Ladies and gentlemen, thank you for standing by and welcome to The Ensign Group Q4 and Fiscal Year 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's conference call is being recorded.

I will now turn the conference over to our host, Mr. Chad Keetch, Chief Investment Officer. Sir, you may begin..

Thank you, operator. Welcome everyone, and thank you for joining us today. We filed our earnings press release yesterday, and it is available on the Investor Relations section of our website at ensigngroup.net. A replay of this call will also be available on our website until 5:00 PM Pacific on Friday March 5, 2021.

We want to remind any listeners that may be listening to a replay of this call that all statements are made as of today, February 4, 2021 and these statements have not been nor will be updated subsequent to today's call.

Also, 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 laws, Ensign and its affiliates do not undertake to publicly update or revise any forward-looking statements where changes arise as a result of new information, future events, changing circumstances or for any other reason. In addition, the Enzyme Group Inc.

is a holding company with no direct operating assets, employees or revenues.

Certain of our wholly-owned independent subsidiaries, collectively referred to as the service center, provide accounting, payroll, human resources, information technology, legal, risk management and other services to the other operating subsidiaries through contractual relationships with such subsidiaries.

In addition, our wholly-owned captive insurance subsidiary, which we refer to as the Captive, provides certain claims made coverage to our operating subsidiaries for general and professional liability as well as for workers' compensation insurance liabilities. The words Enzyme, company, we, our and us refer to The Enzyme Group Inc.

and its consolidated subsidiaries. All of our operating subsidiaries, the service center and the captive, are operated by separate wholly-owned independent companies that have their own management, employees and assets.

References herein to the consolidated company and its assets and activities as well as the use of the terms we, us, our and similar terms used today are not meant to imply nor should it be construed as meaning that The Ensign Group, Inc.

has direct operating assets, employees or revenue or that any of the subsidiaries are operated by The Enzyme Group. Also, we supplement our GAAP reporting with non-GAAP metrics.

When viewed together with our GAAP results, we believe that these measures can provide a more complete understanding of our business, but they should not be relied upon to the exclusion of GAAP reports. A GAAP to non-GAAP reconciliation is available in yesterday's press release and is available on our Form 10-K.

And with that, I'll turn the call over to Barry Port, our CEO.

Barry?.

We're happy to report another record quarter as we achieved our highest adjusted earnings per share in our history, in spite of the continued challenges brought on as a result of the ongoing pandemic.

I want to emphasize that the work our frontline partners, our field leaders and our service center folks are doing is awe inspiring and at the heart of our performance. Their determination to remain indispensable and responsive during this global trial has saved and improved countless lives.

These local teams have shown incredible strength and consistency, while doing everything in their power to care for their patients, residents and the healthcare community they serve.

Rather than hunkering down and waiting for the storm to pass, they rolled up their sleeves and worked tirelessly to find ways to make clinical and operational adjustments that are tailored to meet the needs of their existing and potential patients and their local market.

As they have done so, the medical community and the patients' families have entrusted them to care for their residents with increasingly complex clinical needs.

As evidence of that confidence, our medical communities have and our local clinical leaders, our operations saw market improvement in patient volumes, especially with high acuity and skilled patients.

On the Medicare front, we saw Medicare days for our same-store and transitioning portfolio increased 7.2% from second quarter to third quarter, and increased again by 10.8% between third quarter and fourth quarter.

The increase in Medicare census continues to be the result of our operators' efforts to take on higher acuity patients, including many COVID positive admissions in an effort to ensure that hospitals have the needed capacity to deal with the most critically ill patients. During the quarter, we admitted and cared for over 5,000 COVID positive patients.

Not only has this helped preserve hospital capacity, but it has also strengthened our reputation as a partner of choice to hospitals' health plans and senior living communities in our markets and strengthened our standing in the continuum of care.

As we have gained more experience with COVID treatments and greater access to testing, our facilities outcomes and confidence in treating COVID patients have improved.

Most importantly, this evolution has also helped provided a much-needed solution to our vulnerable seniors, allowing them to receive the latest treatments and care and helping them to thrive rather than language in their existing setting, extending their health and preventing countless others from further infection and spread.

Similarly, on the managed care front, we saw managed care days for our same-store and transitioning portfolio increased by 6.2% from second quarter to third quarter and increased again by 5.7% between third and fourth quarter.

