Five Star evaluates skilled nursing business to address revenue, occupancy challenges

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Five Star CEO Bruce Mackey
Five Star CEO Bruce Mackey

Five Star Senior Living is evaluating all of the skilled nursing units within its continuing care retirement communities to determine whether the space might be more profitable if used differently, President and CEO Bruce Mackey said Thursday on the company's second-quarter earnings call.

“We've talked about our Rehab to Home program in the past, but in addition to that, we will determine if skilled units will be more profitable as other types of senior living operations where the demand is evident,” he said.

Five Star's senior living / post-acute revenue for the second quarter decreased 3.5% to $270.9 million from $280.9 million in the same quarter of last year, Mackey said. “The biggest driver of our comparable-community revenue decrease year-over-year was the skilled nursing revenue originating from our stand-alone skilled nursing communities as well as our CCRCs,” he said. “Together, our comparable stand-alone SNF and CCRCs were down $6.4 million, or 8.1%, in skilled nursing revenue compared to the same quarter last year.”

Occupancy at the company's leased SNFs was 74.7%, down 500 basis points from the second quarter of 2017, Mackey said. “We're seeing a similar trend in the skilled units at our CCRCs,” he added.

Length of stay is decreasing as accountable care organizations and managed Medicare programs try to save money by requiring patients to bypass skilled nursing facilities and receive care at home, he said. “This is causing not only a decrease in occupancy, but also a shift in our payer mix from high-reimbursement Medicare to lower-reimbursement Medicaid,” Mackey said.

IL, AL revenues flat; memory care competition remains ‘fierce'

Revenues for private-pay independent living and assisted living communities combined were flat, the CEO said. Memory care revenues, however, were down 6.3%, or $1.8 million, on a comparable-community basis in the second quarter compared with the same quarter of 2017, he said.

“Memory care was a portion of the private-pay business where we were not be able to overcome occupancy loss with increased rates, as it has been consistently one of the fiercest sources of competition in our markets,” Mackey said.

Occupancy in Five Star's owned and leased independent and assisted living communities was up. Occupancy in the owned communities increased from 80.7% in the first quarter to 81.1% in the second quarter. Occupancy in leased communities went from 83.4% to 83.6% in the same time.

Mackey credited the company's new revenue management program for an increase in move-ins. The program currently is being used in 100 communities, with eight to 10 communities being added every month, he said.

Managed communities using the program have seen move-ins increase 7% year over year compared with the second quarter, Mackey said, whereas move-ins at communities not using the program saw a 3% decrease year over year.

The situation also is more positive at Five Star's rehab and wellness division, known as Ageility Physical Therapy Solutions. There, revenues for the second quarter were $8.7 million, a $1.3 million increase, or 17.1% more than the second quarter of 2017, Mackey said.

The division now operates 111 outpatient clinics, 10 of which are not affiliated with a Five Star community, he said. Five Star is looking to open more, Mackey said.

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