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The Bottom Line: United Methodist Communities CFO Expects V-Shaped Recovery, Eyes Memory Care Growth

Covid-19 took United Methodist Communities on a wild ride with regard to occupancy, but CFO Bob Peterson expects to be moving in the right direction in 2021..

He compared occupancy trends to a roller coaster: rates fell with the initial outbreak wave in the spring of 2020; rebounded somewhat in late summer through fall, then plummeted with the larger second wave of late fall and early winter of 2020.

With vaccines proving effective, however, Peterson predicts a V-shaped recovery as more consumers regain confidence in senior living, which will bode well for UMC’s occupancy and improved margins.

“The difference now is we’ll be on an upward trend,” he told Senior Housing News.

The Freehold, New Jersey-based provider operates four full-service campuses, five affordable senior apartment properties, as well as Homeworks, a home care line. Going forward, growth in home care and memory care could be pieces of the provider’s post-pandemic strategy.

This interview has been edited for clarity.

Senior living has become more operationally and financially complex over the last few years. How has that placed new demands on you?

The cost offering of our communities is very highly fixed, and variable costs are relatively low. Because of that, with Covid-19, we saw a decrease in our occupancy last spring when [cases] really started to pick up. When we have something like that, that affects our occupancy or our revenue levels, it’s not as easy to offset some of that with expense reductions.

[Covid-19 caused] additional expenses that we haven’t typically had — things like personal protective equipment and the need to increase some staffing levels. We ended up paying a lot of overtime, because people were out and would have to be quarantined themselves.

Did those additional expenses mitigate after the initial wave of cases?

To some extent. We saw occupancy rebound a bit in late summer to early fall. Then came November and the second wave, and we started seeing reductions again.

It was a cycle: we went down initially, came back up, then took another hit.

How is occupancy now?

We’re seeing movement in the right direction. Our occupancies are starting to return. Vaccines are [helping restore confidence]; people are a lot more comfortable now going into a community setting. We’re also seeing a lot more inquiries on assisted living and Tapestries, which is our memory care program.

Will margins be under more, less, or the same amount of pressure this year?

[We expect pressure to be] the same, but in a different direction.

We saw those decreases in occupancy in the early part of the pandemic, and then pick up again in the late winter. That brought us down to levels lower than we’ve historically ever been. I almost see it as sort of like a V-shaped curve, except that the difference now will be on an upward trend rather than a downward trend.

What were the low points for your occupancy, across care levels?

Independent living held well throughout the pandemic — we were anywhere between 82% and 85% for most of the pandemic, which is really strong, because there had been several years back where we were lower than that.

The bigger issues were in our health care units. Some of them went down probably into the 60% range because of a couple of things. Anytime you had an outbreak in one of the communities, either the Department of Health or the county would typically say, “Nobody can be admitted to the unit until everything is clear.” That, combined with the reduction in elective procedures, which takes away your rehab, really hurt us on the health care side.

How do you define a healthy balance between mission and margin?

My philosophy has always been that I don’t want to be penny wise and pound foolish. We didn’t make major sweeping expense reductions [during the pandemic], because we were concerned about reducing the quality of the experience for our residents. It was going to be difficult enough as it was for our residents, because there was so much time in quarantine. We didn’t want to further reduce that quality of life for the people.

I truly believe that, although we have to watch finances in the short term, we also have to make the right investments in our future. So we have continued to look at different technology options — things that will make us better going forward. We’re still trying to recover from some of the financial difficulties from Covid-19. We’re still looking towards the future, how do we grow and become even stronger? And sometimes that does take spending some money.

How is United Methodist Communities approaching M&A activity in 2021?

We have a strategic plan. One of the key things for us is that we want to have the right cultural fit with another organization. That’s the first hurdle that we want to look at.

We do think that we could add some scale to our organization and not have to significantly increase our cost structure. We feel that we could provide great administrative and management functions to anybody out there that was looking for some assistance. It is definitely on our radar, and it’s one of the keys to our current strategic plan.

Is United Methodist Communities considering any new developments or campus expansions?

We’re considering it more for memory care. We have ideas for some cutting edge ways of addressing the needs of any resident [in memory care]. It’s still in the planning stages, but it’s something that could become a big part of our growth over the next several years.

Are you considering expanding service lines?

We have a home care line we launched about six to eight months ago. We’re actually looking [to expand it] in one of our communities where we do have some capacity in assisted living. We’re considering the possibility of [bringing it into] some independent living, just to have another use for apartments that aren’t full right now.

How is United Methodist Communities’ access to capital?

We’re pretty confident. We still talk with several of our banks that we have relations with, and they’re all interested in the new projects that we have coming up. We anticipate that we shouldn’t have any problems securing capital. And we’re fortunate right now that the rates are very low.

The post The Bottom Line: United Methodist Communities CFO Expects V-Shaped Recovery, Eyes Memory Care Growth appeared first on Senior Housing News.

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