These increases in our managed care volume are being driven by growing confidence from managed care payers that their patients can be safely cared for in the post-acute setting in a cost-effective way. And that is not - it is not always necessary to hospitalize COVID positive patients.

It is also a reflection that certain elective procedures that have been put on hold are beginning to normalize even in the context of the pandemic.

While occupancies are still lower than they were a year ago at this time, our results this quarter, yet again, showed the resilience of our model and our local leaders' ability to adapt to changing circumstances in their local healthcare markets.

Also, this improvement in our admissions trends not only demonstrates that we can continue to perform well if the pandemic stubbornly persists, but it also gives us insight into the post-pandemic environment and demonstrates that we are in an excellent position to see occupancies normalize to pre-pandemic levels, a pattern that we have noticed in some of our largest markets.

We've been working arm-in-arm with our long-time hospital managed care partners and formed relationships with new partners in several markets to care for complex patients and solidify the critical role we play in a post-acute care continuum as an essential and cost-effective setting for high-acuity patients.

Our strong results in the quarter do not come from any one thing, but rather is the aggregation of continued improvements and skilled mix across the portfolio, improved admission trends, availability of more frequent and broader COVID testing, increased managed care volumes, cost saving initiatives, improved cash collections, sequestration suspension and improved Medicaid funding in certain states.

During the latest and most significant surge of COVID-19 positivity rates in states like Texas, Arizona and California, we saw an accompanying increase in skilled mix. However, unlike prior quarters where COVID surges were accompanied by occupancy declines, during the fourth quarter, we saw consolidated occupancies remained flat.

Just as COVID positivity rates have varied market-to-market, so has the impact on our occupancies. Most notably, we have seen some very encouraging trends emerging particularly in our most mature operations.

More specifically, we have seen over 30% of our same-store operations improved their occupancies to over 80%, which is at or near consolidated pre-COVID levels. In some markets like Utah, we have seen entire clusters already reach pre-COVID levels.

As is true of many things in our business, it's typical to see trends in certain markets act as very reliable indicators for what is to come in our other geographies. And while we have a long way to go, we like where we are and the direction in which we are headed.

We are again reaffirming our guidance for 2021 with annual earnings per share guidance of $3.44 to $3.56 per diluted share and annual revenue guidance of $2.62 billion to $2.69 billion.

The midpoint of this 2021 guidance represents an increase of approximately 14% over the midpoint of our 2020 guidance, which as a reminder, we increased twice during 2020.

We remain confident that we can achieve this guidance as we begin to see the positive impact of vaccination efforts and begin to realize the enormous upside in our newly acquired operations coupled with the opportunistic acquisitions that we see on the horizon.

But more importantly, we believe when this pandemic is behind us that our operations are prime to rebuild occupancies and continue to gain additional market share as a result of these deepened relationships with acute care providers and other healthcare partners.

We again remind you of the results for the quarter and the year do not include any benefit related to CARES Act Provider Relief Funds.

We have returned all of the relief funds we have received to date, which included approximately $109 million in provider grants in July, $33 million in the fourth quarter and an additional $5 million we received in January. We are aware of the ongoing discussions in Washington DC related to additional CARES Act's funding.

If there is another round of funding, we will reevaluate the purpose and needs of any future grants, specifically considering potential costly testing requirements or other newly mandated regulations and the terms and conditions that accompany those funds.

However, when we consider our healthy balance sheet and liquidity, which we have taken great care to protect and reflect in our financial performance during the pandemic, we are committed to operate as best we can without CARES Act's funding.

While this pandemic continues to evolve, we are confident that our local leaders, caregivers and other frontline staff will continue to provide amazing service to their patients, families and our society as a whole.

We have great hope that as the vaccines continue to become available that we will see significant reductions in infection rates in our operations and the communities at large. We can't even begin to express our love and appreciation for all of our amazing team members and all that they're doing to help get us through this unprecedented time.

We look forward to 2021 and to continue to show our dedication to all those that have entrusted us with the care of their loved ones. And with that, I'll ask Chad to give us an update on our recent investment activity.

Chad?.

Thank you, Barry. We are pleased to announce that we are making progress in our effort to highlight and ultimately unlock the growing value in our owned real estate. As a first step, starting in the fourth quarter of 2020, we began reporting the results of our real estate portfolio as a new segment.

This new real estate segment is comprised of properties owned by us and leased to skilled nursing and senior living operations, 64 of which we operate, and 31 of which we leased to The Pennant Group.

