Q1 2021 Ensign Group Inc Earnings Call
Thank you for standing by and welcome to the Ensign Group first quarter fiscal year 2021 earnings Conference call. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session. The ask a question during the session you'll need of press star one on your telephone as a reminder, today's program may be recorded.
And now I'd like to introduce your host for today's program, Chad Keetch Chief Investment Officer. Please go ahead Sir.
Welcome everyone and thank you for joining US today, we filed our earnings press release yesterday and it is available on the investors section of our website at Ensign group Dot net.
A replay of this call will also be available on our website until five P. M Pacific on Friday June for 2021.
Want to remind any listeners that may be listening to a replay of this call that all statements are made as of today April 32021, and these statements have not been nor will be updated subsequent to today's call.
Also any forward looking statements made today are based on management's current expectations assumptions of beliefs about our business and the environment in which we operate these statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today's call lists.
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 ex.
Except as required by federal Securities laws Ensign and its affiliates do not undertake to publicly update or revise any forward looking statements where changes arise as a result of new information future events changing circumstances or for any other reason.
In addition, the Ensign Group, Inc. Is a holding company with no direct operating assets employees or revenues certain of our wholly owned independent subsidiaries collectively referred to as the service center provide accounting payroll human resources information technology legal risk management and other services to the other operating subsidiaries through.
The contractual relationships with such subsidiaries and the.
Addition, our wholly owned captive insurance subsidiary, which we refer to as the captive provides certain claims made coverage for our operating subsidiaries for general and professional liability as well as for workers' compensation insurance liabilities the <unk>.
Words Ensign company, we our and US refer to the Ensign Group, Inc, and its consolidated subsidiaries.
All of our operating subsidiaries of the service center and the captive are operated by separate wholly owned independent companies that have their own management employees and assets.
For instance, here in to the company consolidated company and its assets and activities as well as use of the terms, we us our and similar words used today or.
Not meant to imply nor should it be construed as meaning that the Ensign Group, Inc. Has direct operating assets employees or revenue or that any of the subsidiaries are operated by the enzyme group.
Also we supplement our GAAP reporting with non-GAAP metrics when viewed together with our GAAP results. We believe that these measures can provide a more complete understanding of our business, but they should not be relied upon for the exclusion of GAAP reports.
GAAP to non-GAAP reconciliation is available in yesterday's press release and is available in our form 10-Q.
With that I'll turn the call over to Barry Port our CEO Barry.
We're very happy to report record results again this quarter. Thanks to early access to the vaccine we have seen a significant reduction of the number of COVID-19 positive patients and staff in our operations throughout the first quarter with weekly resident cases in the single digits across our entire portfolio.
As a result of our patients and caregivers, who have begun to enjoin environment that although certainly different in many ways is starting to look and feel a lot more like pre COVID-19 times.
<unk> reminds you that the results for the quarter do not include any benefit related to the cares act provider relief funds to.
To date all of the provider relief funds totaling over approximately $153 million has been returned to the government.
As they've shown on so many times before our locally empower leadership teams have yet again demonstrated the agility of our model as they have been customizing their strategies to meet the specific needs of the markets. They serve.
The sustained results during one of the largest global health care challenges in recent history are what temporary ensign affiliate from the rest of the industry.
Our operations have remain integral to the preservation of the health care continuum, despite great difficulties because of the adjusted and adapted to meet the acute needs of their markets and now as these operations emerged from the height of the crisis. They are poised fulfill an even greater role of them before as the standout from traditional nurse.
The thing homes as the new standards of excellence for post acute care.
As we expected as the community spread of COVID-19 has slowed we've seen occupancies increases the pent up demand for health care services in our markets has continued to increase.
While Medicare census has begun to trend towards pre COVID-19 levels.
Our affiliate site improvements and overall census, we were particularly pleased by the continued improvement in our managed care growth across the portfolio.
