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WEALTH ADVISORY | OUTSOURCING | AUDIT, TAX, AND CONSULTINGInvestment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC‐registered investment advisor
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Aging Services‐ Financial Implications of COVID‐19
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Our Hypothesis
COVID‐19 is disrupting referral patterns, resulting in a significant revenue
shortfall and cash burn that will challenge the fragile
SNF ecosystem.
CLA USE ONLY. PREPARED 3/29/2020 9:52AM 2
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Create Opportunities PROPRIETARY v2 03/19/2020
CLA COVID Revenue Modeling Approach
| | | | | | | | | | | | | | | | | | | | | | | |Jan‐20 Feb‐20 Mar‐20 Apr‐20 May‐20 Jun‐20 Jul‐20 Aug‐20 Sep‐20 Oct‐20 Nov‐20 Dec‐20 Jan‐21 Feb‐21 Mar‐21 Apr‐21 May‐21 Jun‐21 Jul‐21 Aug‐21 Sep‐21 Oct‐21 Nov‐21 Dec‐21
The “Old” Baseline The New COVID
Reality
DIP (How Big & How Long?)
TURN(How Big & How Long?)
RECAPTURE(How Much & How Long?)
KEY ISSUES TODAY1. The size of the “dip”2. The duration of the “turn”
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Overview of Revenue Modeling
Cash impact BEFORE any other interventions• Cost increases, reimbursement increases, etc.
Cash impact of lost volumes• Short stay and long stay• Assumes variable costs “flex” with revenue
Cash impact of COVID surge• Assumes revenue is inadequate to cover costs• Based on actual cost data and an assumption of blended rate
• Assumes revenue takes 40 days to collect
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Sensitivities in the Model – 90 Day View
How much short‐stay business will go away?• How quickly, and for how long?
How much long‐stay business will go away?• How quickly, and for how long?
What % of facilities will have COVID in their building?• What are the implications?
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SNF Highlights ‐ National• CLA estimates $6‐9 billion of liquidity could be needed for US skilled
nursing facilities by late June before the impact of interventions• CLA simulations of liquidity need includes a 10% SNF Facility Infection
Rate which could result in a liquidity loss of $1.2b• CLA simulations indicate that 70% of US SNFs could be in a negative cash
position by mid May• SNFs could have an important role to play in assisting hospitals in
management of a “past peak” surge with potential to reduce health care system costs by $4.5b to $5.0b during peak surge
• While SNFs could play a role, CLA estimates that currentMedicare PDPM and Medicare Advantage rates are a minimum of $1.3b+ short of funding surge related costs for SNFs over the next 90 days
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United States Experience ‐ Conservative
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United States Experience ‐ Aggressive
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Texas Experience ‐ Conservative
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Texas Experience ‐ Aggressive
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Approach to Evaluating Financial Impacts of COVID
PROPRIETARY AND CONFIDENTIAL 03/20/2020 11
• Size REVENUE at RISK• Size the DIP
– Consider the COVID Surge• Size the TURN• Estimate the RECAPTURE• Size the Contingency PLAN• Access the Post COVID REALITY
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Create Opportunities PROPRIETARY AND CONFIDENTIAL: 03/24/2020
“SIZING THE DIP”
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Inability to market units, show units and campus protection = reduced entrance fee inflows!
Declines in occupancies with large fixed costs translates to potential margin erosion.
Providing continued service to residents may result in higher costs for labor and other expenditures.
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Contingency Plan Considerations
PROPRIETARY AND CONFIDENTIAL 03/20/2020
CLAs Models and ApproachCan Help Inform
How Much?
When?
How Long?
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Reductions or Delays in Spending
Hiring Delays
Reduce or Eliminate Discretionary Benefits
Investment Market Downturn implications
Workforce Reductions Capital Spending
Working capital considerations
Across the Board (atb) Compensation Reductions
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Create Opportunities PROPRIETARY AND CONFIDENTIAL 03/20/2020 14
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The Bottom Line
Proactively seek all relief opportunities• Federal and state• Beware of “kicking the can down the road”
Model multiple scenarios• Focus on cash flow• Best estimate on timing
Act with speed and intelligence, not desperation• Recognize the interdependency of key relationships•WE ARE IN THIS TOGETHER!
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Insights – Aging Services Provider Perspective
SBA and PPP Loans
Stimulus Dollars
Accelerated Medicare Payments
Payroll Tax Deferral
Grants and Other
Opportunities
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Caveats and Limitations of the Analysis
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The analyses included herein were based hypothetical assumptions concerning the potential effects of COVID 19 on the near term liquidity of selected health care segments. Our analysis was limited to available public data and high level assumptions regarding near term revenue losses. Our analysis is intended to provide insights into the size of the liquidity problem faced by these industries during the critical next 90 day time period as of March 30, 2020. It does not attempt to include the impact of the various actions being taken to solve this liquidity problem. As such, we did not perform an examination, review, or compilation on any of the underlying data and provide no assurance of any kind on the results of these analyses.
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CLAconnect.com
Michael J. Siegel, CPAPrincipal972‐383‐[email protected]
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