Each of these properties are subject to triple-net long-term leases that generated rental revenue of $61.3 million, $46.1 million of which was derived from our own operations. Also, for 2020, we generated $49.5 million in FFO, an increase of 51.6% over the prior year of $32.7 million.

Our goal in separating this real estate business from our operations is to demonstrate the enormous inherent value that these real estate assets have and will have over time. We hope that this extra disclosure will be helpful to our current and prospective investors as they evaluate this growing part of our business.

At the same time, we are narrowing in on a framework that will go even further to demonstrate the true value of this real estate, while allowing us to stay legally and culturally connected to the assets.

This strategic structure would enable us to more aggressively pursue and acquire attractive assets, including accretive acquisitions for Enzyme and also some operations, that for one reason or another, are not a good fit for Enzyme to operate, such as operations that are in markets where we don't currently have available leadership.

We continue to engineer and carefully consider a solution that builds upon the many lessons we learned from the 2014 spin-off of our then owned real estate.

As we look to ways to apply those lessons, our priorities are to protect our culture and to make sure that we and our real estate partner remains unified in our joint mission to protect the health of the operator first, and in doing so, ultimately create long-term value in the real estate.

While we are often approached by many potential buyers that would love the chance to purchase and leaseback our real estate, we do not believe that approach is the best way to advance our mission and maximize long-term shareholder value. We will continue to provide more detail as this develops in future quarters.

In the meantime, our focus is on continuing to build equity value in these assets by making them essential within the care continuum to each market they serve. During the quarter, we paid a quarterly cash dividend of $0.0525 per share.

This is the 18th consecutive year that we have increased our dividend, which we hope shows our continued confidence in our operating model and our ability to return long-term value to shareholders. And because our liquidity remained strong, we have no current plans to suspend future dividends.

Also, during the quarter and since, Ensign's affiliates acquired the following skilled nursing operations. The Medical Lodge of Amarillo, an 82-bed operation located in Amarillo, Texas. Hays Nursing and Rehabilitation Center, a 116-bed operation located in San Marcos, Texas. Golden Hill Post-Acute, a 99-bed operation located in San Diego, California.

St. Catherine Healthcare, a 99-bed operation located in Fullerton, California. Camino Healthcare, a 99-bed operation located in Hawthorne, California. And San Pedro Manor, a 150-bed operation located in San Antonio, Texas.

Our recent growth in the midst of the pandemic is a true statement to our local team of clinical and operational leadership and their experience, planning and preparation. Given the unique effort required to transition during a pandemic, we've been even more selective than usual.

And therefore, each and every one of these have been handpicked by our local operators. Because of the extra COVID precautions we had to take with each one of these, we have had extra time to prepare, and in some cases, we were even allowed early access.

Because of that, we feel an extra measure of confidence that these operations are poised to contribute to our overall results very soon. In addition to these new acquisitions, we still have several deals in the pipeline that are taking longer than usual to get to the finish line given the extra precautions that we are taking.

Another half dozen or so of these opportunities are now slated to close in the first quarter and early second quarter, and we look forward to announcing those transactions when they close over the next few months. As we noted in our release yesterday, we have well over $340 million in available capital right now to grow.

In addition, we have 74 completely unlevered real estate assets. We continue to work on unlocking some equity value in seven or eight of our owned assets that are unlevered through long-term fixed rate had HUD debt.

This process can take several months and will not be completed until later in the year, but we are preparing now for a wave of new acquisitions we see on the horizon and are excited about the deals we're working on now and the new opportunities that are on the way.

As I've reminded you in the recent past, our primary constraint to growth is not capital or supply of available operations to acquire. Rather, it is the availability of locally driven clinical and operational leaders.

When we evaluate each opportunity, there are many factors we use to determine our level of interest, including the availability of local leadership, the building's reputation and a long-term return potential. Our acquisition decision making process relies on those local leaders and the health of their neighboring operations.

When they are strong, it fuels our growth. And because we are healthy and becoming healthier in many of our markets, we have the ability to be aggressive in our growth when prices are right.

Whether it is one or two at a time or a larger deal that spans over several of our markets, our transition process is scalable across several markets at the same time. We look ahead - as we look ahead to 2021, the pipeline for our typical turnaround opportunities and exciting strategic opportunities remain strong.

Currently, with more deals available than we have the capacity to transition. In some cases, the deals we expected to see last year have been delayed as the CARES Act funding has provided additional capital to provide temporary assistance to under-capitalized or struggling operations.

