from a from a cash collection perspective, thats not to say that there is not going to be.
Theres not going to be a quarter, where we fall short of what our goal could be but but in terms of the systems that we have in place the team that we have leading it and the notion of contract integrity with our customers that is all that's all here to stay.
Opportunistically when and if there if a customer does have as a result of the funding maybe some some benefit that we've we've.
We've we've accommodated them in the past and Theyre willing there are willing and able to true up maybe in Arrearages that may exist to a lesser degree, but again the majority of it is dsos related and I think thats reflected in the numbers.
Sure. So the general positive trend we've seen this year.
Regardless of kind of government assistant that trend should should coincide.
Yes, that's our expectation when we look out over Q4 and into next year again. Our goal is simply said to collect what we bill and that hasn't changed the extent, we're over that we'll call. It out like we saw this past quarter.
And prior quarters, not just Q2, but also.
You know in in Q Q4 of last year Q3 of last year, we will call that out but otherwise our goal is very simply said again to collect what we bill.
Awesome, great. Thanks, guys.
Thank you next.
Next question comes from Brian Tanquilut with Jefferies.
I guess I'll just follow up on.
On that last question from Ryan. The first question well you called out bad debt as a driver for margin expansion for the quarter.
Just quantifying that and how you're thinking about that as it relates to.
Cares Act binders for.
Revenue at what Ryan was asking right I mean, as you're trying to get squeezed on the cash side again.
I think that there is variability in that bad debt accrual as we think about 2021.
Yeah, there there I would say that we don't think there could be we know there is bad debt and or variability in that and bad debt expense because of the very nature of the new accounting guidance see sold that was implemented at the beginning of the year. So us and all companies I think to a degree have maybe a higher level of very.
<unk> ability in that particular line item, it's really driven off of collections for us collecting what we built based off of a track record of.
A track record of year, so as better performing years come in to the trailing periods and and worst performing years fall off that could have one type of impact and Conversely, if theres a poor performing year that comes in at a better performing year falls off that could have an impact the other way but by.
And large Cecil is what's driving and the accounting guidance is what's driving.
A more I'd say mechanical.
Less subjective bad debt expense again for us and for.
The rest of the public company universe that adopted it.
I understand that any quantification you can given that.
For the quarter.
Yes, I mentioned that earlier, we had we had bad debt expense of right around $1 million got it.
Got it Okay and then just my last question since your last earnings call.
Your largest client although.
Called it out inside.
The industry or they need government funding to.
We remain solvent or be a going concern. So what are those conversations like with Genesis and how are you thinking about the risks that you face as they struggle financially.
Well Genesis is a great partner, we have incredibly frequent communication with them and they've continued to pay us within terms. So no there there I believe on David.
They have a great leadership team and a management team that is committed to executing on their plan, we're going to continue to monitor that situation closely but beyond that there's really no updates to report.
All right got it thank you.
Take care.
Next question comes from James Terwilliger with Northland capital.
Hey, guys can you hear me.
Yes, hi, guys James.
Okay, great nice quarter, considering all the impacts of co but my first question I missed part of the call. So I apologize for that.
Very quickly when you look at the coal that supplement that's in the press release, how is that split between housekeeping and food services.
That's about 60 40 split James of that nine or so million dollars 60 to housekeeping and 40 to dining.
Okay. Good and then secondly, I guess.
I guess this one's for you Ted and again I want you to speak from a macro level and not as an individual customer how is the health of the nursing home. If I look back to 2019 that seemed like it was turning and then we got hit by co that you've mentioned the cares Act before we're waiting on another stimulus from the fed.
From the federal government on a daily basis, how are your nursing home customers, you doing and and how do you view your customers from the macro level in terms of their health not one individual customer.
Yes, well I think the industry just the highest the highest level at that macro level is look the industry.
Shall remain a vital and ongoing part of the healthcare continuum right and if you just look at what will be an ever growing demographic pie skin.
Skilled nursing in particular nursing homes that you called out is going to be an absolutely critical component of that continuum, along with home health, along with independent and assisted living along with the other points of care.
So at the highest level, it's got a bright future ahead of it the industry clearly it's gotten the industry sniff specific we have gotten their share of bad press over the past few months I think.
To go might grow a little bit I have to say often under reported is the exceptional care. James has provided by the vast majority of caregivers and facilities and we happen to have a front row seat.
For these many inspiring stories, but.
But I think it is yet to be determined if that heightened focus if the attention that the industry's had no what's going to be the impact on in on the regulations are the regulatory environment and what are going what are those.
The resulting reporting requirements going to be.
I would only add if thats the put I'd say that take would be that.
