Q3 2020 Genesis Healthcare Inc Earnings and COVID-19 Update Call
Your speakers presentation, there will be a question and answer session chassis question, you would need to press star one on your telephone. Please be advised today's conference is being recorded I'd like to hand, the conference over to your speaker today Lori Mayer. Please go ahead.
Good morning, and thank you for joining US today, we issued our press release earlier. This morning. This announcement is available in the Investor Relations section of our website at Genesis H.C.C. Dot Com a replay of this call will also be available on our website for one 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 including statements about the impact of coping night of the COVID-19 pandemic.
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 laws Genesis.
Sure 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 activity 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 or.
Our discussion today and the information in our earnings release and in our public filings include references to adjusted EBITDA, Our EBITDA and 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 measures and its GAAP to non-GAAP reconciliations contained in today's earnings release and with.
That I will turn the call over to George Hager CEO of Genesis healthcare.
Thank you Laurie.
Good morning, and thank you for joining us today.
The number of members of the Genesis Senior management team on the call today, including Dr., Richard Feifer Genesis healthcare as Chief Medical Officer.
Dr. Joanne Reifsnyder Genesis Chief Nursing Officer.
Well, Tom <unk>, our Chief Financial Officer, and Steve Young, our Chief Accounting Officer and Treasurer.
Before I turn the call over to Dr. Feifer for COVID-19 up the.
I would like to make.
A few opening remarks.
Well the pandemic continues.
We're starting to see some positive momentum from three specific areas.
[laughter].
First both labor and labor related expenditures.
A moderated since the peak of the Cobot night outbreak in the spring.
Staffing patterns.
Didn't see usage and wages in facilities located in our buys most impacted hot spot sales.
Have come down dramatically to levels more consistent with the rest of the portfolio.
[noise] shortages of PPD.
I had a dramatic impact on nursing home early independently.
Both in terms of availability and cost.
However, Genesis, we have gone to extraordinary lakes, good uptake for purchase supplies to protect our patient resident.
Residents and employee.
We have dynamically adjusted our sourcing of PPD.
And we'd be even set up our corporate headquarters as a warehouse and distribution hub.
To ensure supplies are said, where they are needed most.
Because we have spent much acquiring and warehousing PPG. We are currently not experiencing a shortage in pp up this car.
Second arc.
Occupancy levels have started to improve.
Since the end of June 2020 occupancy has grown 230 basis points through October.
Which is certain certainly encouraging.
The recovery of sense.
Which has been slower than anticipated industry wide.
It's critically important to our ability to return to pre cobrand levels or the bit door.
Finally, our ancillary businesses have been resilient throughout the pandemic.
Including Genesis rehabilitation services.
Careers there.
Genesis physician services.
And our LTC accountable care organization.
Genesis rehab services.
Before the cobot stimulus funds grew.
Grew EBITDA by $8 million for 42%.
In the third quarter of 2020 versus the third quarter of 2019.
These improved results are.
Direct result of intense operational focus.
To improve patient outcomes and therapist efficiency from the P. D. P M bar.
Careers, though.
So a significant increase in the placement of temporary agency staff.
As employees in nursing homes across the country fell ill with cold at night team.
Career step one and continues to be.
And it's an integral part.
Our own staffing strategy.
Our LTC a CEO.
Which is the first long term care sponsored accountable care organization in the United States.
Received a positive reconciliation in settlement and the Medicare shared savings program.
For the 2019 performance here and as a result.
Generated shared savings for the second consecutive year.
In the third quarter of two to 2020.
Yes, he see a C O we see massive p. shared saving settlement of approximately $18.8 million, an income of approximately $7 million net a participating provider distributions.
Our LTC a CEO benefits.
From a strong collaboration with dedicated Genesis physician services physician and advanced practice providers.
As well as improved alignment and collaboration with other participating positions.
Despite the strong performance by our ancillary company.
Organizations revenue revenue levels.
Or lower.
And our overall color cost are still significantly higher.
Now than they were pre cope.