We are still being very selective and keeping plenty of dry powder on hand for what we believe will be an attractive buyers' market once the pandemic-related dust settles and the government relief funds run out.

We look forward to growing within our existing geographical footprint as we see significant advantages to adding strength in markets we know well, including some of our newer emerging markets as they continue to mature and prepare for growth. And with that, I'll turn the call back over to Barry.

Barry?.

Thanks, Chad. Before Suzanne runs through the numbers, we'd like to share a few examples that represent improvements we've seen in occupancy during the quarter in some of our larger markets.

For example, our San Diego market comprised of 15 operations, saw a rapid decline in occupancy in the second quarter of 2020 in connection with high COVID positivity rates. During those three months, we saw occupancy dropped from 92% to a low of 83% in the third quarter.

Our operations responded by developing innovative approaches to confront these declines, including strategic partnerships with upstream and downstream continuum partners and increasing clinical competencies to treat high-acuity patients, including those that are COVID positive.

Some operations added COVID wings, while others became COVID dedicated facilities, enabling an important offloading of strained hospital capacity. As a result, occupancy rebounded nearly four percentage points during the fourth quarter up to 87%. The San Diego market continues to adjust.

And while the recovery process doesn't always allow for a smooth curve upward, our leaders' ability to rebuild census has proven to be an important indicator of our field-driven leadership model success.

Likewise, our skilled nursing affiliates in Arizona, a market comprised of 32 operations, saw occupancy declined from second to third quarter from 81% to a low of 74%.

After working alongside their acute care partners and managed care partners to develop new strategies for operating in this new environment, occupancies recovered to 77% in January with an accompanying all-time high skilled mix of 46%, an increase of 18% over the second quarter of 2020.

Our Arizona leaders showed tremendous resiliency as they afford through this recovery process.

In fact, some of our most mature operations have returned to pre-pandemic occupancies, like Montecito Post-Acute Care and Rehabilitation, a 222-bed campus in Mesa, Arizona who are again 100% full in spite of a 2 percentage point drop during the third quarter as cases surged.

Early in the pandemic, the Utah State emergency response team and members of the largest acute care provider community chose Milestone, our collection of Utah affiliated operations to be their strategic partner in formulating a COVID plan for post-acute care.

They contracted with four Ensign affiliated facilities to ensure that all geographies within the state would have a preferred COVID positive sniff provider.

The City Creek Post-Acute, a 108-bed skilled nursing facility in Salt Lake City; Harrison Pointe Healthcare Rehab, a 63-bed recovery center in Ogden; Orem Rehab and Nursing, a 120-bed campus in Utah County; and Coral Desert Rehabilitation, a 60-bed operation in St.

George, Utah, all are playing a pivotal role in the recovering care for COVID diagnosed patients across the entire State of Utah.

These contracts proved very successful in allowing hospitals to maintain bed availability even during the height of the latest surge by transferring COVID positive patients who didn't require acute level of care to our designated skilled nursing facilities.

These facilities received extra training and specialized equipment and were able to provide the latest medical and rehabilitative treatments. The model also prevented outbreaks and deaths in other facilities by allowing them to quickly transfer newly identified COVID cases to our specialty facilities.

During the fourth quarter of 2020 alone, over 720 COVID positive patients were admitted to these facilities. This model proved so successful that representatives from other western states reached out to Utah to learn from their model, and some of them in turn contracted with Ensign affiliated operations in their area.

In addition to the clinical benefits, our ability to specialize in these facilities, stabilize our census by increasing our admissions and reducing unplanned discharges during a time when most providers occupancy has plummeted.

As we mentioned earlier, our San Diego, Arizona and Utah leadership are showing us a realistic path that others can follow to grow occupancy during the pandemic and ultimately return to normalcy once the pandemic is over.

By strengthening existing partnerships and creating new ones, and most importantly, demonstrating clinical capabilities and favorable outcomes, our localized operating strategy will allow us to repeat these experiences across all of our markets.

With that, I'll turn the time over to Suzanne to provide some more detail on the company's financial performance and our guidance, and then we'll open it up for questions.

Suzanne?.

Thank you, Barry, and good morning, everyone. Detailed financials for the year are contained in our 10-K and press release filed yesterday. Some additional highlights for the year and the quarter include the following. GAAP diluted earnings per share for the year were $3.06, representing an increase of 87% over the prior year.