The typically we saw same store and transitioning managed care average daily census increased from the fourth quarter.
Approximately 18% and 26%, respectively, which is our third sequential quarter of managed care census growth.
Additionally, the strong results from the quarter were also the result of a multifaceted effort, which included making continued progress on our companywide cost saving initiatives, improving our cash collections and making significant strides on our operational expense management as some of the extra COVID-19 related expense.
<unk> has started to decline we also continue to benefit from the continuation of sequestration suspension and improved Medicaid funding in certain states.
Moreover, with full access to vaccines throughout the quarter, we saw new resident in staph infection rates Plummet and we began quickly became one of the safest environments available for our critically ill population of.
Although we will see some seasonality we expect the positive trend in occupancy to continue throughout the year as volumes and higher acute settings and managed care utilization continued to increase.
We look forward to continuing to work closely with our hospital of managed care partners in this new environment and to continue to demonstrate our ability to care for patients with the most complex medical needs with the highest standards and outcomes.
Our leaders of very excited to redirect the enormous energy expense and dealing with the pandemic towards continuing improvement on the fundamentals that have made our operations. So successful for so many years, including achieving high quality outcomes, increasing occupancy enhancing our clinical capabilities and driving.
Consistent organic and inorganic growth.
As we look out towards the near long term horizon as occupancies begin decline towards pre COVID-19 levels and beyond our.
Our existing portfolio of truly has never had so much growth potential as we said last year. This pandemic arrived at our doorsteps at a time when our organization has never been stronger clinically and financially.
As a result of being stretched to our limits in the face of this pandemic, we have learned many lessons and become even stronger in there of leaders and caregivers of made life changing sacrifices omni half of patients and their families.
As we announced yesterday, we increased our 2021 annual earnings guidance to $3 54.
To $3 66 per diluted share up from the previous guidance of $3 44.
For the $3 36 per diluted share and affirmed our previous annual revenue guidance of two.
262 billion to $2 69 billion. This.
This increase comes from the strong results during the fourth quarter first quarter positive trends on occupancy and the continuation of sequestration suspension, which provided some additional reimbursement that was not included in the original guidance.
Our current health combined with our culture proven local leadership strategy healthy balance sheet, the enormous potential in our existing portfolio and the tremendous acquisition opportunities on the horizon gives us the confidence that we're well positioned to not only rebound to our pre COVID-19 path, but to accelerate our growth.
While we transitioned from operating in the pandemic two of post pandemic environment. We are confident there of local leaders caregivers in the other frontline staff will continue to provide amazing service to their patients family and our society as a whole we can't even begin to express our love and appreciation for all.
All of our amazing team members, especially those on the front lines.
For all of the they're doing to help us to get through this unprecedented time.
We're on the absolute driving force of the outcomes that have been achieved.
Sacrifice the continue to sacrifice putting themselves in harm's way to keep their patients safe and secure we honor them and are so grateful for them.
While we certainly expect some challenges we are excited about the year ahead of us and look forward to showing our dedication of all of those who have entrusted us with the care of their loved ones and with that I'll ask Chad to give us an update on our recent investment activity Jeff.
Thank you Barry we are pleased to announce that we are continuing to make progress in our efforts to demonstrate the value of our owned real estate.
As you are aware, we took the first step in the fourth quarter of 2020, when we began reporting the results of our real estate portfolio of the new and independent reporting segment, which is comprised of properties owned by us and leased two affiliated skilled nursing and senior living operations and 31 senior living operations that are at least to the pennant group.
Each of these properties are subject to triple net long term leases and generated rental revenue of $16 million.
Of which 12 million was derived from ensign affiliated operations.
Also for the first quarter of 2021, we reported $14 million in <unk>, which represents a 25% increase over the prior year quarter of $11 million.
As I shared with you on our last call our goal on separating this real.
State business from our legacy operations as the demonstrate the enormous inherent value of that these real estate assets have and will have over time.
