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Although profitability for both single-site and multi-site long-term care providers took a major hit during the pandemic, liquidity remained strong, according to a financial data expert.
Ziegler Managing Director Amy Castleberry provided an analysis of the 2021 Financial Ratios & Trend Analysis of CARF-Accredited Continuing Care Retirement Communities during a LeadingAge membership call on Monday.
The analysis is a joint project of CARF International, Ziegler and Baker Tilly. The 2021 edition is the first to reflect the effects of the pandemic and government relief on financial statements.
Single-site providers, Castleberry said, hit an all-time 29-year low in their profitability margins, showing that pandemic pressures hurt almost all organizations, weak and strong. And multi-site providers reached profitability median lows that haven’t been seen in a decade — since the housing and financial crisis.
Divergence appeared in liquidity, she said. Although single-site providers have been building liquidity over the years, multi-site liquidity stayed somewhat lower and more constant. The takeaway, Castleberry said, is that multi-site organizations benefit from location diversification and size, and are generally more comfortable operating on thinner relative liquidity than a single-site organization.
Caslteberry said a surprise was the jump in single-site liquidity.
“We certainly expected profitability to be pressured, but I don’t think we expected it to be pressured as much as it was, and as widespread as it was,” she said. “The jump in liquidity, even with relief funds and loans which we expected to be spent, we were surprised to see it still on balance sheets at year end.”
Overall, long-term care organizations are “in a good position to weather the storm,” Castleberry said. One takeaway from the report, she said, is that although organizations may be well-situated, not-for-profits relied heavily on relief funds and loans to manage through the worst of the pandemic.
Castleberry added that although she believes that organizations could have survived without that relief funding, pandemic pressures will persist into the future.
“All of the labor pressures, insurance expense increases and other expense pressures — we’re not seeing those ease with the waning of the pandemic,” she said. “In 2021 and, likely, 2022, we’ll continue to see pressure on profitability margins.”
Castleberry added that long-term care organizations have managed their debt well and their ongoing cash operations are able to cover annual debt service. Although bankruptcies are not happening on a large scale, she said, those organizations that are experiencing financial problems or see them on the horizon are being proactive in reaching out to other not-for-profit providers as partners.
One concern Castleberry shared was the slowed pace of building, which she said she hopes will pick up to allow organizations to focus on growth, renovations and repositionings to maintain their competitiveness. With low borrowing costs, organizations can afford to implement strategies put in place this year and in prior years, she said.
