Q4 2024 CareTrust REIT Inc Earnings Call
Karen: Thank you for standing by. My name is Karen, and I will be your conference operator today. At this time, I would like to welcome everyone to the Care Trust Read Fourth Quarter 2024 Earnings Conference Call.
Karen: All lines have been placed on mute to prevent any background noise. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star followed by the number 1 on your telephone keypad.
Speaker Change: To withdraw your question, you may press star followed by the number 1 again. I will now turn the call over to Lauren Beale, Care Trust Chief Accounting Officer. The floor is yours.
Lauren Beale: Thank you and welcome to Care Trust REIT's fourth quarter 2024 earnings call. We will make forward-looking statements today based on management's current expectations, including statements regarding future financial performance, dividends, acquisitions, investments, financing plans, business strategies, and growth prospects.
Lauren Beale: These forward-looking statements are subject to risks and uncertainties that could cause actual results to materially differ from our expectations.
Lauren Beale: These risks are discussed in Care Trust REIT's most recent Form 10-K and 10-2 filings with the FDC. We do not undertake a duty to update or revise these statements, except if required by law.
Lauren Beale: During the call, the company will reference non-GAAP metrics such as EBITDA, FFO, and FAD, or FAD.
Lauren Beale: A reconciliation of these measures to the most comparable GAAP financial measures is available in our earnings press release and Q4 2024 Non-GAAP Reconciliation that are available on the Investor Relations section of CareTrust's website at www.caretrustreit.com.
Lauren Beale: A replay of this call will also be available on the website for a limited period.
Speaker Change: On the call this morning are Dave Sedgwick, President and Chief Executive Officer, Bill Wagner, Chief Financial Officer, and James Callister, Chief Investment Officer. I'll now turn the call over to Dave Sedgwick, CareTrust REIT's President and CEO. Dave?
Speaker Change: Thank you and good morning everyone and thank you for joining us as we kick off what we hope to be another very strong year at CareTrust.
Speaker Change: It's worth stepping back to consider the broader macro environment. A couple of years ago, when the Fed raised interest rates more aggressively than any time in our country's history, financial markets, and the REIT sector in particular, faced serious challenges.
Speaker Change: However, because we had driven down leverage and built up our dry powder, we were uniquely positioned to capitalize on a window of opportunity that opened and continues open to us today.
Speaker Change: The elevated rates drove many banks and investors to the sidelines and drove more and larger deal flow our way.
Speaker Change: We maximize the opportunity by recalibrating the team, deepening strategic relationships, and working flat out, resulting in $1.5 billion of investments, essentially match-funded, with $1.5 billion of equity issuance from both the ATM and a follow-on offering.
Speaker Change: The full effect of last year's activities will result in meaningful FFO per share growth this year without any new investments.
Speaker Change: Today we are one of the rare reeds that is largely indifferent to a higher for longer outlook.
Speaker Change: If rates come down, we will certainly benefit, but if they don't, our balance sheet, our portfolio, our access to capital, the opportunity set in front of us, and our team are all in a stronger position today than we were going into 2024.
Speaker Change: Our mindset to maximize the window of opportunity open to us has not changed. Neither has our underwriting discipline that has made our portfolio so secure and resilient.
Speaker Change: We do not grow for the sake of growth. We remain laser focused on long-term FFO per share growth.
Speaker Change: For us, that will always only be achieved by matching the right operators with the right opportunities and setting them up for success.
Speaker Change: In our view, the right operators are those who first take care of their employees so that their employees can, in turn, take care of their residents and patients and loved ones.
Speaker Change: With respect to those operators in our portfolio, we continue to enjoy exceptional lease coverages overall at 2.82 times EBITDARM and 2.21 times EBITDAR.
Speaker Change: Our top 10 tenants, which account for approximately 80% of triple net revenue, are covering at 3.02 times EBITDAR and 2.37 times EBITDAR.
Speaker Change: Furthermore, looking at the many acquisitions made last year, the early performance is in line with expectations.
Speaker Change: The operating environment in general continues to stabilize, with most parts of the portfolio at or ahead of pre-pandemic occupancy, skilled mix, and coverage.
Speaker Change: Of course, there's some noise and speculation about what the new administration means for skilled nursing.