And adjusted diluted earnings per share for the year were $3.13, an increase of 76% over the prior year. GAAP diluted earnings per share for the quarter were $0.82, which represents an increase of 67% over the prior year quarter. And adjusted diluted per share for the quarter was $0.80, an increase of 33% over the prior year quarter.

Consolidated GAAP and adjusted revenues for the year were $2.4 billion, an increase of 18% over the prior year. GAAP net income was $170.5 million for the year, an increase of 86% over the prior year and $46.3 million for the quarter, an increase of 69% over the prior year quarter.

And adjusted net income for the year was $174.6 million, an increase of 75% over the prior year and $44.9 million for the quarter, an increase of 34% over the prior year quarter. Other key metrics as of December 31 include; cash and cash equivalents of $236.6 million and $342.4 million of availability on the revolving line of credit.

We maintained a lease adjusted net debt to adjusted EBITDA ratio of 2.18 times as of year-end, and a decrease of 1.77 times from last year. Also, our cash flow from operations for the year was $373.4 million.

These improvements are attributable to growth in our EBITDA from same-store transitioning and newly acquired operations as well as enhanced cash collections. As Chad just mentioned, we also own 94 assets, 74 of which are unlevered with significant equity value that provide us with even more liquidity.

In March 2020, the federal government began to undertake numerous legislative and regulatory initiatives designed to provide relief to healthcare providers during the COVID-19 pandemic, including a waiver of the three day stay; the CARES Act funding, which provides among other things, direct relief fund and advanced payment program for Medicare, which for us totaled approximately $105 million.

As Barry mentioned, we have returned all of the Provider Relief Fund under the CARES Act, which as of generated 2021 totaled a $147 million. In addition, the CARES Act temporarily suspended the automatic 2% reduction of Medicare claim reimbursements, otherwise known as sequestration for the period from May 1, 2020 through March 31, 2021.

The suspension of sequestration had and will continue to have a positive impact on our revenue, depending upon how the pandemic affects our Medicare census. The federal government also increased FMAP by 6.2%, which depending upon the state, will provide an increase in Medicaid reimbursement.

The temporary increase in funding and the timing of the payments vary by state, but eight of the states in which we operate, have approved funding. With the latest COVID surge, it is anticipated that states will continue to fund their Medicaid programs to coincide with the end of the federal declared state of emergency.

As Barry mentioned, we are reaffirming our 2021 annual guidance to $3.44 to $3.56 per diluted share and annual revenue guidance of $2.62 billion to $2.69 billion. The midpoint of the 2021 guidance represents an overall 14% increase from our 2020 guidance, which we raised twice during the year.

The 2021 guidance is based on diluted weighted average common shares outstanding of approximately 57.8 million, a tax rate of 25%, the inclusion of acquisitions closed in the first half of 2021, the exclusion of losses associated with start-up operations, which have not yet stabilized, the inclusion of anticipated Medicare and Medicaid reimbursement rates net of the provider tax, the recovery of COVID-19 pandemic with the primary exclusion coming from stock-based compensation.

Additionally, other factors that could impact quarterly performance include; variations in reimbursement systems, delays and changes in state budgets, seasonality and occupancy in skilled mix, the influence of the general economy on our census and staffing, the short-term impact of our acquisition activities, variations in insurance accruals, the surge in COVID-19 and other factors.

And with that, I'll turn it back over to Barry.

Barry?.

Thanks, Suzanne. We want to again thank you for joining us today and express our appreciation to our shareholders and their confidence and support.

We recognize the heroic efforts of our nurses, therapists and other frontline care providers who have courageously faced this pandemic and provided life enriching care to our residents, especially during the very difficult COVID surge that our nation faced during the fourth quarter.

We are also very appreciative to our colleagues in the service center who are working tirelessly to support our operations and enabling us to succeed in spite of the challenges we faced. Thank you for making us better every day. Michelle, we'll now turn to the Q&A portion of our call..

[Operator Instructions] Our first question comes from Scott Fidel with Stephens. Your line is open..

Hi. Thanks, and good afternoon, everyone. First question, actually just wanted to just follow back up on, Suzanne was talking a bit about some of the additional flexibility in supplemental rates that have been provided during the public health emergency.

And just interested in how you're thinking about some of the changes that have played out even since you have provided your initial 2021 guidance between the year-end spending bill agreement and then also with the letter that the Biden administration has sent out to the states around continuing the FMAP.