Especially with the ongoing volume of PPD and testing required to maintain safety of our patients residents and staff members.
Furthermore, we are aware of increased nursing home outbreaks nationally.
I mean, and we remain concerned about the impact COVID-19 could have on our sensors and staff as.
As we enter the winter months.
We are we are working diligently to protect our patients residents and staff and limit outbreaks in our facilities.
With that I'd like to turn the call are Dr. Lynn Piper Genesis has chief Medical Officer.
Thank you George.
Since we are approximately eight months into this pandemic I would like to provide a brief update on where we are regarding COVID-19.
As we enter the fall we are hearing many reports of outbreaks throughout the country and an uptick in cases in nursing homes let.
Let me be clear that at this time, we are not seeing a major increase in the redevelop rates for the number of cases within Genesis affiliated nursing homes.
We are however, very much aware of what is going on around us and are deeply concerned about these trends since we know that the prevalence of comedy and the surrounding community represents the greatest risk of COVID-19 to nursing homes.
We are actively working to prepare our centers for the next wave of the virus.
Next I would like to address the issue of testing.
Last quarter, I mentioned that the centers for Medicare and Medicaid services CMS made a commitment to deliver point of care testing devices to every nursing home in the country.
At this time all of Genesis is skilled nursing facilities have received these point of care devices, along with a small supply of testing materials.
Some facilities have also received a limited supply of device freeze testing kits.
Genesis centers are in the process of setting up dedicated testing labs or have already set up their labs and are actively using the point of care devices.
These point of care tests are becoming increasingly important as PCR tests still create a delay which sometimes extends upwards of four days to receive results.
Any delay in determining who might be contagious is unacceptable and all the more reason the point of care tests are so critical at this juncture.
We are still having some difficulty with certain states approving the use of point of care tests, despite explicit support from CMS and C.D.C.
We are aggressively working with those states to change their stance.
In terms of the accuracy of the point of care tests. We are not currently seeing high rates of fall false positives for false negatives. However, we are hyper vigilant to use PCR tests for follow up confirmatory testing should up point of care test result seen clinically suspicious.
In doing so we are carefully following CDC guidance.
I'm also pleased to report that we now have the ability to reorder point of care test kits from the equipment manufacturers. The small inventory we received from the government is only a small fraction of what we will what will be needed to carry out frequent testing of patients residents and staff.
At this time CMS recommends testing staffed to cope in 19.
Frequency that varies based on county level test positivity ranging from twice weekly to just one time per month.
We are adhering to this minimum but at times are increasing the frequency based on other factors, suggesting a higher risk.
The ability to have easy access to instant results will allow us to more effectively fight this virus through routine testing.
While the cost is significant the safety of our patients residents and staff is the highest priority.
Turning to visitation.
We have created analytic tools to help us track the risk of coated transmission in each local community and a tailored center specific precautions and protocols to adapt to community risk levels every week centers receive an update on how their local communities are doing providing guidance on how their facilities infection.
In control procedures may need to adapt.
When rates of local community transmission or higher centers are more restrictive with precautions. When community transmission is lower centers continued good practices of infection control, social distancing mask wearing and frequent handwashing, but may be able to flex precautions in areas that are extremely important to our.
Residents and their families subject to state and local rules and regulations, including family visitation and participation in group activities Oh.
Ultimately as access to the point of care tests continues to expand we are hopeful that there will be adequate supply to begin testing visitors.
Availability is just not there yet.
We'd increase implementation of testing diligent practice of infection prevention protocols and up to date communication of the current risk of transmission in each community Genesis centers are leading the way in reducing COVID-19 risk to our patients and residents at achieving the confidence and trust of their loved ones.
Finally, let's review potential treatments and vaccines for cold at 19.
First Genesis has partnered with drug manufacturer, Eli Lilly and company in a phase three trial studying the monoclonal antibody drug L Y Koby 555 for the prevention of Sars Koby to infection, and COVID-19 disease and residents and staff at long term care facilities.