Speaker Change: It's too early to be definitive, but our conversation with policymakers, lobbyists, operators, all lead us to believe that the minimum staffing rule will be reversed.
Speaker Change: and that Medicaid and Medicare will continue to be unchanged as the cornerstones of health care in general and skilled nursing in particular.
Speaker Change: Our operators continue to post superior star ratings and quality measures compared to the industry at large and to their respective state averages as well. We count ourselves truly blessed to be able to associate with some of the best operators in the country.
Speaker Change: and we can't thank them enough for all they do for their employees, patients, and residents.
Speaker Change: Not to mention the security and tailwinds they provide us and our investors.
Speaker Change: With this solid foundation, we are poised for another year of significant external growth if deal flow is even close to last year.
Speaker Change: On January 1st, we effectively woke up to double-digit FFO per share growth on a run rate basis without accounting for any additional investments.
But we are absolutely not resting on last year's records.
Speaker Change: We continue to execute our long-term strategy and zealously pursue investments that will expand and diversify the portfolio.
Speaker Change: James will provide color on the pipeline and the broader opportunity set in front of us. I'll just say this, I've never been more excited about our current trajectory and potential for growth. If you liked our story last year, I think you're going to love chapter 2025. James.
James Callister: Good morning, everyone. During 2024, PeerTrust completed new investments totaling just over $1.5 billion at an estimated stabilized yield of 9.7%.
James Callister: The investments range in size from one facility to 46 facilities, from less than $5 million to over $450 million, from real estate acquisitions to acquisition financing, MES lending, and preferred equity investments.
James Callister: We finished off the year with what is, for us, an unprecedented quarter of investment activity, with every department in the company putting an impressive effort to close approximately $700 million of new investments.
James Callister: at an estimated stabilized yield of 9.9%. During the quarter, we added 81 triple net facilities to the portfolio along with several new operators.
James Callister: Subsequent to the fourth quarter, we have closed on approximately $26.8 million of additional investments at a yield of 10.6 percent.
James Callister: These investments include the acquisition of the 28th and final facility related to the large Tennessee transaction previously announced in December at an initial contractual lease yield to CareTrust of approximately 9%.
James Callister: We also funded approximately $6.4 million under a mezzanine loan related to a small portfolio of skilled nursing facilities in Maryland at an initial yield of 13.2%.
James Callister: Our investment pipeline moving forward continues to be robust as we look to continue 2024's momentum into 2025. The reloaded pipeline today sits at approximately $325 million of real estate acquisitions and consists of some singles and doubles as well as some mid-sized portfolio transactions.
James Callister: Not included in our quarter pipeline are a couple of larger portfolio opportunities.
James Callister: The pipeline primarily consists of skilled nursing facilities, but also includes some seniors' housing.
James Callister: Please remember that when we quote our pipe, we only quote deals that we are actively pursuing under our current underwriting standards. And then, only if we have a reasonable level of confidence that we can lock them up and close them within the next 12 months.
James Callister: We continue to look at a healthy flow of marketed opportunities as well as off-market deals brought to us by existing operators and other relationships, including relationships garnered through our decision over the past couple of years to lend with a purpose.
James Callister: Our primary focus has always been, and will remain, on sourcing and executing on accretive real estate acquisition opportunities.
James Callister: With that said, we expect to continue to receive inbound requests for loans and will selectively pursue lending opportunities that we feel will lead to attractive real estate acquisitions in the future with best-in-class operators.
James Callister: As we turn to 2025, the consistent flow of inbound opportunities, both marketed and off-market, has us feeling highly optimistic that with our built-up team, our 2025 investment activity will continue to build on last year's results.
Bill Wagner: The combination of our access to capital, a focus on accretive transactions with quality operators, and the strong ongoing demand for post-acute and senior care provide an ample runway for pipelines of future growth during the coming year. With that, I'll turn it over to Bill.
Bill Wagner: Thanks, James. For the quarter, Normalized FFO increased 68.1% over the prior year quarter to $72.9 million, and Normalized FAD increased 63.7% to $74.3 million.
Bill Wagner: On a per share basis, Normalized FFO increased 4 cents or 11.1% to 40 cents per share, and Normalized FAD also increased 4 cents to 10.8% to 41 cents per share.