We hope that this extra disclosure will be helpful to our current and prospective investors who are familiar with our history of successfully incubating businesses as they evaluate this growing part of our business, which we believe is a key differentiator in the market.
Our growing real estate portfolio consists of 94 properties 64 of which we operate in 31 of which are leased to the pennant group.
While we are often approached by potential buyers of would love the chance to purchase and leaseback our real estate.
We do not believe that that approach is the best way to advance our mission and to maximize our long term shareholder value.
But there are several guiding principles and lessons we learned from our past spin offs that are leading our decision making with.
With the health of the operator, taking top priority to ensure the long term value of these real estate assets.
Since our last call we have engaged advisors to help us determine the best path towards the structure inside of enzyme the.
Of the demonstrates the growing value of our own real estate, while not losing sight of our purpose driven mission.
We envision a structure that not only creates better visibility into the demonstrable value of our real estate.
But we will also provide us with an efficient vehicle for future acquisitions of properties, which could be operated by ensign affiliates or other third party operators just as we have done with the pennant group.
We also seek a structure that will preserve the optionality that enables us to take advantage of private and public market conditions in order to maximize long term shareholder value.
We are very excited about the new opportunities embedded in this chapter of our growth story and look forward over the coming quarters to updating you on our progress.
We were also very happy to continue our efforts to grow after a brief pause on our acquisition efforts during the early months of the pandemic. Our teams have shown their commitment to one of the things that drives our organization, which is the consistently and methodically acquire not only in good times, but even when it would be easier.
The shutdown growth, while waiting out the storm.
The following skilled nursing operations were acquired during the quarter incentives.
Golden Hill post acute of 99 bed skilled nursing facility located in San Diego, California.
St Catherine Health care, and 99 beds skilled nursing facility located in Fullerton, California.
Camino health care of 99 bed skilled nursing facility located in Hawthorne, California, San Pedro manner on 150 beds skilled nursing facility located in San Antonio Texas.
Boulder Canyon health and rehabilitation of 140 bed skilled nursing facility located in Boulder, Colorado.
<unk> care and rehabilitation of 76 bed nursing facility located in <unk>, Colorado.
And South Valley post acute rehabilitation, a 106 bed skilled nursing facility located in Denver, Colorado.
We are very excited about each of these handpick the opportunities and some of our strongest markets and because of the extra time, we had to prepare given COVID-19 protocols. Each operation is poised to be a contributor to our results very soon.
Each of these additions is a true testament to our local team of clinical and operational leaders leadership their experience planning and preparation.
As we look ahead to 2021 the pipeline for our typical turnaround opportunities and exciting strategic opportunities remained strong currently with more deals available then we have the capacity for transition.
In some cases the deals we expected to see last year have been delayed as the cares Act funding is provided additional capital provided temporary assistance to undercapitalize are struggling operations.
We're still being very selective in keeping plenty of dry powder on hand for what we believe will be an attractive buyer's market once the pandemic related dust settles and government relief funds run out.
We look forward to growing within our existing geographical footprint and we see significant advantages to adding strength in markets, we know well, including some of our newer emerging markets as they continue to mature and prepare for growth.
As we mentioned on our release yesterday.
We have well over $340 million and available capital. In addition, we have 70 for completely Unlevered real estate assets.
We continue to work on unlocking some equity value on seven or eight of those owned at owned and Unlevered real estate assets through long term fixed rate HUD debt.
This process takes several months and will not completed the completed until later in the year, but we are preparing now for a wave of new acquisitions, we see on the horizon and are excited about the deals. We are working on now and the new opportunities that are on their way and with that I'll turn the call back over to Barry Bury Inc.
Yes.
For Suzanne runs through the numbers, we'd like to share a couple of brief examples that represent the tremendous difference that ensign leaders make especially during challenging and unusual times.
