Gen Digital Inc.
Q3 2017 Earnings Call Transcript

Published: 11 Nov 2017

[Operator:]

Good morning. My name is Tasha, and I will be your conference operator today. At this time, I would like to welcome everyone to the third quarter 2017 earnings call. [Operator Instructions]. Thank you. Ms. Lori Mayer, you may begin your conference.

[Lori Mayer:]

Good morning, and thank you for joining us today. We issued our earnings press release last evening. This announcement is 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 1 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 mention 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 various operations are operated by the 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 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.

[George Hager:]

Thank you, Lori. Good morning, and thank you for joining us today. Yesterday, we made very important and positive announcement that we have reached preliminary nonbinding agreements to restructure our leases and loans with Welltower and Sabra. The objective of these restructuring plans is to establish a strengthened and sustainable capital structure that provides Genesis with the free cash flow and liquidity necessary to execute on our long-term business plan. We also reported our third quarter 2017 results. Tom DiVittorio, our CFO, will provide additional color and details around the results later on the call. My comments this morning will focus on the restructuring plans, our value-based initiatives and our response to the recent hurricanes. But first, let me give my perspective on the macro challenges impacting operating performance across our sector. The margin compression we are seeing across the industry is driven by a confluence of events. Total occupancy and, in particular, skilled patient occupancy continues to be under significant pressure, caused by the growing number of utilization management strategies occurring across the continuum as value-based initiatives are further developed and implemented. Furthermore, within the more profitable skilled mix category of patients, migration toward Managed Medicare products continues to occur. Managed Medicare admissions inherently yield about a 20% reduction in length of stay and about a 10% to 15% lower rate per patient day as compared to traditional Medicare. These top line pressures are further exacerbated by the fact that government-sponsored reimbursement rate growth is not keeping pace with inflation and cost, particularly nursing labor costs amid a strengthening labor market. And unfortunately, unlike other industries, with the majority of our revenue coming from government-sponsored payment plans, skilled nursing operators have no ability to pass these incremental costs along to our customers. Clearly, this has been the most protracted and complex down cycle in our history. More recently, as these pressures had continued to mount, we have begun to see operators of all sizes forced into receivership or other formal restructuring proceedings. That is why I cannot emphasize enough how appreciative I am of the long-standing collaborative partnerships we have with both Welltower and Sabra. And in difficult times as partners, our interests clearly overlap. As you can imagine, there are a number of moving parts to these restructuring plans that we have announced, and there are a number of conditions that must occur for Genesis to realize the full economic benefits of the restructuring plan. Those conditions include the sale of Genesis-leased assets to new landlords and reduced markets [indiscernible] and reduced escalators. Subject to the conditions, we estimate that total impact of the restructuring plans to be between $80 million to $100 million of permanent annual reduced fixed charge coverages. We expect these agreements will result in at least $54 million of permanent annual rent savings, beginning in the first quarter of 2018. We expect additional fixed charge reductions through the refinancing and restructuring of certain of our debt agreements and from the repayment of debt from a limited number of asset sales. I like to put that $80 million to $100 million opportunity in better perspective. Genesis' fixed charge coverage ratio over the last 12-month period was approximately 1.1x. Using a $90 million midpoint of the estimated fixed charge reduction range, fixed charge coverage ratio would improve to 1.3x on a pro forma basis. I think everyone would agree on this call that it is virtually impossible to create organic earnings growth in this industry, with the pressures that we are facing at any meaningful level. I would say