Bill Wagner: During the fourth quarter, and in order to match fund our previously announced robust pipeline, we closed on an overnight offering raising net proceeds of $487 million at $32 per share, which pre-funded the November and December investment closings.
Bill Wagner: As of today, we have $180 million of cash after funding those investments.
Bill Wagner: and after funding January and February investments and after receiving the tenant purchase option exercise that closed on February 1st of $44 million and also after making our dividend payment which is now roughly $55 million per quarter.
Bill Wagner: In yesterday's press release, we initiated guidance for the year with normalized FFO per share of $1.68 to $1.72 and for normalized FAD per share of $1.72 to $1.76.
Bill Wagner: This guidance includes all investments made to date, a diluted weighted average share count of 187.5 million shares, and also relies on the following assumptions.
Bill Wagner: One, no additional investments nor any further debt or equity issuances this year.
Bill Wagner: to CPI risk rent escalations of two and a half percent.
Bill Wagner: Our total cash rental revenues for the year are projected to be approximately $279 million.
Bill Wagner: Not included in this number is the amortization of lease intangibles that will total about $3.5 million, but this will be in the rental revenue number as required by GAAP.
Speaker Change: 3. Interest income from financing receivables of $11.5 million. Included in this number is $9 million of cash and $2.5 million of non-cash revenue for gap purposes that is subtracted in the FAD reconciliation.
Speaker Change: or interest income of approximately 84 million. The 84 million is made up of 76 million from our loan portfolio, and 8 million is from cash invested money market funds.
Speaker Change: Five, interest expense of approximately $21.3 million. Interest expense also includes roughly $4 million of amortization of deferred financing fees. And six, G&A expense of approximately $30 to $37 million, and includes about $11.7 million of deferred stock comp.
Speaker Change: This guidance represents a range of FFO per share growth of 12% to 14.6% and on FAD per share of 11.8% to 14.4% without any additional investments.
Speaker Change: Our liquidity continues to remain strong. In addition to cash on hand, we have $1.2 billion available under our new revolver which closed in December.
Speaker Change: Leverage continues at historic lows with the net debt to normalized EBITDA ratio of 0.5 times. Our net debt to enterprise value was 3.5% as of quarter end and we achieved a fixed charge coverage ratio of 17 times.
Speaker Change: Lastly, towards the end of Q4 and into Q1, we have seen the cost of our equity increase
Speaker Change: While the cost of our new revolver has decreased to where it may make sense to begin utilizing our new large credit facility and then decide how we want to term out those draws. We still love having all options on the table with respect to financing our robust pipeline. And with that, I'll turn it back to Dave.
Dave Sedgwick: Great. Well, we hope the report's been helpful and happy to take your questions now.
Speaker Change: At this time, I would like to remind everyone in order to ask a question. Press star, then the number 1 on your telephone keypad. We will just pause for just a moment to compile the Q&A roster.
Speaker Change: Your first question comes from the line of Wes Goloday from Baird. Please go ahead, your line is open.
Wes Goloday: Hey guys, looking at last year, you know, Pats was a big driver of the investment activity, really strong year. When you look at the pipeline now going forward, do you see that start to broaden out? And more specifically, the portfolios, the larger portfolios, would those be with new operators?
Wes Goloday: Yeah, I think this, I think what you'll see this year is what you've seen from us in the past, which is.
Wes Goloday: expanding with existing operators and probably adding some new ones. With respect to large portfolios, those are kind of too early to to really talk about at this point.
Speaker Change: Your next question comes from the line of Pharrell Granas from Bank of America. Please go ahead, your line is open.
Speaker Change: Hi, good afternoon. Thank you for taking my question. I did another question about PACS going forward I was wondering if you could make some commentary on your conviction as well as is there any bad debt associated within your guidance either to Either offset if there were to be an outcome on their current situation
Speaker Change: No, there's no bad debt at all in our guidance, and we certainly don't expect any from PACS or any of our operators this year.
And so with respect to PACS, it's
Speaker Change: It's too early to really make any comments before they are able to release their results, so we'll wait for that.
Hope to hear from them soon.
Speaker Change: Great and just one more from me just in terms of your pipeline where are you seeing cap rates either shift and are you seeing any compression going forward?