Given that this virus disproportionately affects the elderly it is so important that we all work together to help find possible new treatments for this deadly virus Jan.
Genesis skilled nursing senior living and independent living facilities in the states of Pennsylvania, and Colorado will be the initial potential locations for this phase three trial.
As far as the vaccine is concerned we are cautiously optimistic that we will see a vaccine for health care workers and long term care residents by the first quarter of 2021.
The federal government has already prioritize health care workers and skilled nursing facility residents in phases, one eight and one beat.
We are now in the process of coordinating with federal and local officials. So that we're prepared for when the vaccine becomes available.
Finally, I want to remind everyone that we continue to work hard to keep the virus out of our facilities. We conduct on announce internal infection control surveys to ensure our policies are being followed we are testing above state requirements. In many cases, and we continue to monitor patients the admission observation units or status among other per call.
Cautions.
Before I turn the call back over to George.
Want to thank all of our physicians nurses aides therapists advanced package providers and other center and regional staff members.
We've been working so hard to keep our patients residents and employees safe. During this pandemic. They are the true heroes I.
We continue to be forever grateful for their commitment and compassion.
George.
George back to you.
Thank you rich.
Before Tom the inventory our CFO.
Who's our third quarter results in more detail I would like to address the companys ongoing financial challenges.
Unrelated going concern disclosure.
The revenue loss and the incremental increase in expenses from the pandemic.
Have resulted in significant operating losses and cash flow deficit.
These losses have been temporarily funded.
By short term federal loan program.
Without legislative relief, we will begin repaying federal loans in April of 2021.
There is no question.
Genesis will need ongoing support from the federal government.
And our capital partners to sustain operations.
We are actively working with our occupancy resources, including the American Health Care Association.
To communicate the critical need.
Important are continued federal support.
Additionally.
We have initiated discussions with select capital partners to analyze a number a restructuring alternatives.
We will continue to work diligently to protect our patients right.
Residents and staff.
Improve the operating performance of the business.
And pursue opportunities to improve the financial position of the company.
I would also like to express.
My sincere appreciation and admiration to our staff.
Who had so selflessly dedicated themselves to our patients a residence Inn resident families.
During the most challenging eight months, we have ever experience.
Thank you.
That I would like to turn the call over to Tom the inventory.
Thanks, George Good morning, everyone.
My comments this morning will focus on the Pandemics impact to our third quarter financial results.
Beginning with the top line.
Reimbursement rates, which exclude federal cares act funds grew across all payer types with weighted average rate growth of 9%.
This increase reflects cobot specific supplemental funding provided by many state Medicaid programs and higher patient acuity.
We recognized $30 million of COVID-19 state funding in Threeq, you 20, and $76 million year to date.
We have commitments for an additional $10 million of supplemental state funding and we remain optimistic that additional funding will be appropriated at least through the declared federal state of emergency which is currently extended through late January 2021.
In addition to these state sponsored funds, we recognized $34 million of federal support under the Cures Act and we deferred recognition of an additional $32 million received before quarter end.
The deferred funds or to be used in future periods to cover the costs of infection control, including the cost of testing.
As a result of the pandemic same store skilled admissions were down 24% in Threeq you 20 from Threeq you 19.
This is a significant improvement in the skilled admissions reported into Q 20, which were down 61% from two to 19.
Operating occupancy of 75.4% in Threeq, you 20 was down 11.9% from Threeq to 19.
Since the onset of the pandemic the occupancy low point occurred in the month of June when occupancy was 74.2%.
From the June low point occupancy has steadily grown 230 basis points to 76.5% in the month of October and occupancy continues to grow through the first week of November.
As we highlighted last quarter. The pandemic has had its greatest impact on our facility is located in the five states of New Jersey, Connecticut, Massachusetts, Pennsylvania, and Maryland, which represent 45% of our operating beds in.
In these five states same store occupancy is down nearly 19% from pre pandemic levels, while our facilities located in 20 less impacted states have experienced only a 9% drop in occupancy.
Excluding the state and federal financial support recognized we estimate the net impact of lost occupancy caused by the pandemic.
