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Genesis Healthcare, Inc. (GEN)
Q3 2018 Earnings Conference Call
November 8, 2018 8:30 A.M. ET
Lori Mayer - Vice President, Investor Relations
George Hager - Chief Executive Officer
Tom DiVittorio - Chief Financial Officer
Chad Vanacore - Stifel
Kevin Fischbeck - Bank of America
Caleb Harris - Credit Suisse
Frank Morgan - RBC Capital Markets
Previous Statements by GEN
» Genesis Healthcare, Inc. (GEN) CEO George Hager on Q2 2018 Results - Earnings Call Transcript
» Genesis Healthcare's (GEN) CEO George Hager on Q1 2018 Results - Earnings Call Transcript
» Genesis Healthcare's (GEN) CEO George Hager on Q4 2017 Results - Earnings Call Transcript
» Genesis Healthcare's (GEN) CEO George Hager on Q3 2017 Results - Earnings Call Transcript
Hi, good morning and thank you for joining us today. We issued our earnings press release last evening. This announcement and an updated slide deck are available in the Investor Relations section of our website at genesishcc.com. A replay of this call will also be available on our website for one year. Before we begin, I would like to quickly review a few housekeeping matters.
First, any forward-looking statements made today are based on management’s current expectations, assumptions and beliefs about our business and the environment in which we operate. These statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today’s call.
Listeners should not place undue reliance on forward-looking statements and are encouraged to review our SEC filings for a more complete discussion of factors that could impact our results. Except as required by federal securities law, Genesis Healthcare and its affiliates do not undertake to publicly update or revise any forward-looking statements or changes that arise as a result from new information, future events, changing circumstances or for any other reason.
In addition, any operation we mentioned today is operated by a separate independent operating subsidiary that has its own management, employees, and assets. References to the consolidated company and its assets and activities, as well as the use of the terms we, us, our and similar verbiage are not meant to imply that Genesis Healthcare has direct operating assets, employees or revenue or that any of the [technical difficulty] same entity.
Our discussion today and the information in our earnings release and in our public filings include references to adjusted EBITDAR, EBITDA, adjusted EBITDA, which are non-GAAP financial measures. We believe that the presentation of non-GAAP financial measures provides useful information to investors regarding our results because these financial measures are useful for trending, analyzing and benchmarking the performance and value of our business, but such non-GAAP financial measures should not be relied upon at the exclusion of GAAP financial measures. Please refer to the company's reasons for non-GAAP financial disclosures and its GAAP to non-GAAP reconciliations contained in today's earnings release.
And with that, I'll turn the call over to George Hager, CEO of Genesis Healthcare.
Thank you, Lori. Good morning and thank you for joining us. Today, I'm going to focus on the following. First our [technical difficulty] for the quarter. Second, progress from the execution of our near-term strategic objectives. Third, the improving reimbursement and regulatory landscape. And last, our patient comes and CMS Five-Star results. I will then turn the call over to Tom DiVittorio, to provide more color around our business trends.
After a solid first half of the year, I am pleased to announce a very strong third quarter, driven primarily by disciplined operational expense control, overhead cost reductions, and improving reimbursement and occupancy trends, same-store adjusted EBITDAR, less cash lease payments. A critically important measure that, we and all of our stakeholders track exceeded FactSet consensus estimates by $7 million or 21%.
More importantly, adjusted EBITDAR on a same store basis grew over the prior year quarter by 3.8 million or 2.6%. I cannot stress how significant these results are as we have not seen absolute same store organic year-over-year growth in adjusted EBITDAR since 2015. To several quarters now we have consistently discussed how occupancy trends are clearly improving.
While year-over-year occupancy declined 30 basis points this quarter. The rate of decline definitely continues to narrow. In fact, our third quarter occupancy grew 20 basis points sequentially from the second quarter marking historical seasonal trends. Even more encouraging, thus far in the fourth quarter, we are seeing the strongest same-store occupancy trend in over four years.
In a few minutes, Tom will discuss these trends and reference our investor deck in much greater detail. Overall, we are cautiously optimistic that this critical leading indicator may have finally reached bottom. I’m also pleased to report that the reimbursement environment continues to improve. Medicaid rates are up 2.5% for the year, as compared to flat this time last year.
On the Medicare front, after taking into account the 2.4% net market basket adjustment and the impact of the SNF value-based purchasing program we expect our Medicare Part A rates will increase approximately 1.7% effective October 1, 2018. This compares to 1% last year. While nursing wage inflation is still modestly exceeding overall reimbursement rate growth, the gap is clearly closing.
Beyond our inpatient business, our rehabilitation services segment had another very strong quarter, producing year-over-year EBITDA growth of $8.3 million or 40%. As we continue to position Genesis Rehab Services as the leading therapy provider in the United States. Operational execution, productivity improvement, and therapist efficiency have all contributed to this segment’s success.