Daily Local News (West Chester, PA)
Year proved a difficult one for Genesis HealthCare
Kennett Square company announced several restructuring moves late in the year in an effort to brighten its financial picture
It was a difficult financial year for Genesis HealthCare in 2017.
The problems came to light in November when Genesis announced it reached agreements with several landlord and credit parties, allowing it to reduce fixed charges and improve cash flow.
Then, only weeks later, the New York Stock Exchange put the company on notice it will de-list Genesis if it does not make improvements to meet the minimum financial requirements to stay on the exchange. The nursing home operator was continuing to work on remedies as the year came to an end.
The company also announced a $53 million settlement with the Department of Justice in 2017 to settle claims against several of its subsidiaries.
The setbacks followed another, more positive, reason Genesis was in the news this year. In March, the company broke ground on a $19 million PowerBack Rehabilitation location in the Oaklands Corporate Center in Exton. The building on six acres, which continues to be worked on, is expected to open in the summer of 2018.
The financial struggles of Genesis, whose headquarters have helped rejuvenate downtown Kennett Square, was one of the region’s top business stories of the year.
It was a situation that came to light in the company’s third-quarter report, when Genesis Healthcare announced a US GAAP net loss of $373.8 million compared to $20.5 million in the prior year third quarter.
At the time, Chief Executive Officer George V. Hager Jr. told investors the latest financial restructuring is “a huge, huge step for us bridging to the recovery and moving to the next cycle of this industry.”
Under the plan, two companies that Genesis leases properties from — Sabra Health Care REIT Inc. and Welltower Inc. — will sell certain properties to new owners who have agreed to lease them to Genesis at a lower rate.
If completed, the restructuring plans, which include debt restructuring and a pause in cash payments on certain debt, are expected to reduce the company’s current cash fixed charges between $80 million and $100 million annually. Genesis said it believes the transactions could occur during the first half of 2018.
“The operating environment continues to be very challenging, with further declines this quarter in skilled patient admissions and higher levels of nursing wage inflation than in recent quarters,” Hager noted in the earnings report. “These factors served to further compress operating margins in the third quarter of 2017.
“We are very appreciative of the constructive and collaborative support of our key credit partners,” Hager said. “We look forward to executing on the Restructuring Plans, which upon completion, we believe will result in a significantly strengthened capital structure for the company, providing adequate liquidity and free cash flow to allow continued investment in our people and our clinical programs.”
At the end of November, Genesis announced the news of NYSE’s warning that it was out of compliance with the exchanges standards to be listed on the exchange.
Its stock has fallen below $1 a share. According to NYSE rules, Genesis can regain compliance with the minimum share price requirement if, during a sixmonth cure period following receipt of the notice, on the last trading-day of any calendar month Genesis’ common stock has a closing share price and a 30 trading-day average closing share price of at least $1.
“We are confident in our ability to address the listing standard deficiency,” Hager said.
In June, Genesis agreed to pay more than $53 million to settle six lawsuits in which the Department of Justice alleged it violated the False Claims Act.
Among the claims resolved by the settlement were allegations of viola-
“[Genesis’ restructuring is] a huge, huge step for us bridging to the recovery and moving to the next cycle of this industry.” – Genesis HealthCare Chief Executive Officer George V. Hager Jr.
tions by Skilled Healthcare Group Inc. and two of its subsidiaries. Those allegations included billing Medicare for hospice services for beneficiaries who weren’t terminally ill, conducting
inappropriate billing of some physician evaluation management services, and submitting claims for medically unnecessary therapy services.
Genesis completed its acquisition of Skilled Healthcare in 2015. The False Claims Act violations are alleged to have occurred before that acquisition took place.
On a brighter note, Genesis held a ground-breaking for its 12th PowerBack Rehabilitation location, this one in the Oaklands Corporate Center in West Whiteland about 12 miles from its Kennett Square headquarters.
Joined by township, county and state officials, Genesis employees marked the beginning of the $19 million project with a traditional ground-breaking
ceremony involving hard hats and silver shovels. The building on six acres is expected to open in the summer of 2018.
“This is something very exciting to us,” said Paul Bach, executive vice president and chief operating officer of Genesis. “We’ve been hopeful about this project for two years now.”
PowerBack Rehabilitation was launched by Genesis HealthCare in 2012 in response to the market demand for shorter post-hospital patient recovery periods and fewer post-discharge setbacks. The other 11 PowerBack centers are in New Jersey, Pennsylvania, Colorado, Maryland and Texas.
Genesis HealthCare is one of the nation’s largest post-acute care providers with more than 450 skilled nursing centers and assisted/senior living communities in 30 states nationwide. Genesis subsidiaries also supply rehabilitation and respiratory therapy to approximately 1,700 healthcare providers in 45 states, the District of Columbia and China.
To contact Business Writer Brian McCullough, call 610235-2655 or send an email to bmccullough@21stcenturymedia.com.