Speaker Change: No, cap rates are really staying where they always have for skilled nursing, the 12.5 to 13.5, I would say somewhere in there, and that remains consistent with yields in somewhere in the 9 to 10 range. On seniors' housing, maybe a little bit of compression, but...
Nothing that's all that notable at this point, no.
Okay, thank you very much.
Speaker Change: Your next question comes from the line of John Kielichowski from Wells Fargo. Please go ahead, your line is open.
Speaker Change: Good afternoon. Thank you. Maybe, Bill, if we could start with your last comment that you made on the call before we turn it over to Q&A. You said your cost of debt is becoming a little bit more attractive here and that cost of equity has creeped up.
Speaker Change: Could you give us some sort of guardrails on actual numbers around the calculus of what you're looking at here and maybe a more definitive answer so we can understand in our models how you're thinking about it?
I'm sure.
Speaker Change: Well, I'll begin with we have a stated range of net debt to EBITDA four to five times.
Speaker Change: Obviously, if we draw the revolver, we have a long way to go to get to that range. I think depending upon our investment pipeline, the quoted pipe, and then call it the
Speaker Change: the funnel to the pipeline. It all depends on how that investment flow
Speaker Change: as to how we will either use our revolver or issue equity under our ATM. If we see a lot of deals
Speaker Change: at yields that call it were what they were last year. I still think it makes sense to use a portion to fund using equity.
Thank you.
Speaker Change: but again it's it's a decision that is based on what we see beyond our quoted pipe.
Speaker Change: Got it. And then maybe if I might jump over to Medicaid here. And Dave, you made this comment earlier where you
There's a great sense of confidence that
Speaker Change: these discussions around Medicaid cuts and Medicare fraud investigations won't hit you all. So maybe more on the Medicaid side, what gives you the confidence to say that? And if there were to be cuts, where do you think they would be? And again, why do you think that they would not sort of touch the SNF space?
Well.
Speaker Change: It's really just too early to be, like I said in my prepared remarks, very definitive on it.
But if you...
If you read what
Speaker Change: House Speaker Johnson said just a couple of days ago and you take him at his word and what President Trump has recently said about Medicaid
Speaker Change: I think we would say we'd have more reason to believe that it will not be touched than it would be.
Speaker Change: Speaker Johnson just Tuesday said Medicaid has never been on the chopping block.
Speaker Change: and that they're just looking for fraud, waste, and abuse, which of course we would we would applaud as well.
Speaker Change: They have, there's bipartisan support for Medicaid as it is today and you have a Trump administration who in the first administration was incredibly supportive to the skilled nursing space.
Speaker Change: and we expect that that same type of understanding of the importance of Medicaid.
and the bipartisan support for it to continue.
Got it. Thank you.
Speaker Change: Your next question comes from the line of Austin Werschmidt from Key Bank Capital Markets. Please go ahead, your line is open.
Austin Werschmidt: Great, thanks. Bill, I just want to go back to your answer to the last question and also your comment in the prepared remarks about, you know, the source of funding kind of will depend on, you know, the pipeline in front of you, but, you know, the pipeline today at 325 million is,
Austin Werschmidt: They're somewhat larger than maybe the average it was at various periods last year, points in time. And the team still seems very bullish on opportunities ahead.
Austin Werschmidt: I mean, should we take the comments about, you know, it may make sense to use the credit facility, you know, in the near term and term that out as, you know, any sense that there's an air pocket in deal activity immediately in front of you and that then you'll take it in stride, you know, as the year progresses and you have a little better visibility?
Thank you. Thank you.
Speaker Change: Well as it relates to the quoted pipe of 300 plus million, first we'll use cash on hand. So that's going to take out a large portion of that.
Austin Werschmidt: I don't think we see right now any air pockets in our investment pipeline. It continues, as it did last year, to replenish.
So that gives us
So, that causes us pause each time we go.
Austin Werschmidt: to sign up a deal as to how we want to invest it, how we want to fund it.
Right now, we do like the price of our equity.
Austin Werschmidt: And I would say we would continue to fund using equity, but having that revolver come down in pricing relative to the cost of our equity causes us a little more pause, unlike last year, to possibly maybe use that to fund it.