that $80 million to $100 million of increased earnings and fixed charges are truly extraordinary. The expected reduction in fixed charge levels will, obviously, have a meaningful impact on free cash flow over time and our liquidity. Our pretax cash flow for the September 2017 LTM period was approximately $5 million after taking into account cash rents, cash interests and maintenance capital expenditures. So this level of expected fixed charge reduction will have a significant impact on the company's current free cash flow and would meaningfully improve the leverage and overall credit profile of the company. I want to reiterate our thanks not only to Welltower and Sabra but also to our other key credit partners, who have been incredibly supportive of our efforts to execute on these important restructuring plans. We'll continue to provide updates to these restructuring plans as important milestones are reached in future periods. Turning now to our value-based initiatives. Our participation in these programs has been and continues to be invaluable. Regarding the Medicare shared savings program, even though this program did not result in a 2016 gain share, participation in the MSSP program and the Model 3 BPCI bundled payment program is vital to our long-term success. The experience and know-how gained, along with access to vital information about the total episodic cost of our patients, including the cost post-discharge from our centers, will continue to give us a leg up in the further development of our value-based operating model. I also want to emphasize that because of our outstanding results in the BPCI program, the combined BPCI and Medicare shared savings gain share of $80 million originally anticipated at the outset of this year is still expected to be exceeded for the full year 2017. I'd like to take a few minutes to speak about the 2 major hurricanes that hit Texas and Florida during the winter. I had the great fortune of touring our centers this past month that were impacted by the storm. In all my years working in this industry, we have never had to evacuate centers on such a large scale in such a short period of time. To have 2 such events literally days apart is truly unprecedented. Beginning August 24, Genesis made a difficult decision to evacuate 65 residents in Rockport, Texas and 103 residents in Beaumont, Texas. Residents were welcomed without incident to 8 sister Genesis facilities in Texas, some as far as 200 miles away. Genesis also admitted an additional 35 patients from other skilled nursing providers. Several days later, as Irma threatened Florida, Genesis preemptively moved another 345 residents from 3 centers in Naples, Tampa and Port Richey, Florida. The safety of our patients, residents and staff is always of utmost importance. While it is never easy to carry out evacuations at this magnitude, hundreds of Genesis employees, to ensure that everyone was transported safely despite overwhelming devastation within their own personal lives. In times of trouble, the true heart and soul of an organization can be witnessed, I'm humbled by the employee response to both hurricanes. Genesis employees went above and beyond. Their generosity, compassion and dedication to serving others, whether it be patients, residents or coworkers, is truly amazing. And for that, I would like to say thank you. Before I turn the call over to Tom, let me conclude by saying that despite the current headwinds and uncertainties, I remain very optimistic about the long-range growth potential of our skilled nursing and contract therapy business. The service we provide is and will continue to be an essential component of the healthcare delivery system, particularly given the impact demographics are expected to have on demand in the face of limited and increasingly obsolete supply of skilled nursing beds. In addition to the restructuring plans that I outlined here today, we are aggressively pursuing a number of additional opportunities that will serve to further strengthen the capital structure of the company. There continues to be significant value that we can extract from the balance sheet and capital structure of this company. I am confident that our restructuring initiatives will be fully executed in the first half of 2018, and upon their completion, Genesis will be stronger, better capitalized and more nimble, allowing us to take greater advantage as the industry leader in delivering innovative, high-quality, post acute health care services and improving the outcomes for the patients that we serve. With that, I'd like to turn the call over to Tom DiVittorio, Genesis' Chief Financial Officer.