Once adjusted for a commensurate reduction in variable costs resulted in reduced earnings of $71 million in Threeq, you 20, and $145 million for the full year 2020.
We remain hopeful occupancy will grow at an accelerated pace as we move toward what is historically, a seasonally strong period for admissions.
In the third quarter of 2020, we incurred $52 million of incremental operating expenses as a direct result of the pandemic.
This is a 64% improvement from the incremental costs incurred in Twoq 20.
These incremental costs include higher labor expenses predominantly in the nursing function, including increased use of agency staff overtime and bonus pay as well as additional workers compensation related expenses.
Increases in non labor cost stemming from both a cost and usage of personal protective equipment testing and enhanced cleaning and environmental sanitation costs.
Over 80% of the $205 million of cobot specific costs incurred since the onset of the pandemic or labor related largely within the nursing function.
Our same store weighted average nursing labor cost per hour grew 11% in Threeq you 20 over three to 19.
This too is a significant improvement from the 29% increase we reported in Twoq 20.
Unlike last quarter the rate of growth in nursing labor costs in Threeq, you 20 was not materially different when comparing facilities in our five hotspot states to facilities located in 20 other states less impacted by COVID-19.
The moderation in hotspot state nursing labor cost is reflective of actions taken to systematically reduce reliance on expensive agency labor and actions to thoughtfully ratchet back enhance pay programs and practices that were absolutely essential during the peak of the outbreaks we experienced in the initial hotspot COVID-19 Mark.
Yes.
In summary, with respect to the Pandemics overall impact to our financial results. The COVID-19, federal and state funding support we recognized in Threeq, you 20 of $64 million fell nearly $60 million short of a combined $123 million of direct co.
At 19 cost incurred and the impact of lost occupancy.
We remain hopeful that future federal appropriations under the cares act or other legislation will address the needs of providers like Genesis, who were disproportionately impacted in the early months of the pandemic by virtue of their location and proximity to communities, having high density COVID-19 outbreaks.
Moving now to liquidity.
Liquidity at September 32020 was $281 million.
During the September quarter, we estimate that the business exclusive of Federal Cares Act support funds consumed approximately $75 million of cash.
Aspirant to moderate in future periods as a result of actions we are taking to further manage down operating expenses and regain occupancy.
Our success closing this gap will be dictated by the overall pace of recovery from the pandemic, which has been slower than anticipated and could be further affected by the latest surgeon COVID-19 cases being reported across the country.
Included in liquidity at September 32020 is $157 million of funds received under the Medicare accelerated and advance payment program.
Barring any future action by the federal government recruitment of these funds is scheduled to begin in April 2021.
Also included in liquidity at September 32020 is $65 million of deferred payroll taxes half of which is to be repaid by December 31, 2021, and the balanced by December 31 2022.
These government obligations are material and constitute a significant percentage of our operating liquidity.
Our ability to meet these and other material obligations as they come due will be significantly influenced by the future appropriation and receipt of timely and adequate government sponsored funding.
The pace of recovery in our occupancy levels and the impact of Cobot night of the COVID-19 pandemic on our operating expenses.
Because these factors are largely outside of our control we determine that such conditions raise substantial doubt about the company's ability to continue as a going concern.
Given these circumstances as George referenced we are actively evaluating possible lease debt and other restructuring options with certain of our credit parties.
Regardless of these financial challenges and the unprecedented challenges of the pandemic, we're more committed than ever to provide the highest quality of care to our patients and residents in the safest environment possible.
With that Mary Please open the line for the Q and a portion of our call. Please.
Thank you, ladies and gentlemen, we would like to remind everyone in order to ask a question press star one on your telephone.
Your first question is from Frank Morgan with RBC capital markets. Your line is open.
Good morning, appreciate the color on the the slight bump in occupancy.
In in October and how that's carrying over into November, but can you talk a little bit more about.
How widespread the occupancy recovery is that you talked about you know the hotspot markets initial hot spot markets being 45% it's never been.
