ProMedica Senior Care Reports $124M Loss, Slowed Occupancy Recovery Makes ‘Big

ProMedica Senior Care, which houses the nonprofit health system’s skilled nursing operations, has lost $124.3 million during the first quarter of 2022 as both the operator and the industry continue to face lagging occupancy recovery coupled with high labor costs.

The financial figure compares to $72.5 million in operating losses for Q1 of 2021. On the plus side, net patient service revenue for the senior care division increased by $28.3 million, or 4.5% to end the quarter at $662.6 million.

The demand is there, according to ProMedica CFO Steve Cavanaugh, and referral sources “would love to” refer to ProMedica properties, but the issue still remains having sufficient staff.

“We’ve been struggling with that just like everybody has,” Cavanaugh said.

Coupled with its staffing-related losses, ProMedica’s overall operating revenue decreased 2.6% compared to last year to land at $1.6 billion, primarily from its Medicaid contract loss.

ProMedica insurance arm Paramount Advantage in February sold its Medicaid contract to Anthem Blue Cross Blue Shield for $50 million – the insurance company’s contract bid in Ohio was rejected by the state’s Medicaid department in April 2021.

“You have elevated costs in the acute business and the senior care business. That’s coupled with, on the senior care side, depressed revenue and volume levels – that made for a pretty tough first quarter,” Cavanaugh told Skilled Nursing News.

ProMedica operates 157 skilled nursing facilities within its senior care division; the health system has 44,000 staff across 500-plus locations in 28 states.

SNF occupancy lags behind other sectors

ProMedica’s senior care division occupancy has slowed on its way back up to pre-pandemic levels, while acute care and physician office assets have returned to occupancy levels not seen in more than three years.

Its nursing homes in particular are about 10% below pre-pandemic levels, according to Cavanaugh.

“Those 10 percentage points of occupancy make a big difference in terms of the financial performance of the business,” said Cavanaugh. “It’s really the senior care side of the business where we’ve struggled to get enough staff to be able to care for the residents.”

When looking at ProMedica as a whole, the company experienced a $126 million loss during Q1 2022 – the nonprofit reported a $69.2 million operating loss during the same quarter in 2021.

“We had the Covid surge that really began in the mid- to latter-half of the fourth quarter of 2021, and that really carried over into the first quarter of 2022,” Cavanaugh said. “People were out of work being either directly Covid positive or on some sort of quarantine protocol to care for somebody at home that’s got Covid.”

During the peak of the latest Covid surge, ProMedica had between 2,000 and 3,000 staff that were unable to work, according to Cavanaugh.

Expenses in the first financial quarter of 2022 increased by $76.2 million, or 10.5% compared to the prior year, driven by agency costs even as the nonprofit recorded $12.7 million in CARES Act funding and other government stimulus dollars. The nonprofit reported $19.9 million in stimulus revenue for Q1 2021.

Federal funding was “insufficient” to cover $34.5 million in Covid-related costs, according to the nonprofit’s quarterly report.

In line with industry trends, ProMedica has had to take on an increased amount of agency staffing to make up for the ongoing workforce shortage.

A ‘significant’ part of revenue

ProMedica’s insurance business brought in a little over $100 million a month in revenue from the Medicaid contract, Cavanaugh said, but the nonprofit saw half of that in February of this year and none in March.

The dent in revenue caused by its Medicaid contract loss is “unique to ProMedica,” Cavanaugh said, compared to what SNF operating peers are experiencing.

“It was a very significant part of our revenue,” he added.

The company’s insurance arm makes up 23% of ProMedica’s sources of revenue – senior care takes up the majority at 43% and its provider division at 34%.

Paramount brought in about $2 billion in revenue last year, Cavanaugh said — $1.5 billion of which came from Medicaid.

ProMedica entered into a subcontracting relationship with Anthem after selling the contract; Paramount will still manage the medical costs and clinical care of Anthem Medicaid members that live in Northwest Ohio, about 125,000 members in 19 counties around Toledo.

“We will be responsible just like we were when directly insuring them for medical and clinical outcomes, as well as the cost of that care. That was a way for us to tweak our insurance business and our Medicaid business, to stay involved,” added Cavanaugh.

ProMedica is also working to expand Paramount’s reach into more markets across Ohio, Michigan and Indiana, specifically for Medicare Advantage beneficiaries.

“You have to get registered in every county with CMS,” Cavanaugh said of its Medicare Advantage product. “We’re trying to expand and grow our membership. We’re having some level of success with that, and hope to continue to grow that going forward.”

Paramount provided Medicaid managed care in the state for 28 years. The company’s subsidiaries provide insurance products to approximately 392,000 members across six states, including Ohio.