Over the last several quarters, while much of the skilled nursing sector has experienced the trend of sharp declines in occupancy during the pandemic.
Many of our facilities have continued to grow census.
Focusing relentlessly on clinical quality and strengthening partnerships with managed care and acute hospital systems in the communities they serve.
This formula has been consistently demonstrated by the team that health care resort of Plano located in Plano, Texas.
Despite pandemic pressures that have reduced discharged from their local acute hospitals. The resort has grown overall occupancy by approximately 6% and Medicare skilled mix by 29% compared to the same quarter last year.
This five star facility led by executive director matched Max Edgington.
And D&S Stephen E. K has partnered with attending physicians from Baylor Presbyterian and Methodist Health systems and enable these providers to seamlessly manage their patients through the care continuum.
This provider support has enabled the facility to develop numerous clinical programs, including specialized cardiac program and the resort has gained a reputation of the community for being able to effectively rehabilitate a wide variety of medically complex flex patients.
Not only has this careful coordination with continuum partners resulted in improved outcomes and reduce re hospitalization rates. It has also led to increased revenues as many patients continue to receive outpatient rehabilitative services post discharge.
The team at Plano is create full transparency with their partners, giving them access to key metrics that impact outcomes and costs.
Likewise Maxon Steven are attuned to the needs of their market and are constantly sharing and shifting and the adapting to meet those needs.
They have become the standard of the coordinated care in a very competitive north Dallas market entered the absolute facility of choice.
And this last year the have seen their efforts result in a 58% EBITDAR increase.
This quarter compared to the prior year quarter, we look forward to what they will continue to achieve.
Another similar example of the standard of excellence is found as Chandler post acute.
Located in the Phoenix suburb of Chandler, Arizona over.
Over the past five years leaders Chandler monks, CEO and Jamie Gertie COO and their team have developed deep relationships with their local health care continue.
They have strengthen these relationships by consistently evaluating and adapting their clinical programs to meet their partners' needs for.
For example in 2018, they learned that health plans on hospitals were struggling to place the ha.
<unk> complex dementia patients.
The next year, receiving specialized training modifying part of the physical plant and partnering with the communities top behavioral health care providers.
Finally in the fourth quarter of 2019, they open their specialty unit for these complex patients one of only for such units in the entire state of Arizona.
The unit quickly grew to 100% of occupancy with the waiting list and as it grew so did the facilities reputation for achieving great outcomes of other high acuity patients.
As the results throughout the past four quarters. Despite the pandemic Chandler post acute has grown managed care census by nearly 50% and during the first quarter of 2021 occupancy averaged over 97%.
They are clinically driven model and the market focused initiatives have also boosted the financial results with revenues, increasing by 28% and EBIT.
The EBIT improving by 106% when compared to the first quarter of last year.
But the impact of churn Theres post acute goes far beyond these financial results and then even beyond improving the lives of patients equally.
Equally important these leaders have pioneered ways to recruit and retain high quality nursing staff.
In fact over the past two years, Jamie spearheaded a leadership development curriculum for clinicians, which has provided hundreds of nurses with management skills and produced eight new directors of nursing, who are now leading ensign affiliated facilities throughout the Arizona.
These operations and these leaders represent this new standard of post acute excellence, we referenced earlier.
It represents the stark difference from the traditional model of nursing home care and demonstrates transformative integrated health care execution and partnership for our growing senior population.
Our leaders of driven to transform and dignified post acute care in the eyes of the world and we are grateful for their continued progress towards that goal.
With that I'll turn the time over to Suzanne to provide more detail on the company's financial performance and our guidance and then we'll open it up for questions Suzanne.
Thank you Barry and good morning, everyone detailed financials for the quarter are contained in our 10-Q on press release filed yesterday.
Additional highlights for the quarter include.
GAAP diluted earnings per share for the 86, representing an increase of 17% over the prior year quarter.
Adjusted diluted earnings per share with 87 time, Inc.