So obviously, it looks like now the enhanced FMAPs may continue through the end of the year. We didn't know that when you had initially provided guidance. And then some of the other things too, like three day stay waivers, other things.

So just interested in terms of how you're thinking about that in your guidance now relative to when you had initially provided that?.

Scott, that's a great question. I think when we initially provided that, we knew it was going to go into at least the first quarter. And as you know, at that time, we also hadn't hit the Q4 COVID wave that occurred.

And so really when you have the COVID wave that occur, a lot of that additional FMAP that's out there is being utilized by the additional supplies that we are utilizing to treat those COVID positive patients. And so we're excited that it could continue through the end of the year.

I think that that's up in arms and debate right now with the governor sending that letter on over to Washington to see if it does actually continue.

But we think it could help us as we kind of go throughout the year and really look at some of those long-term additional requirements or other things that could come with that money as well, which there is still in debate and talks..

Scott, an important thing to remember about that funding is that we're really only utilizing that funding to offset actual costs. So we don't recognize it unless we need it. So it's one of those helpful things. Our expectation at is - is and was as the costs associated with the pandemic start to ease, our use of the FMAP funding would also ease..

Got it. And for my second question, just interested if you could maybe just address 4Q revenues just as it's related to your prior revenue guidance. And I know that the timing of deals being closed certainly influenced that in the fourth quarter.

But just interested in terms of as you take the 4Q revenues and then think about your M&A pipeline that you've updated us on, how that all sort of rolls forward into your thoughts around your 2021 revenue guidance range, which I know you did reaffirm in the earnings release?.

Yes, you're correct. When we look at putting that guidance out there for 2020, one of the things is that we did expect some of those acquisitions that ended up closing in Q1 of 2021 to close in Q4. I mean, again, COVID we had quite a few operations that were also shut down for admissions as a result of that COVID surge in Q4.

So that was a little bit lighter.

But as we roll into 2021 and we look at where we're at with 2021, look at the acquisitions that's closed to date, the pipeline that we have and excited to have and included in the guidance the first half of 2021, we felt a little confident with what we've put out there for 2021 guidance, and that's why we did reaffirm it..

Got it. And just one more for me then I'll get back in the queue. Just interested in - appreciate the new disclosures around the real estate portfolio, and I'm sure all of us will be by now tracking that.

Is there any guidance you can give us just on how to think about if we wanted to model that out going forward? How you may suggest doing that? For example, you've got the 94 real estate assets currently.

Is there like an annual target that you have in terms of how many assets you may look to add or any types of trends that you can provide to us to think about modeling that real estate portfolio now that you're going to be disclosing that as a segment? Thanks..

Yes. Thanks, Scott. Appreciate the question. So I guess, related to your question around growth goals and anticipated acquisitions, we are very careful to not look at it that way. We don't sit around before the year starts and say, okay, we want to acquire X number of assets this year.

We're very much more kind of opportunistic in the situation all about that. We're going to be disciplined and grow when it makes sense to grow. And in some years that might mean lighter growth as in year of the pandemic, like last year.

And in other years, when prices are right and our leadership is strong, we can be a lot more aggressive and have been in the recent past. So we're definitely going to grow when it makes sense to grow and then it won't have sort of a smooth curve to it, for sure, at least not intentionally.

So that's - I know that doesn't help you with modeling, but that - we'll try to guide you and give you some sense for what we think the pipeline looks like and those sorts of things.

In terms of modeling and looking at that segment, I guess the first point is, we don't think that it's anything that should shift or adjust your modeling of sort of our typical operating business. And we really look at this as additive.

And it's an additional business segment that we have and should really be something that's looked to in addition to all the opportunities we have as an operator. So I think, again, this is something that's new that we will continue to add more detail over time.

But shouldn't really adjust at all the growth prospects and everything else that we normally look to in our traditional business segments.

So Suzanne, anything to add to that?.

Yes. I think Scott it's a great question. I think that the information that we've provided in this quarter, again like Chad mentioned, is the first time. But we're hopeful that you will see that cash. This is how much they're charging themselves. This is how much they're charging third-parties. Okay, now you have a $61 million run rate business.

You know that we have 97 assets. And so now instead of just having that book value that you have visibility and insight to, you also have the value what we're putting through on the P&L. And so our thought is that you guys can use that as a jumping point from there to actually transform.

It's something that's really book value-based, it's something that has more of a valuation-based approach and help translate that model over into what you guys are putting out..