The north east of the quarter. So was that did you disproportionately see the occupancy improvement there or was it more broader.
Frank I would say that the occupancy was disproportionately still outside of those markets.
Yes.
If that answers your question.
So those five states still continuing to feel I would say a disproportionate drag relative to the rest of our states.
Okay or are those five going up just not as much as the opex leverage or are they still saying, we're seeing across the board increase, but but disproportionately more heavily weighted outside those markets.
Okay.
And in terms of.
You know just when you think about the steady state cost structure of the company I'm just curious.
Do you do you think you've basically done everything you can at this point.
Or is there is there are you know.
Anything else that you could do if you say occupancy is we're going to.
Go back down again, we have another.
Surge that people talk about.
So just curious about that new cost structure.
Well the.
The opportunity going forward that we're actively managing it every day and making really good progress on is still on the expense side. So there's there's still work to be done there and we're making that progress every day.
And.
Making very good progress on the on the occupancy front as well.
Look take taking any additional hit and occupancy Frank of course is going to be problematic. We can flex our operating expenses down relative to census, but that becomes more challenging when you're in a surge type of arena, which is I think as the hypothetical you're describing becomes a bit more difficult to manage those.
<unk> costs down if you're if you're fighting outbreaks.
Right got it okay.
I would add to Toms comments there that.
When you think about.
Especially genesis and its geography in April May and June, but we knew very little about the virus number one number two access to BP was a significant challenge and obviously testing what was an enormous challenge.
Think as we as we sit here today, obviously, we are concerned about you know some of the surge as we are seeing in certain states.
This point, we clearly haven't seen the impact on the business that we saw in April may and June, but I will say I think.
We are much better prepared to.
Adjust cost structures and I think even limit you know the extensive outbreaks because now back to point of care testing availability of pp just much better knowledge. So.
We had extreme extreme cost increases just to get that into some of our buildings in the hot spots like New Jersey I.
I think our labor cost increased 65% PPD in New Jersey, I wouldn't anticipate anything remotely close to that again so.
So I I think you know the knowledge base and what we've done and clearly point of care testing.
We will be very very helpful.
In limiting the impact if we do start to see surges and rich I don't know if you have any additional.
Got on that.
No I think Thats exactly right George it's it's doing everything you can to limit the impact because the impact of the each up rate will necessarily drive up costs to manage the outbreak. So its limiting the virus spread itself within each center and that requires an investment of testing, but that pays off because of a more controlled outbreak will.
Limit our need for further testing as well as for use in PT and having staffing related costs. So that certainly is.
Maybe one last one and I'll hop back in the queue.
I appreciate the color about the liquidity and the cash burn in the quarter and and just curious you know based on that obviously a.
When you think about I guess, that's excluding the impact of a you know these future repayments that starts so.
Just.
Any color on you know on current liquidity, how long do you think you can make it without those.
Without any kind of changes in those repayment rules around the taxes are the.
Yes, the payroll taxes and.
You know kind of.
How far along are you in discussions with with your credit partners with regard to doing something.
Were you waiting on something to happen before that can be done at work or just any update there and I'll hop. Thank you.
Hey, Frank look we there's a limited amount that we can say there.
Obviously, a $281 million of liquidity.
You've known the company for a long period of time, that's historically a high level of liquidity for us and we are aggressively managing liquidity at every turn.
Now that being said the business is still burning cash and obviously the repayment.
Government repayment is looming, we look into the second quarter.
2021.
But we're very active in that there are a lot of there are a lot of levers that we are looking to pull we have an extremely valuable ancillary platform.
We highlighted some of the performance of that platform.
In our comments this morning.
We have.
I think.
Secured some very innovative transactions in joint venture type models that have been proven to be liquidity enhancing de leveraging.
And quite frankly, our operating performance improving transactions.
And obviously help from our credit parties of credit partners capital partners.
It is also being evaluated here, but no. We're we're very active it's hard to give you a percentage or a status of where any of those conversations are but.