Austin Werschmidt: That's helpful. And then maybe just, you know, for the team or whomever, you know, does the fluctuations in your stock price, I mean, you referenced you still like the cost of the equity, does that change how aggressive you'd be on more of the
Austin Werschmidt: Call them, you know, value add, you know, investment opportunities where you were willing to maybe take a lower initial lease yield with, you know, potential upside in the coming years. Does that sort of change the, you know, sandbox, if you will, that you're playing in on the types of deals that are attractive to you today?
Austin Werschmidt: No, it doesn't. I think we underwrite each deal on its own.
Austin Werschmidt: we get the right risk adjusted returns that the deal presents to us.
Thanks for the time. Thanks, Austin.
Speaker Change: Your next question comes from the line of Michael Cairo from RBC Capital Markets. Please go ahead, your line is open.
Thank you for watching. Bye.
Michael Cairo: Yeah, thanks. Just talking about, I guess, deal volume, I mean, how should we think about the cadence of the overall investment activity? I mean, it looks like the pipeline today is fairly similar to what it was at the end of 2024. Is that just due to, like, normal seasonal patterns of sellers trying to rush to sell before the end of the year? Or has there been a pause of activity due to the macro uncertainty? I mean, how should we think about that cadence over the last two months or so?
Speaker Change: Yeah, Mike, I'll take this. James, I mean, I don't think there's been a pause in the cadence. I don't think that, you know, we see much of a change in deal flow. It still remains.
Speaker Change: healthy you know we still see deals coming in really weekly so I think that you know if anything you see a rush of closings towards the end of the year as deals you've been working on during the year kind of
Speaker Change: start to having to come to a head and get done and tax planning, et cetera. But I don't think we've seen a meaningful shift in cadence of deal flow coming across our desk.
Speaker Change: In the last 6 to 12 months, it's been healthy and consistent.
Speaker Change: Okay, and then, James, can you provide details on the recent acquisitions, I guess the ones that you're transitioning new operators and you're banking on them stabilizing? I mean, in general, over the past 18 months, have they performed in line with your expectations? So kind of marching back up to that mid 1415 type coverage ratio?
Speaker Change: Yeah I mean some of them it's just too early Mike right I mean Tennessee in particular it's just too early really to see that from when they got in to now we just don't have a full set of
Speaker Change: financials probably that really would show that but on the whole I would say yeah and I think that
Speaker Change: You know, we don't have any reason to believe they're not on track to get where and when we've stabilized them going and I would add that You know a key part of the equation and the risk adjusted return as well as the credit, you know, and and
Speaker Change: The lower coverage going in the more credit we're going to insist on and as of right now we see those performing you know
as projected.
Speaker Change: Okay and then when should we expect to see those coverage ratios start to kind of click into the the SUP and I guess I'm specifically looking at links and I mean great if you could talk about it but I know it's one specific operator so you might not want to give us too many details but I mean I think the first four buildings required in what mid 2023 I mean will that start to roll onto the SUP sometime in 2025?
Mike, probably not because links in particular.
Speaker Change: You might recall we gave them, I think, a two-year ramp in their
their rent to get to stabilization.
and so
Speaker Change: That one in particular had a longer lead time than others. When we acquire new facilities and we bring in new operators, we give them the time they need to wrap their arms around the buildings, get them seasoned and stabilized before we start.
putting that in this up.
Speaker Change: Okay, so for our links, you will give it to us in year three, so which would be 2026, to give us the trailing number for that.
I would expect so, yeah.
All right, great. Thank you.
Speaker Change: Your next question comes from the line of Juan Sanabria from BMO Capital Markets. Please go ahead, your line is open.
Juan Sanabria: Hi, good morning. Just hoping you could talk a little bit more about the pipeline, kind of mentioned seniors housing a couple times. So just curious if there's any more appetite on the senior side, if you're seeing more deal flow there.
Juan Sanabria: And would that include SHOP, which I know you've kind of talked about previously, and just as the last little bit of that, cap rate expectations for the seniors housing pieces of the transactions pipeline.
Thanks, Juan. Yeah, I think we've been.
Juan Sanabria: We've been really interested in looking at seniors and from a shop perspective call it for the last couple years.
I think that interest remains.
