Estia Health reveals hit from COVID-19 – 2.1% drop in occupancy, blow outs in operating costs, deferred refurbishments and developments

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A story that is likely being echoed across the sector.

The listed provider has told the market that occupancy of its 5,944 beds has fallen from 93.8% to 91.7% – the loss of 125 beds – 80 respite beds and 45 permanent beds – in its latest trading update.

Estia has blamed the cancellation of travel, elective surgery and a slowdown in regular hospital activity during time, combined with a “conservative approach” to new admissions (presumably making new residents undertake a ‘quarantine’ period), plus falling numbers of respite residents and visitor restrictions, for the decline.

The operator says it is now reviewing their admissions process as restrictions ease.

Operating costs were also higher due to increased medical costs, greater use of Personal Protective Equipment (PPE), and higher staffing levels – including the need for more lifestyle programs and paid quarantine leave for staff needing to self-isolate – and Estia says it expects these costs to be ongoing.

“The future level and duration of this increase in costs is highly dependent on uncertain future events, including potential COVID-19 infections,” it said.

These costs are unlikely to be covered by the Government’s $850 million COVID-19 stimulus package for operators either.

Estia says it only expects to receive an additional $6.3 million in Government funding during FY2020 – an extra $1.2 million in ACFI funding plus the one-off payment for providers announced on 4 May to implement the Industry Code for aged care visits – which will amount to $5.3 million.

In what is perhaps a pointed comment, the provider adds it is still waiting to hear about the staff retention payments announced by the Government as part of the stimulus package back in March – two months ago.

Estia says the pandemic has also forced the deferral of several refurbishment and development projects including its St Ives greenfield development (now due to resume in 2021) and the sale of its Mona Vale site in June 2020 (now moved to November 2020).

The operator will now announce its full year results in August – but have already flagged that these could be below expectations.

As we covered here, Estia had scrapped its 2020 guidance on 17 March, telling the market it was unable to calculate the impact of the fallout from the pandemic on its profits.

The operator previously told the market in its 2019 half yearly report that a 1% difference in their occupancy is equal to $5 million EBITDA – suggesting this 2% is worth $10 million.

Interestingly, Estia has revealed that while none of its residents have tested positive for COVID-19, three of its 7,500 staff did contract the virus in March and April – all were quarantined without infecting residents.

The Department of Health’s data record confirmed cases among aged care residents and home care recipients, but not staff so exact numbers of positive cases among workers is unknown.

How many other operators have also experienced similar ‘near misses’?