[Thomas DiVittorio:]

Thanks, George. Good morning, everyone. I'll focus my comments today on the details underlying George's remarks about operating trends, and then I'll address capital structure and balance sheet matters. Revenue in 3Q '17 of $1.32 billion declined $103.5 million or 7.3% from 3Q '16, and adjusted EBITDAR of $147.8 million declined $24.4 million or 14.1% from 3Q '16. Roughly half of the revenue and 1/3 of the adjusted EBITDAR decline is attributed to the net impact of divestitures in excess of acquisitions and the loss of the Texas MPAP reimbursement, which we've discussed in previous quarters. The remainder of the decline is due to organic contraction, principally caused by lower occupancy and skilled mix, impacting both of our business segments and nursing wage inflation exceeding reimbursement rate growth. With respect to occupancy and mix, operating occupancy in 3Q '17 of 84.6% declined 90 basis points from the prior year quarter. Skilled days mix in 3Q '17 of 18.7% declined 90 basis points from the prior year quarter. Within the category of skilled patient days mix, Medicare mix declined 110 basis points from the prior year quarter, while the insurance category, which largely consists of Managed Medicare days, increased 20 basis points. During the third quarter of 2017, we experienced a 5% decline in skilled patient admissions as compared to the third quarter last year. This is up from a 3.3% year-over-year decline reported in 2Q '17. Within the 5% skilled patient admission decline, we experienced a 10% decline in Medicare admissions, offset by a 1% increase in Managed Medicare admissions. Given the differential in the reimbursement rates and the average length of stay of Medicare patients versus Managed Medicare patients, this trend, along with the overall decline in occupancy, is one of two primary contributors to our organic contraction this quarter. Average Medicare length of stay for patients discharged to home in the third quarter dropped 1 day as compared to the same quarter last year, while average Managed Medicare length of stay was relatively unchanged. On the topic of all-in nursing labor cost versus reimbursement rate growth. 3Q '17 wage inflation for nonovertime hours worked by our employed nursing staff grew 3.3% over 3Q '16. Including overtime hours and agency costs, our all-in nursing wage cost per worked hour grew 3.7% in 3Q '17 versus 3Q '16. This 3Q-over-3Q all-in nursing wage inflation of 3.7% is up from 2.25% in the first half of the year and this all-in rate of inflation exceeded the approximate 40 basis points of weighted average reimbursement rate growth, we received from our payers outside of Texas over the same period. This relationship is the second of 2 primary contributors to the organic pressure we experienced this quarter. It is important to note that some of the added wage pressure this quarter was self-imposed. In certain challenging labor markets, we made tactical compensation adjustments to be more competitive and improve retention rates. Over time, we expect this investment will drive down our reliance on more expensive over time and agency hours, which typically run at a 30% premium to regular hours worked by our employed staff. The operating challenges discussed today, moving now to our balance sheet and the resulting impact on our financial performance caused us to be out of compliance, with certain of our financial covenants contained in our material, lease and loan agreements. We received waivers at September 30 from our major landlords and lenders, and we expect to enter into a forbearance agreement through January 2018 with the lenders to our ABL credit facility. Because the waivers and expected agreement do not extend 12 months from the date of this quarter's Form 10-Q filing, the accounting rules require us to make certain disclosures and to reclassify much of our debt and capitalize lease obligations from a long-term classification to the current classification. To echo George's comments, we're very happy with the support received from all of our credit partners, who recognize the importance and value to giving us the time and flexibility necessary to make progress and execute on the restructuring plans. We expect that the fixed charge reductions associated with the restructuring plans, as they become realized, will bring us back into compliance with the financial lease and loan agreements. With that, Tasha, please open the lines for any questions.

[Operator:]

[Operator Instructions]. And your first question is from the line of Chad Vanacore with Stifel.

[Chad Vanacore:]

So just thinking about your restructuring plan. It looks like about 1/3 of it seems to be coming from either loan forbearance or changes in covenants and the addition of asset pay down. Can you parse that for us?

[George Hager:]

Chad, I wouldn't describe the 1/3 of the restructuring benefit from forbearance or things like that. I mean, we are -- and it's hard to parse, but suffice to say that a combination of restructuring and recharacterization of some of those loan instruments, reductions in interest rates and marginal benefit from asset sales will result in that level of interest savings that is implied in our release. Hard to parse them. It's a little bit complicated, but once again, we are highly confident on the execution. And in fact, some of those interest savings are already in place as we speak today.

[Chad Vanacore:]

So can you go to any detail on how much savings in the interest rate and any changes in covenants?

[George Hager:]

No changes in covenants. I -- we're not expecting any changes in covenants. We believe that the restructuring plans we've announced bring us back into full compliance with all our credit facilities. And I'd really can't provide an additional detail on the debt restructuring part of the restructuring plan. But we are well down the path on much of that and, once again, express a high level of confidence that will be achieved in the first half of '18.

[Chad Vanacore:]

Okay. And then what about the rent concession side of things. How long do you expect for the transitions to take place to new owners?

[George Hager:]

Well, first of all, I mean, some of the rent concessions in the 54 are binding and will be in place effective January 1. Another portion, most notably the Welltower. I think Welltower, in their call, has talked about a $35 million rent concession will be in place upon the sale of their assets. And I don't think Welltower commented on the timing, therefore, we cannot comment on the timing on those transactions. But as I said, we are cautiously optimistic and hopeful that those transitions will happen in the very near term.