The focus that the industry has gotten has also shined a light on how important critically important adequate funding and responsible reimbursement programs, our two patient resident care and I think.
Skilled nursing has always I thought been left behind in terms of priorities and I think thats going to change going forward. So I think in so much as there is an evolution in the regulatory and we're reporting landscape I believe there is enough political will at this point that there would be a corresponding evolution in funding and payment. So.
Sure as well.
Look from from my perspective, we're positioned to thrive in any environment.
So we're well situated our value propositions more compelling than ever before so again.
So again I feel good about how were positioned but I also feel very.
Very good in spite of some of the headlines about again the future of the industry.
No you're right on the front lines, providing care for a high risk patient population and as much as the headlines are bad I've got lots of stories myself from friends and family members, who have been very pleased with the care at their age within these particular institutions My last question.
Thank you for that color. My last question is really on and I think you said it earlier in the call that the census recovery or the or the occupancy rates, which is something I focused on within your customers can you quantify and I know, it's a tough question from the macro perspective can you quantify any type of degree of hit.
That these facilities have have been hit in terms of their census from occupancy.
With the factors associated with Covance.
From a media and level.
If you are looking for and again, there's there's there's significant variability geography to geography, even operator to operator, even within the G. The same geography, depending on the type of patient mix resident population there can be variability overall, James has been about a 10% to 15%.
Impact closer to 10%.
Again, depending on depending on the report for the data that one is looking at I think maybe maybe to help bridge that answer.
Bit too to how we get back I think the keys to making sure you know between now and when census recovery happens, which is inevitable theres really a few different keys, but consistent point of care testing is one.
Is one of them that's been in place and that has been a game changer for the industry, certainly access and availability of ERP, which I must say is substantially better than what it was six months ago and what we've talked about really throughout the call is adequate funding.
And I think even more recently, there's been a few different developments on the funding side that it just Uh huh.
Just to highlight to you because again its bridging the gap to census recovery.
One would be the 20 billion dollar increase were phase three provider relief, which is more targeted funding for us.
For operators that have experienced those significant co bid losses, and then just over the past few weeks Theres been a couple recent couple of developments by CMS.
Again going to target those providers are really disproportionately benefit those those providers that were really impacted by cove, it, especially in the northeast and mid Atlantic. The first is postponing the Medicare advantage payments that now do not have to be repaid until the end of the first quarter.
Which is a major cash flow benefit for providers, especially those who got hit early on.
And the other extends the three day hospital stay waiver and we all know how impactful that is until the end of January so again stimulus to could be another opportunity for the industry and I believe the industry from everything I understand is going to be included in that and thus potentially significant way but testing.
Pp and funding are those keys to bridging that gap between now and the vaccine.
Okay, well, great I'll jump back in queue, but again, guys nice quarter, considering the cove it environment that you're operating in thanks guys.
Thanks, Thanks James.
This question comes from Mitra Ramgopal with Sidoti.
Yes, hi, good morning, just wanted to get a sense as you look to bring on new business and the conversations you're having with potential customers. If you are sensing a change in their mindset or greater willingness to outsource.
In a post cobot oral.
I'd say the important add on there to your question Mitra was the post call bid World right I'd say without a doubt as it relates to demand for our services and more specifically are increasingly appealing value proposition cobot has shown a very bright light on that right. If you think about delivering.
Outcomes in operational outcomes regulatory outcomes and financial outcomes.
You know that that's right in line with what we've always done and in many regards the market is moving to us when you.
When you think about health care level cleaning of course in the health care facilities that were servicing but really across the the the country in many other industries right. You think about retail you think about dining you think about education and healthcare level cleaning and disinfection infection prevention infection control will become.
The new norm, so in many instances and through a wide.
Mens mitra that value proposition resonates more than ever so while in this moment of.
In the midst of a pandemic and approaching influenza season with an election looming as you can imagine there's not a significant appetite among our prospective customers to disrupts potentially disrupt their operations and engage with the new outsourcing partner in this very moment, but certainly as we look out to the time horizon, you called out which would be post co.
David.
We couldnt feel better about our prospects for continuing to cultivate and build that pipeline of Cigna.
Significant new business opportunities.
Okay. Thanks for taking the question.
Thanks Mitra.
And at this time I will turn the call over to Mr. Ted Wahl.
Okay. Thank you.
Looking ahead, we will continue to innovate in managing our business and remaining flexible in responding to our client partners evolving service level staffing and supply chain needs and above all we remain committed to making decisions that best position us to deliver shareholder value.
So again on behalf of Matt and all of US at Healthcare services group I wanted to thank Sharon for hosting the call today and thank you to everyone for participating.
This concludes today's conference call you may now disconnect.
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