There are a lot of levers here to get that can be pulled and we are we are we have been and will continue to be very active in looking at the optimal.
You know restructuring alternatives going forward.
Okay. Thank you.
Again, if you would like to ask a question press Star one on your telephone. Your next question is from AJ Rice with credit Suisse. Your line is open.
Hi, everybody.
First off just maybe look.
At the other side of the questions that Frank was asking.
When you think about the business, where you're at an occupancy rate I know, we've got the issue of the accelerated payments and what's going to have with them as well as the deferred tax.
Repayments, but what is sort of the occupancy rate that you need to get back to at a minimum.
For dissuade cash flow positive on an ongoing basis to sort of be sustainable with the.
<unk>.
Lightbridge and everything you have.
So George I'll take that one.
Hey, we were running at 88% occupancy pre pandemic.
And we were counting on that.
At that level, you know our liquidity levels, maybe werent, where we wanted them to be but they were certainly moving in a very good direction operationally and financially you know going into the pandemic.
So look I think I think you've got to get it somewhere.
Near near that target.
And that's going to take some time, but that's that's what that's the target I would be thinking about in.
In terms of that inflection point it may maybe maybe 200 basis points below that because keep in mind that.
The cost per unit of service is up so even even if the occupancy returned to 88% the cost of managing the business you know even one so I'd say, we moderate and get on the other side of the pandemic. There's added costs now of operating this business safely.
Right right, Yes, no I Didnt know, whether all all the cost reworking you'd done and maybe brought that down a little bit.
But oh, okay that makes sense I guess.
Hey, you know, obviously, you're looking out there and depending on what the government does with the accelerated payments in the deferred payroll and other really make a difference.
It may be covenants aren't even relevant now, but where are you at with respect to any relevant covenants at this point.
Hey, Jay the only covenant that quite frankly really matters is the liquidity covenant and as George pointed out we've got we're well ahead of that.
We're in compliance with all of our covenants, where we've gotten way.
That's.
Right. Some credit some credit parties will just take a different view about how you approach your calculations and obviously understand the situation and we'll just wave. So we're in good standing with all of our credit parties.
Okay maybe.
Maybe just talk a little bit more about the discussion with referral sources.
I guess that would include discharge planners physicians that are managing patients and facilities and hospitals and discharging to you and I guess to some degree families.
How is that.
That discussion going at this point I know some of that's been diverted it sounds like you've got here the home health providers to home health that would have normally come to you.
Do you become concerned that that starts to get a little entrenched or what.
Just give us some flavor for what the discussions are like these days.
Yeah.
Yeah, Hey, Jay you know.
There's no question that there is still.
[noise] lingering it I think we should all expect that to continue concern.
With institutional.
Institutionalized care, if institutional care can be avoided and.
And in many cases it just it just cannot be avoided. So I think there is a marginal it's hard to quantify the impact of that but I do think that if there are even some aggressive options to to return patient the home more quickly.
They will continue to be sued and maybe more aggressively than they did then they were pursued pre coded.
You know that would that be that being said, we still think that once hospital volumes get back to for normal levels.
I think we'll begin to see more accelerated improvement in overall on the.
It's good we were the biggest issue in our recovery I think we've demonstrated.
Well I mean give me the exact number but you know operating costs.
We're we're improved $100 million Q3 versus Q2, I think we can demonstrate we can manage the cost side of the business very well. So we are intensely focused on.
The things that we need to do to.
Improve occupancy we're also looking at programmatically I mean, there are.
Chronic condition quite Frank is required to finalization, whether its alzheimer's or other dementias.
And we're looking to.
Take advantage of our clinical skills and our clinical capabilities to.
Differentiate ourselves in the marketplace. So.
It's a big issue I wish we could get you had a little more clarity in.
How quickly the census will will recover.
There are still headwinds clearly, but.
But we are we have developed plans to try to offset those headwinds that you too.
Try to fill up as much of the capacity as we possibly can and rich I don't know or Joanne.
Others are thought to.