[Chad Vanacore:]

Okay. Let's switch gears a little bit on the MSSP payments. How close did you come to the threshold? You had expected about $10 million to be paid out this quarter. You just didn't get there. So can you give us any more details on where you came versus what you had expected?

[George Hager:]

Yes, Chad. One of things we did learn as we went through the reconciliation is the reconciliation process is a very, very complicated calculation with a significant number of assumptions that were very difficult for us in our first year to predict with any level of accuracy. The first negative for us was we thought the trend factor. So your target rates are trended up for the inflationary cost of your target population, calculated by CMS. We were expecting a much higher trend factor to inflate our target rate than we actually realized. One issue. We had a very unique set of circumstances in that 25% for our MSSP population is in the State of Maryland. The State of Maryland is the only state in the country that has an exemption under the Medicare RUG payment systems for acute care. Effectively rendered all of our reduced acute utilization in the state of Maryland that virtually had no impact on cost savings in that calculation, which is something that we did not anticipate going in. So I think our target was 2.7% of where the calculation came out. We were under 2% savings, but we learned a lot [indiscernible] of the program and the calculations. And I'd like to emphasize, we went into 2017 with a forecast of about $18 million of combined savings between MSSP and bundled payment. We're running at $20 million on bundled payment alone. So even though we're disappointed in the MSSP program for '16, we're still optimistic about that program in the long term, and we're still achieving our value goals under our value-based initiatives as far as impact on our cash flow and earnings of the company.

[Chad Vanacore:]

All right. So that's a good point. And you did really well on the BPCI. I think pretty much doubled what you thought you are going to take. When did that get paid out? And what did you do there that was different than your initial expectation?

[George Hager:]

Well, the good thing about bundled payment versus MSSP, the Medicare Shared Savings Program is an annual settlement. And we did not receive that reconciliation or settlement until September of '17. So literally, 9 months after the end of the year. So that's a challenge in of itself. The difference between MSSP and the bundled payment program was those reconciliations happen quarterly. So we actually get quarterly payments at the levels that we have talked about in our release in those reconciliations. So you're paid every quarter for your gain share. And the target populations for bundled payment are very different than the target populations for MSSP. The MSSP program is principally targeting the dual eligible population, the long-term care population, the bundled payment program is targeting the short-stay population, and I would say that the biggest changes that we made were, once again, aggressively managing length of stay, looking at how to provide therapy, services on a more cost-effective basis as well as aggressively managing our transitions of care into lower-cost settings, were the primary drivers of the gain share in our bundled payment program.

[Chad Vanacore:]

All right. So with 3Q in the books, how much in payments should we expect in the fourth quarter out of BPCI?

[Thomas DiVittorio:]

It will be between $4 million and $5 million, Chad.

[Chad Vanacore:]

All right. And so that's spread pretty ratably over each quarter?

[George Hager:]

Yes. Yes. Our gain share right now is running in a pretty consistent level.

[Chad Vanacore:]

All right. And then just one more. Last quarter, you had said that you had a rehab client in receivership and I think you weren't getting payments from those at the time. I mean, where did that stand this quarter?

[Thomas DiVittorio:]

Chad, post-receivership and for services provided post-receivership, we were and continued to be paid in advance of the services being provided. So no additional exposure from that particular customer.

[Operator:]

[Operator Instructions]. Your next question is from the line of Joanna Gajuk with Bank of America.

[Joanna Gajuk:]

First, on the restructuring program. So you mentioned the rent release from Sabra and Welltower. And I guess you're not mentioning your other landlords. So is it that they are not participating in this program because there is no need -- because their leases were set at different time and they are different levels? Is that the reason why? Or they are also participating in this restructuring program?

[George Hager:]

Joanna, that's a great question. I think it helps us put that in some perspective. The majority of the restructuring that's in place now on the lease side is with Sabra and Welltower. We have one other large landlord, public landlord, whose coverages are higher than Welltower and Sabra, and there was not a need to restructure those leases. That being said, those top 3 landlords represent approximately just slightly over 50% of our total rent obligation. What we are in the process of doing as we speak, is going to our smaller and medium landlords. Now that these restructurings with our large landlords are in place, and looking at incrementally restructuring some of those leases that need to be restructured. The magnitude of those discussions is nowhere near what we're talking about today, but when I made comments earlier about we are also pursuing additional incremental restructuring opportunities, that's what I meant that we are looking at, and we are in discussions with our smaller landlords to restructure some above market leases and that will once again provide incremental benefits above the level that we have talked about today.

