The COVID-19 pandemic continues to negatively affect the finances of Kennett Square, PA-based Genesis Healthcare, according to the firm’s third-quarter earnings report, released Monday.
The firm received $64 million in COVID-19 federal and state funding last quarter, but this amount fell almost $60 million short of the combined $123 million of direct COVID-19 costs incurred, in addition to the effects of lost occupancy.
In August, Genesis announced that COVID-19 had led the firm to raise substantial doubt about its ability to continue as a going concern. Since then, Genesis has continued to apply for and receive government-sponsored financial relief related to the pandemic and is currently using the CARES Act payroll tax deferral program to delay payment of a portion of payroll taxes incurred through December. The firm also continues to seek and implement measures to adapt its operational model to function for the long term amid the ongoing pandemic. These measures include pursuing creative and accretive opportunities to sell assets and enter into joint ventures to provide liquidity, the company reported.
Many of these measures depend on factors that are beyond the firm’s control, however, and given the unpredictable nature of the pandemic, Genesis said it may be forced to file for Chapter 11 bankruptcy.
“The revenue loss and incremental increase in expenses from the pandemic have resulted in significant operating losses and cash flow deficits,” noted George V. Hager Jr., the firm’s CEO, during its third-quarter earnings call Monday. “These losses have been temporarily funded by short-term federal loan programs. 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 sustaining operations.”
The firm did report a few bright spots from a financial perspective, however. Both labor and non-labor related expenditures have moderated since the peak of the COVID-19 outbreak in the spring. In addition, occupancy rates have started to improve. Since the end of June, occupancy has grown 230 basis points (2.3%) through October.
“The recovery of census, which has been slower than anticipated industry-wide, is critically important to our ability to return to pre-COVID levels of EBITDAR,” Hager said, referring to earnings before interest, taxes, depreciation, amortization and restructuring or rent costs.
This article appeared in the McKnight’s Business Daily, a joint effort of McKnight’s Senior Living and McKnight’s Long-Term Care News.