Sure I certainly can't can add to that George as everyone knows there are really two factors that drive the decreased volume of short stay skilled admissions to skilled nursing facilities and one is the reduction in patients coming out of hospitals, because there is a lower volume of elective procedures in low volume.
Capitalizations procedures that would lead to skilled rehab is very little we can do about that but what we can influence is the selection of skilled nursing facilities versus home health as well as the choice a skilled nursing facility and we have a we have deployed a very deliberate strategy nationally to share all that weve done too.
Make skilled nursing facilities make our facilities safer and to protect against the virus, including.
Use of personal protective equipment serial testing of all new admissions several times during their observation status ensuring that there is very limited if any mixing of patients within a facility at so all of these things are part of our approach to why we have not seen a dramatic uptick in our outbreak spread as I.
I mentioned earlier during this call and so were Schiller hearing all of that with discharge planners those in hospitals, who are guiding the discharges as well as families themselves. We put our medical directors in the front seat being the messengers that to families and there and potential new admissions to reassure them of all the steps we're taking.
Keep new admission sales and we believe that thats contributing to the uptick that Tom mentioned.
Yeah I appreciate it I guess last question.
Is there anything in the fourth quarter I know you will continue to have a deferred tax benefit.
I don't know, whether you think you'll recognize any more of that care money cares act money free it up or here on any other funds that haven't yet been allocated but is there anything else unusual.
It will happen.
In the fourth quarter as we think about the cash flow trends and then.
I guess the question also would be.
With the Medicare accelerated payments start to come due.
What happens if I mean, if you can pay them back or are they just automatically going to be deducted from your reimbursement and so you don't have the choice not to pay them back I'm just curious.
I would assume the government itself is not going to for someone to do I.
After 11 type of scenario, but but I don't know.
Any thoughts on that.
Hey, Jay will cover the last piece first the mechanism is in the form of a recruitment. So it's not a repayment they essentially will withhold 25% of the Medicare receipts that we otherwise would receive in the normal course, starting for us in the month of April.
So that's the mechanism.
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As to how that works as you think about the fourth quarter. There are a number of things a favorable things going into the quarter and beyond the quarter from a funding point of view the first is.
The $32 million that we deferred on the balance sheet, which is for infection control specific expenditures I fully expect that we'll we'll use all of that 32 million and therefore recognize all of that $32 million in the fourth quarter.
Separately, we have the second component of the fourth round of stimulus.
That is a value based program based upon your performance in terms of infection rates in your buildings starting in September and measured each month for the month of September October November and December and then a final measurement for an aggregate period and again, it's we're just now.
Getting our first glimpses of the dollars associated with that program.
Here in October for the September measurement period, and it's a little early but our best guess for the totality of that program is it could be a $30 million to $40 million uptick for us in terms of cash flow. We also have another $10 million of state funds that have been clearly committed through the end of the year and that's a very conservative number.
AJ I fully expect that we're going to see more than that.
Here, you know as we as we round out the fourth quarter and some of that will continue right through the date of the state of emergency being lifted which now is at the end of January if that gets further pushed out we would expect more Medicaid f. map funds to follow.
So there are there are a number of things and then back to the CEO.
You might have.
We might have referenced earlier that we've been pretty conservative and how weve accounted for our potential gain share there and as it as it relates to the 2020 program year.
Which will get a settlement for in late 2021, there theres some theres some upside there too, but what I would expect we'll see in the fourth quarter.
Alright, great. Thanks, a lot.
You're welcome.
There are no further questions I turn the call back over to George Washington.
Well, thank you everyone as always.
And rich, Joe and Steve myself, but Lori are available for any specific questions. After the call.
We appreciate.
Everyone's continued support of the company, especially during these very challenging times.
And.
Everyone, hopefully stay safe, but they add up harms way and.
So that we are working diligently to approve the.
The operating performance of the company the financial condition of the company while at the same time.
Oh are tightening safety for our residents patient there. Thank you all.
Ladies and gentlemen that concludes today's conference call. Thank you for joining you may now disconnect.
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