[Joanna Gajuk:]

And also on the second, I guess, part of the restructuring is where you talk about, I guess refinancing the loans and potentially repaying them. So how you plan to do it? Are you -- I mean, you mentioned that a very small piece will be from asset sales. So do you plan to refinance with hard loans because it seems like those have been happening quiet slow. So I don't know what the time frame would be or where the alternatives to refinance loan?

[George Hager:]

Joanna, there's probably somewhere between 6 and 8 different events in this refinancing plan. I would prefer not to go into those details. We're continuing to provide updates to the market. But there are a variety of transactional events, some of which are substantially completed as we speak that will ultimately lead to the reduction in fixed charges that we have referenced in our [Technical Difficulty] today.

[Joanna Gajuk:]

Okay. I'm asking because I guess in the queue you said that you've got some of your debtholders I guess agreed to defer payments -- interest payments through February 15, so is that the kind of the time frame when you plan to have everything sort of in place for that?

[George Hager:]

Yes. That's our current goal. But I think it's important to note that the -- those debt instruments that we referenced that have been transitioned from cash pay to payment-in-kind through February 15, does provide immediate cash flow improvement and liquidity improvement for the company. And that deferral or payment-in-kind interest is in place today.

[Joanna Gajuk:]

All right. Because also on the cash flow, and I guess, which is more related to the operations you mentioned at the -- some of the, I guess, labor increases were self-imposed. So you're saying you try to retain a labor force and you implemented some plans there whether you increase their wages? Or any color you can give us on the labor front?

[Thomas DiVittorio:]

Joanna, that's right. There were a number of markets, where we see more pressure than in others around availability of staff, and where we were relying more on agency labor and overtime than in other markets. And so we targeted those markets as areas to make investments in our employed staff as a way to improve retention rates, attract the best leaders to those facilities, with the ultimate goal of -- in the near term, beginning to bring down our reliance on those more expensive elements of premium labor. So you've got to make the investment first, and then you expect some return in future periods. So hopefully, we see that overall all-in nursing wage statistic that we've been providing for the last year or so. Hopefully, we see some positive movement there in the upcoming quarters.

[Joanna Gajuk:]

So you're saying that -- I mean, because what I was getting at, are you seeing incremental pressure there? Or are you just saying that you, the cost accelerated because you spend more money, I guess? Or you put more money into that bucket, so to speak?

[Thomas DiVittorio:]

Well, it's both. I mean, we were running at 2.5% all-in wage inflation for the first half of the year. That statistic moved to 3.7% in the third quarter. Some of that incremental increase in inflation was caused by the actions that we took to improve and increase wages in challenged markets and then some of it was just simply continued pressure in those markets and other markets.

[Joanna Gajuk:]

Right. And the last point on the industry pressures and how George talked about the pressures continue, which we kind of heard all throughout before. But would you describe kind of the macro environment for skilled nursing as getting worse or kind of stable? Or if it's deteriorating, would you point to any specific driver behind that?

[George Hager:]

Joanna, I would say, right now, as we look at the data that I'm not sure we quite hit the bottom. I think we are very close to the bottom as we look at our daily census trends. They seem to be very, very consistent and very, very flat at this point. We do see a lot of dislocation in the market. This see beds coming out of service. We see still aggressive movement by many of the payers and other at-risk parties trying to narrow networks, which create significant opportunity for providers like us. But I would say it's -- move may not quite get to bottom, but I think, we are very close and hopeful to see the normal traditional seasonal bounce back in Q1 of 2018 and hopefully, we see that bounce back, we can sustain some of those elevated census levels. The key to this industry is census and skilled mix and I think we're very close to the bottom at this point.

[Operator:]

[Operator Instructions]. Your next question is from the line of Dana Hambly with Stephens.

[Dana Hambly:]

It sounds like the restructuring plan is a done deal. But is there any concern that something could happen to derail it?