Juan Sanabria: And it's all going to just come down to finding the right entry point.
William Wagner
if we can find it.
Speaker Change: Historically, we've always done some seniors housing, just about every year, which has kept the concentration kind of where it has been throughout our ten years.
Speaker Change: But, you know, it remains to be seen. We really have to find that right entry point to go into the shop space.
Speaker Change: Okay, great. And then just going back to Medicaid and political uncertainty.
Speaker Change: You know, one of the avenues being discussed is just pulling back on Medicaid expansion. How do you think that would play through and or impact skilled nursing if that were to come to fruition? Just to...
Speaker Change: to play out that scenario, whether or not it happens or not.
It kind of...
with notwithstanding.
Speaker Change: Yeah, I would not view, if that's the direction that it goes, I would not view that as a serious concern for skilled nursing. I think the bulk of that expansion was for younger able-bodied folks who were added to the Medicaid roles. And if that gets...
Speaker Change: And, you know, if they throw work requirements and different eligibility requirements, I would not expect that to hit skilled nursing.
Thanks for watching. See you next time. Bye. Bye. Bye.
Thank you very much.
All right.
Speaker Change: Your next question comes from the line of Rich Anderson from Redbush. Please go ahead, your line is open.
Speaker Change: Hey, thanks. So, your comments around PACS, you know, I appreciate that. You know, you had a sort of a follow-on, you know, kind of completion in 2025 with them.
Speaker Change: I'm just curious what your appetite is to do work with them at this stage given the uncertainty around them. Would you be open to doing a deal with them today or are you sort of in a holding pattern as it relates to your external growth?
Speaker Change: I think PACS themselves are probably in a bit of a holding pattern until they can release earnings and I think it will wait to see how that
how that earnings release comes out and...
and hope that it's a positive one.
Speaker Change: Okay, fair enough. And then on your shop comments, if so, if you were to sort of get something moving in that direction, where do you see it executing? Would it be acquiring an enterprise that has the people and process in place or would you build it organically?
Speaker Change: I think it's still to be determined. I think you could, all options would I would say are on the table with respect to shop. It's certainly a compelling area for the same reasons why skilled nursing is is such a strong place to be. The demographics are just
Speaker Change: Incredible. In the next five years from now, it's projected that there will be more than four million more
people aged 80 years or older.
So that long-anticipated silver tsunami appears to now be breaking.
And so the demographics and the supply and demand.
Speaker Change: It's obviously a very compelling area that we're very familiar with on the skilled side and a lot of that
leads over to the shop side.
Speaker Change: Okay, and then just one last one for me. In your 1.5 billion of investments last year
Speaker Change: How much of that was sort of the normal course replenishment of your visible pipeline, which is today 325?
Speaker Change: And was there any amount in that $1.5 billion that would be quote-unquote larger portfolio that were in addition to what you characterize as your pipeline? I'm just curious.
Speaker Change: to the makeup of the 2024 external growth platform and how that might be extrapolated into 2025 in terms of deal volume. Thank you.
Speaker Change: Yeah, so the way we handle the the pipe is we quote a number that we have a very high amount of confidence in.
Speaker Change: It certainly is not inclusive of everything that we are underwriting or reviewing or chasing even.
Speaker Change: The bigger the deal, the higher the threshold that we have on it before we include it in the number. So as the year went on, you know, we were certainly working on
For example, the Tennessee deal, right?
Speaker Change: throughout the year but we were not including that until we we really had to because it was it was that certain that we were going to get it done and so we we announced what we feel very confident in
Speaker Change: we execute and we replenish that pipe as we we state a replenished quoted pipeline as deals either close, fall out or
or get replenished.
Speaker Change: So, of the $1.5 billion last year, is it fair to say that 50% of it was this sort of replenishment movement and 50% was stuff that wasn't in that pipeline but, you know, ultimately worked out like in the case of Tennessee? Is that a reasonable breakout of what happened last year?
Speaker Change: You'd have to go back to each time that we updated
Our pipe number.
And compare that with what closed.
Speaker Change: We really did wait until that thing was was signed up and and it was a material Investment which required us to disclose it so
Speaker Change: I think if you factor that if you take that one out maybe from the the quoted pipe numbers along the way that that might give you a better read. Okay, good enough. Thanks very much. You bet. Thank you.