Okay, great. I appreciate the thoughts. Thanks..

Thanks, Scott..

Our next question comes from Frank Morgan with RBC Capital Markets. Your line is open..

Good afternoon, everyone. I guess, I'd like to start with just clearly the very strong skilled mix in the quarter. And I know you did have the waivers of the three day stays and those kind of things.

But can you - is there a way to kind of pencil around how much of that growth in skilled mix was a direct result of being able to get people out of hospitals quicker with less than three days.

Just curious how much of a factor that would have been in driving the really strong skilled mix?.

I'll start, Suzanne, and you can maybe add some color. It's a significant benefit in the quarter for sure. Our ability to have the kind of the unnecessary transition of care at a time like this has been tremendously beneficial for outcomes.

And you can imagine, an already vulnerable patient that gets sick to send them to a new setting and then back after just what usually amounts to a three-day observation stay, maybe a little bit more if they're really acute and then coming right back is a big disruption for the individual from a care standpoint.

So we have been utilizing the waiver for patients that need immediate intervention, isolation and then further treatment to kind of avoid that. So specifically on the COVID front, it's been really beneficial from that standpoint. And as you could hear, we treated over 5,000 patients, COVID positive patients in the quarter.

So from that standpoint alone, and some of those are new admissions, some of those are skilled in place, we don't really break that out. So from that standpoint, Frank, it's been hugely beneficial and necessary during this time.

Our hope is that CMS sees the benefits from this on an ongoing basis because it's also beneficial for non-COVID patients that need triaging an intervention that can be done without a transition of care and utilizing things like telemedicine and leveraging your medical director and their knowledge and training with treating skilled patients, it becomes a situation where you can accomplish a lot with very little disruption for the patient.

So we don't necessarily break that out. Quite frankly, we don't track it internally how much is this versus that. But there is a transition happening now with that waiver. There are some nuances to where we won't necessarily be utilizing it for certain aspects of COVID treatment.

So I think you'll see a kind of a waning from that standpoint with how much - what our skilled mix looks like going into the beginning of the quarter. But we're encouraged by the retraction we're getting with our managed care partners as well.

We've seen that occupancy grow pretty substantially sequentially since the beginning of the pandemic as managed care providers are starting to function during the pandemic rather than prevent their members from getting treatments and procedures.

So we're encouraged that there is kind of a shifting more of a normal skilled mix that you've typically been used to seeing us have. And we anticipate that that will start to become more normal over the course of the next few quarters..

Yes. And I would just add to that. Remember that managed care has always had the ability to not utilize the three day stay in the hospital. And so when you see those numbers like we're seeing on the managed care front, that's what gives us some of the confidence that we have with regards to skilled mix in the future..

Sounds good. Good point. And I guess staying on the guidance on modeling from our perspective.

In a typical year, first quarter, fourth quarter, first quarter usually better quarters relative to the second and third, but how should we think about just the cadence, the sequential cadence this year? I mean, it sounds like some of the acquisitions that you thought you would get in the fourth quarter maybe they rollover in the first quarter or second quarter.

But I guess, any color there that you can help us kind of think through that process? And I guess, from a starting point from occupancies, it sounds like maybe just using an average occupancy in the fourth quarter may not necessarily be a good way to do it given the fact that, it sounds like your occupancies may have recovered later.

But just any color there that would be appreciated? Thanks..

Yes. It's a great question, Frank. Honestly, regardless of the pandemic, Q4 and Q1 tend to be seasons where we see more acute patients. And I don't think any of us anticipate that that will change. That said, obviously the cadence might be a little bit different than normal this year, though, I'm not sure how much more different it will be.

I can tell you that from our perspective, our traction with the vaccine and seeing the infection rates decline, especially with our patient population fairly rapidly, they make us more positive than really, we've ever been in the past at least couple of quarters about the potential for normalcy to kind of return probably faster than I think we originally expected.

And given the examples we highlighted today, the examples we mentioned, represent almost a third of our portfolio. And seeing how occupancy can rebound as quickly as it has and did in those markets gives us a lot more assurance..

Okay. Thank you..

There are no further questions. I'd like to turn the call back over to Barry for any closing remarks..

Yes. Thank you everyone for your questions. We're grateful for our shareholders and our employees for joining us today. And have a great day..

Ladies and gentlemen, this does conclude the program. You may all disconnect. Everyone have a great day..