We have 13%.
For any of your acquired.
Consolidated GAAP revenues of $627 3 million adjusted revenue of 626.
Sure.
The increase 4% over the prior year quarter.
GAAP net income was 49 2 million.
I think the 25% over the prior year quarter share.
Net income was 49 six time, Inc.
For the 55% over the prior year quarter.
Other key metrics as of March 31st include cash on cash equivalent of 155 guidance.
Inc.
Cash flow from operations for the quarter with 74 for three nine.
And.
342 million of the guarantor.
On our revolving line of credit.
We continued to Delever, our portfolio achieving a lease adjusted net debt to EBITDAR adjusted EBITDAR ratio of two three times These inc.
Treatments are royalty growth in our EBITDA from same store transitioning and newly acquired operations.
The cash collection.
Also the 90 for Apple 70 for all of which are Unlevered with significant equity value that provide us with even more of a credible.
As Gary mentioned in March we repaid all of the remaining funds from the Medicare advanced payment program for the $110 million.
In addition, we returned all provider relief funds that we have received to date, which as of April 2021, total over $152 million.
The suspension of the 2%.
<unk> was recently extended through December 31, 2021.
The suspension has and will continue to have a positive impact on our revenue depending on how the pandemic effects on Medicare census.
Last week, the public health emergency with extended for another 90 day on July 22021, with the extension of Federal government will continue to provide increased net cents to the state however, Medicaid reimbursement and the timing of payments vary substantially by state.
Currently we anticipate Q of the states in which we operate will continue to have approved funding through July 2021.
We are increasing our 2021 annual earnings guidance of $3 44 to $3 56 per diluted share.
$3 54 to $3 and 66% per diluted share and are reaffirming our annual revenue guidance of $2 62 billion Q six 9 billion the net.
Of the 2021 earnings guidance represents an increase of approximately 15% of our 2020 results.
Our increased 2021 guidance is based on diluted weighted average common shares outstanding of approximately $57 8 million.
The tax rate of 25%.
The inclusion of acquisitions closed in the first half of 2021, the exclusion of losses associated with startup of operations, which are not yet stabilized the inclusion of anticipated Medicare and Medicaid reimbursement rate increases net of provider tax and the recovery of the COVID-19 pandemic with the primary exclusion coming for.
Stock based compensation.
Additionally, other factors that could impact quarterly performance include variations reinvest for first on systems, the ladies and changes on state budgets seasonality in occupancy and skilled mix the influence of the general economy on our census, and staffing the short term and type of acquisition activity variation on insurance accruals surgeon.
COVID-19 and other factors and with the.
I'll turn the call back over to Barry Barry.
Thanks, Suzanne we want to again, thank you for joining us today and express our appreciation to our shareholders for their confidence and support.
We recognize the heroic efforts of our nurses therapists and other frontline care providers, who of courageously phase of this pandemic.
And provided of life enriching care to our residents and their families.
We're also appreciative to our colleagues at the in the service Center, who are working tirelessly to support our operations and enabling us to succeed in spite of the challenges we faced.
Thank you for making us better every day.
We will now turn to the Q&A portion of the call. Joining US also today is our chief operating Officer Spencer Burton.
Jonathan can you. Please instruct the audience on the Q&A procedure, certainly ladies and gentlemen, if you have a question at this time. Please press Star then one on your Touchtone telephone. If your question has been answered and you'd like to remove yourself from the queue. Please press the pound key.
Our first question comes from the line of Frank Morgan from RBC Capital. Your question. Please.
Good afternoon.
I guess, maybe starting at the macro level of just with the proposed rule coming out for.
On the sniff reimbursement thoughts around the market basket update and then also on the.
Your initial thoughts on this commentary about Recalibrating for PDP M would be my first question.
Yes.
Good afternoon at the Ann Thanks for asking that question I think where we've typically see net market basket has been a little bit higher net I think that forecasting error. If you took out the forecasting are at the point of 8% for that.