Speaker Change: Again, should you have a question, kindly press star followed by number 1. Your next question comes from the line of Omotayo Okosanya from Doichi Bank. Please go ahead, your line is open.
Omotayo Okosanya: Oh yes, good afternoon everyone. I'm just curious on the Medicaid side from the state perspective as they start to gear up for their for their yearly budget, are you kind of any early indications of what might be happening in terms of just Medicaid reimbursement at the state level in the key states you have exposure to?
Omotayo Okosanya: We don't expect any any negative surprises on that front based on what we've heard from our operators. There's some Just give you one little Piece of color there. There is some building optimism that Texas will see a fair size increase
Omotayo Okosanya: which would obviously be very welcome news to that state that has historically been underfunded.
Omotayo Okosanya: but we've also been disappointed by that type of hope in Texas before too, so besides that I think we're expecting it to be a pretty routine season with respect to Medicaid rates.
Omotayo Okosanya: That's helpful. And then again, sticking to the Medicaid conversation, I appreciate some of the color you've put.
Omotayo Okosanya: on how the government may be kind of thinking about it. But I do think one of the popular themes is this idea of...
Omotayo Okosanya: the government just kind of pulls back on the amount of, you know, kind of Medicaid matching they're doing and they ask the states to be much more responsible for it. Any thoughts around that line of thinking about how, you know, you could see potential evolution of Medicaid?
Omotayo Okosanya: And on the Medicare side, also a lot of thoughts around, you know,
Omotayo Okosanya: they start to push much more Medicare Advantage versus traditional Medicare. And I think, again, with Medicare Advantage, the reimbursement rate tends to be lower to the operators. So again, just any thoughts on those kind of two thoughts around how the Trump administration may attack this.
Omotayo Okosanya: in place for, gosh, I've been in the business 25 years and it's been
Omotayo Okosanya: Part of the discussion this whole time and that's going to continue. I don't expect that to reverse I think that trend will continue and medic and Medicare Advantage will continue to eat into regular fee-for-service Medicare and and so then
That, what am I about?
Omotayo Okosanya: Historically and going forward is the same as true, that the more sophisticated operators are able to adjust to that. They're able to invest in those relationships with the managed care organizations.
and gain share from that.
Omotayo Okosanya: So, yes, it's challenging and there's a lower length of stay, but you can actually capture some share. And if you're really sophisticated, you can net-net, not do too poorly from that. With respect to the FMAP, Tio, I'm going to turn it over to you. Thank you.
You know, I guess just spitballing, you've got.
Speaker Change: a house that does not have nearly the majority that it had during Trump 1.0
And in the first administration.
Speaker Change: You know, President Trump ran on building the wall and repealing Obamacare, health care reform.
Speaker Change: and they were unable to pass any of these types of approaches to chip away at the Medicaid rates.
Speaker Change: and now you have a fairly razor-thin majority and so as they
Speaker Change: As they look at that, I think you're gonna have the same type of opposition.
with much less room for error.
Speaker Change: in the House, but also those Republican governors are not interested in taking on more of that burden. There's just no room, really.
The Cut.
Speaker Change: for Medicaid, for skilled nursing, and I think the states and the federal government are more aware of that today.
Speaker Change: than they ever have been based on what happened with the pandemic.
Speaker Change: If that's helpful, and if I may indulge with one more.
Speaker Change: Just around PACS, again, I know it's a bit of a black box today, but how do you guys kind of think about a worst-case scenario as it pertains to kind of, you know, the current federal investigation, just again, as you guys are kind of handicapping this thing? Like, worst-case scenario is what, in your minds?
Speaker Change: No, we don't really want to speculate on that in this forum. We don't have a worst-case scenario that we're concerned about right now. We think that they're going to be just fine, and we really don't have much more to comment before they themselves are able to comment.
Fair enough. Thank you.
You bet.
Speaker Change: If there are no more questions, I will now wrap up the Q&A session.
Speaker Change: I will now turn the call over to Dave Sedgwick, Chief Executive Officer for Closing Remarks.
Speaker Change: Well, thank you guys very much for your interest and support. Look forward to another very strong year here at CareTrust. Have a great day.
Speaker Change: Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.