[George Hager:]

There's a little bit of transactional risk, Dana, but I would say that we are highly confident at this point to this restructuring plan. We'll be, in effect, in it's totality, as I said in the first half of '18.

[Dana Hambly:]

Okay. And are there any restructuring penalties associated with this? And how is your liquidity until we get that $80 million to $100 million of relief early next year?

[George Hager:]

Yes. There are no penalties whatsoever. And liquidity has never been that strong, but liquidity is stable at this point and obviously, with some of this restructuring already in place, such as the payment-in-kind of all of our mezzanine financing, we will begin to build liquidity quickly, and then obviously as the rent consensus kick in in early '18, $54 million is $4.5 million a month, that begins to move the liquidity needle quickly in and of itself.

[Dana Hambly:]

Okay. All right. And congratulations on the restructuring plan. It's a huge relief, but I fear if the underlying operations don't start to stabilize and improve, we could be at the same point another year or so from now. So I appreciate your comments George, that you think we're getting near bottom, but -- and I know you don't want to give guidance, but just kind of simplistically, if I were to annualize the third quarter EBITDA and add the $80 million to $100 million, is that a fair kind of run rate to think about? Or is it may be too draconian and then maybe just some of the puts and takes that would impact that?

[George Hager:]

Yes. I prefer not to comment on '18 at this point. We're on our budget process right now. But look, these restructuring plans I think we'd all agree, $80 million to $100 million of increased earnings in cash flow ultimately increase liquidity cannot be achieved in this current environment organically. So this is a huge, huge step for us bridging to the recovery and moving to the next cycle of this industry. So this is very, very significant to us in getting us where we need to be. As I alluded to in my comments as well Dana, there are a number of other initiatives that we are undertaking with other significant credit parties that we expect that we'll also have positive impact. Not quantifiable at this point, positive impacts, as we look forward into '18 that once executed, we will communicate with the market as well. And I think the third quarter for us is historically and seasonally, the lowest quarter, so I think annualizing anything around this quarter is draconian. And so I would advise against that. We will try to provide the best guidance we can, as we move forward getting through the fourth quarter into early '18.

[Dana Hambly:]

All right. Fair enough. Last one for me, George. It sounds like you're prepared remarks may have been address to some government officials. So just as an industry, what efforts are you taking right now to get some sort of relief through reimbursement updates? Anything you can add on what you're advocating for either at the federal level or -- and/or at the state level?

[George Hager:]

Well, Dana, just a couple of comments around that question. I've been at the company now 25 years, and seeing several cycles in that 25-year period, and one of the issues that has always impacted this industry is that reimbursement adjustments lag cost, underlying cost changes. So in periods where we're seeing some inflation in costs, the impact of that being seen in our rates lags as much as a year or longer. And likewise as you see moderation of cost, the benefits of that continuing in your rates for some period of time, so that -- until the inflation factors come down, but there's moderating cost. So in periods of inflation, payment rates lag, and we're in one of those periods right now. So that's just sort of the normal cycle in this industry. That being said, we have a new Chairman of the American Health Care Association. We have a very strong President of the American Health Care Association and Governor Mark Parkinson. We have as good and strong a voice as we've ever had. What I've asked for between Mark Parkinson and the new Chair of the HCA, Michael Wylie. Michael Wylie is an employee of Genesis, is that we focused on attention on the Statehouses as well because the real problem facing this industry was 70% of our census being funded by the medical assistance programs is, in fact, Medicaid payment rates. So we've asked for additional resource and attention placed through our lobby organization at the state level, so that we can get greater attention to this issue. A lot easier said than done. But the true problem in this industry is chronic and significant underfunding by the state medical assistance programs.

[Operator:]

At this time there are no further questions. I will now turn the call back over to George Hager.

[George Hager:]

Appreciate everyone joining us on the call today. And maybe you can hear from our voices, we are extremely encouraged with the restructurings that we have put in place [Technical Difficulty] and we see significant opportunities as we go forward into '18. So this is a very, very significant step for us to get to a period, where we can begin seeing growth and development and positive movement in this company and in our industry. Thank you, again.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.