That's kind of more on our typical range that we're testing the market basket came in around that.
On behalf of $2 three so that was a little bit lower than what we had on our initial guidance.
So that was a little bit of a decrease for US Nice Inc. On the additional amount that you had mentioned on the PDP M.
<unk> Recalibration.
Have a couple of different thoughts on that right the 5% that they've identified as the potential recalibration.
Then a couple of different ways that we broke out in all of it.
But over a period of time, we have the opportunity the operationally adjusted over that now.
John right away.
We think that that's going to be harmful for people who are in a really tough situation right now and but for us it actually gives us some opportunity maybe on the acquisition front to really take and get.
Some of those acquisitions, where people can't make it anymore.
What would be your response like when you when you give you of comments back to them about this recalibration assumption.
Yes.
The first question is it simply just suggesting the phase of the on over time or do you see anything structurally wrong with how it's being implemented or do you think is being adversely affected by COVID-19.
That would be of follow up.
Yes, it's a great question Frank we've submitted our response fact, we just did that yesterday and in it were similar similar themes of what you've just identified yes on both.
First and foremost.
Sure.
We feel that there is some some deficiencies on the analysis that was done.
As it relates to the budget neutrality, just given the nature of the pandemic the complexity of the patients and we we lined out those details in our response.
On.
The second to that the question of timing look we're not as concerned about that ultimately as we are making sure that the analysis is done right and like Suzanne said.
Certainly I think most of the prefer that it's spread out over time that theres, a long enough runway to.
To have before that would go into effect, but there is a small part of us that debt.
The.
If it all happened at once it would be bad for.
Everyone in the very short term, but but most importantly for the poorly capitalized companies that just.
Hanging on bye bye bye of thread right now for us.
Most of undoubtedly create a pretty large buying opportunity, which.
It wouldn't be a horrible thing for us to see.
Right and obviously <unk> had lots of.
Cost reduction.
The reduction programs in place.
Cost management programs in place, but where do you think about sort of the opportunities to offset this as it is it really more is it more on the cost side is it something you can do on the revenue side that you see as an offset of this word against group.
Yes, sure I mean, we.
As we look at our our kind of returned to fundamentals.
As we enter kind of of post COVID-19 environment, hopefully that's here to stay we're already seeing operational adjustments that are there.
Really encouraging, but but even more fundamentally PDP M is still if you remember we only had a few months.
Of the new program.
Right before the pandemic hit.
So we werent we werent.
We werent fully on.
Operationally up to snuff as much as we would've liked to have been yet and there are many things that of kind of gone by the wayside over the last year and change that the.
We've got the either Relearned retrain and then we get better at we just feel like there's a lot of opportunity for us to capture the complexity of the patients that we take under this new program then thats, what Suzanne was referencing before as we as we really retrenching.
Re learning that system, we feel like Theres just operational opportunity.
The reimbursement opportunity that is yet to be tapped into as we get better learning that system.
Got you and obviously your expectations around.
Occupancy continues to improve over the as the as the COVID-19.
Subsides.
Do you really feel how.
How comfortable are you with your ability to really sustain the momentum you've got from this <unk> acuity Medicare.
Commercial or Medicare advantage population moving forward or do you think this is a <unk>.
Something that you should be able to sustain going forward or you you would expect us to kind of lean back somewhat as COVID-19 subsides.
So this is Spencer it's a good question and the.
The answer is we never know for certain but there is a lot of evidence that we fundamentally can continue to have a changed and higher percentage of our population be.
Of the skilled nature, but we're not going to focus exclusively on that with the occupancy that we currently have there is opportunity to add incremental census in any area and its going to be positive to our operations and Theres also some fluidity between the two buckets.
You're admitting a lot of skilled patients and some of them are.
Turning over to of long term care patient, that's a positive thing too so.
Our focus is mostly on growing occupancy with quality payors.
Not so much.
Differentiating between if it's Medicare or Medicaid or.
Or if it's a managed care and then also recognizing that when properly.
Managed and properly cared for our long term care payers can be of benefit to our business as well as to the communities we serve as well.
Got you last one for me labor.
A lot of discussions across all provider groups about the labor and use of contract labor maybe.
A little commentary there would be appreciated and as that started to change in any way and what are your thoughts over the balance of the year.
Yes.
We're super fortunate in that our use of contract labor, although higher than where we like it to be.
<unk> is nowhere near what others are experiencing and I think that speaks to our leadership model on our culture.
We've seen ebbs and flows during the kind of the different phases of of the pandemic and certainly with fatigue.
Some of the staff settling in a little bit there.
There has been more than we'd like to see in the early part of this year, but again certainly much less than most of our competitors thankfully.
We've seen spikes in wages that have coincided with us doing additional compensation during challenging phases.
But we're seeing our wage wages come more under control and and non.
Structurally or fundamentally any higher than we would expect it expect them to see year over year, which is which is.
Assuring to us that we can actually recovering kind of return to somewhat.
Kind of normal.
Wage.
Kind of of wage pathway as we as we.
Return to our fundamentals, but.
Yeah.
It's going to be kind of of macro challenge that everyone will deal with.
In health care, just given what we've gone through but we feel like again like our model is poised.
Make sure that we can recover appropriately remember, we don't thankfully have to deal with unionized labor.
And that allows our leaders of lot of flexibility to reward and help compensate staff for the for the good work that they're doing so.
That certainly helps us to be able to manage this closely and effectively at an operational level.
I think theres never been of time operationally, where we've been more focused on our facility by facility culture of cost of.
Making sure that our employees are cared for and that they are able to provide care for the residents because they feel valued and they feel like they are the number one priority. So it's actually it's a positive thing for US right now because its a return to that fundamental of taking care of our employees and that always works over time.
Okay. Thank you very much good group.
Thanks Frank.
Thank you. Our next question comes from the line of Scott Fidel of from Stephens. Your question. Please.
Hi, Thanks.
Happy Friday, everyone.
First question just wanted to ask about.
EBITDA margin trends in your thinking around normalized margins.
Obviously theres been a number of different moving pieces during the pandemic, but you've been able to deliver very strong overall margins in interest interested if as things sort of somewhat back to normal in the Medicare patient mix moves back to pre COVID-19 levels, how that influences your thinking on margins and whether you see that.
The recent trends as sustainable.
Yes, Scott it's a great question I think if you kind of look over the last five quarters you know for this quarter as we were very.
And the.
But if you kind of go back to Q1, 2020, and really kind of a debt hot as kind of on Kal maybe that last week of March and so when you look at margins on how we are performing on the margins basis, we were doing really well on that quarter.
Pretty comparable on the EBITDA margin basis to what we were gearing now at Lalor.
On the Madden said I think that as we continue to ask the interim Vincent mentioned throughout the that occupancy based on how on the occupancy both Carla.
To maintain that skilled mix.
Having that continue to grow as of.
Overall as the overall occupancy grows and so maybe the percentage of it goes down a little bit the power for all non Brian the count of individuals' continues to increase.
The margins are kind of go.
Go back to maybe that key one 2020 on the maybe a little bit for for that margin basis.
Okay.
Got it.
Follow up question, just wanted to touch a little bit more on on the outlook for occupancy.
You referenced the.
The seasonality that typically plays out in the business and just wanted to make sure. So we're modeling that has I guess as accurately as we can obviously there are still unknowns about COVID-19 and things like that I think traditionally your seasonality has been more around the summer volume sweat.
There are some dampening effect on occupancy so.
Would you think it's reasonable to think about you've had some recent momentum on occupancy that sort of continues into the second quarter. The third quarters, where we see some more of that seasonality impact that you've traditionally seen and that you would expect of re ramp in the occupancy in the fourth quarter of getting the winter months as is that a reasonable way to.
Think about on or any any thoughts on that would be helpful. Yes.
Yes, that's exactly right you are thinking about it exactly the right way.
The only caveat I would offer there is that.
We were recovering from a pandemic and so it adds some uncertainty but.
Given the GAAP of where we are today from an occupancy standpoint.
Where we think we will be especially as is.
Hospital utilization and managed care utilization.
Starts to increase which it has been pretty consistently over the last several months.
Our hope is that some of that pent up demand will buffer some of that typical summer seasonality. So.
That might play to our favor, whereas normally we would expect occupancy to go.
Go down.
Okay.
And then just last one for me.
Already gave on just some thoughts on the proposed 2022 right.
Right and the PD TM proposed Rebased Matt.
Just interested if it sounds like you've now updated youre thinking to already.
The lighter in that one 3% proposed just wanted to confirm that's the case and then also.
The sort of lobbying efforts. Obviously this is a proposed rule and.
The skilled nursing industry adds the space a lot of pressure.
During the pandemic Zhou Hao.
How are you thinking about the industry's prospects for potentially lobbying for.
On maybe some improvement as we get to the final rate and that's it for me. Thanks.
Yeah.
Question, I mean, I think theres two components right. The one part one of the one pieces of the market basket. The second part is the value based components on the value of this component there of holding everyone equal.
True.
Now we talk a lot about the quality that we provide on how successful we are with the overall quality that we provide.
So when we have a flat rate where everyone in the industry is treated equally we actually get penalized from that so that's a component of it and I think with all of the COVID-19 adjustments out there I think that that's probably something that theyre going to have to leave and it's probably a harder point for them to move off of just because it's harder for people to measure on that <unk>.
<unk> day based on the component and then on the second part of I think right now, yes, we did build that into what we put out there obviously we're not.
Yeah, seven Dan, but on where and we're still continuing to participate as Barry mentioned earlier in the lobbying efforts of trying to get people to understand the impact on the timing of this maybe isn't the greatest thing for the industry as a whole right now.
Yes.
No.
We believe fundamentally that reimbursement through PD PM has been absolutely appropriate through the pandemic.
I know, it's easy for us to say.
But if you take bias out of it just it's aligned with the.
The level of complexity of the patients that we've seen over the past 12 months.
As the amongst the highest we've ever seen I mean these are.
A typically very very sick patients and the level of of care and the amount of interventions required to care for those patients is obviously.
Much higher.
We've made those points.
Our industry Association is very strong has very good ties the CMS they have.
Really good ongoing dialogue with them I think they're generally opened they've kind of been firm in the coming out in their stance on on the budget neutrality issue.
We'll see how it plays out I mean, we're not overly worried about it one way or another in the end.
We know we'll be we'll be fine and it will create opportunity one way or the other for us so.
We will see what happens theres really no weighted completely tail.
And I think just remembering that we're never just focused on what the market basket increases one of the things that we've done so well over the years is really look at the overall acuity that we're bringing on right.
If you look back at what our rate increases on our year over year never equal on the market basket rate increase and Thats because were continuing to share Thanksgiving on each one of our skilled nursing facilities and that's not of share, but the operators for getting on and so I think one of the things that we're trying to communicate this to you just to help you understand the story.
Isn't it just about the market basket increase but it is about the overall continuing shift of that and I think where interest being a little bit.
Yes, the safer right now because that Theres a lot of moving pieces out there with the guidance.
Okay. Thanks.
Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Barry Port for any further remarks.
Thank you Jonathan and thank you everyone for joining us today as always we appreciate.
Everyone's support and questions have a good day.
Thank you, ladies and gentlemen for your participation on today's conference. This does conclude the program you may now disconnect good day.
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Yes.
Okay.
Okay.