ENSG
#Thank you, Terrence, and welcome, everyone.
We filed our earnings press release earlier this morning and can be found on the Investor Relations section of our website at www.ensigngroup.net. A replay of this call will also be available on our website until 5:00 p.m. Pacific on Friday, May 26, 2017. Before we begin, I have 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 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 Ensign Group Inc. is a holding company with no direct operating assets, employees or revenues. Certain of our wholly-owned given subsidiaries, collectively referred to as the Service Center, provide centralized accounting, payroll, human resources, information technology, legal, risk management and other centralized 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 some claims-made coverage to our operating subsidiaries for general and professional liability as well as for certain workers' compensation insurance liabilities. The words Ensign, company, we, our and us refer to The Ensign Group Inc. and its consolidated subsidiaries. All of our operating subsidiaries, the Service Center and our wholly-owned captive insurance subsidiary, are operated by separate, wholly-owned independent companies that have their own management, employees and assets. References herein to the consolidated company, its assets and activities, as well as of the term ---+ use of the terms we, us, our and similar terms, 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 their subsidiaries are operated by The Ensign 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-Q. And with that I'll turn the call over to <UNK> <UNK>, our President and CEO. <UNK>.
Thanks, <UNK>.
Good morning, everyone.
Thanks for joining us today.
We're pleased to report that we completed a solid quarter and that we're beginning to see an upward trend in our same-store, transitioning and newly acquired skilled nursing operations.
We're encouraged by the improvement in occupancy and skilled mix we experienced in several key markets, including Utah and Texas, even though we believe we're in the very early stages of returning to the performance we expect.
With many of the challenges from 2016 behind us, we expect our newly acquired and transitioning operations, including the Legend portfolio, to continue the momentum created during the quarter and that each will make a meaningful contribution to our results in the latter half of 2017 and beyond.
We also expect to see sequential improvements in each quarter during 2017 as the ramp of organic growth we experienced this quarter continues throughout the year.
We're also very encouraged by the continued success of our new ventures.
Our home health, hospice, assisted living and other new business leaders have helped us to enhance our post-acute care services and have strengthened the organization both clinically and financially.
As you can tell, we believe strongly in our outstanding leaders.
We're grateful for the personal commitment and the personal risk these leaders take as they strive to make their organizations the best providers in the markets they serve, thereby extending Ensign's growing influence in the health care world.
It's through them and our other local leaders that we continue to realize our mission of bringing a new level of quality and dignity to the post-acute care industry, doing it one operation at a time.
Our performance is due to the superior competency, continuous management and hard work of our incredible local leaders and their teams.
Our relentless effort to implement Ensign's bottom-up first who, then what, leadership paradigm in all of our new operations is the key to achieving what we set out to become.
We will continue to recruit, train and support the best local leaders in the business, and we're confident that they will continue to deliver industry-leading performance and returns, both clinical and financial for our patients, our communities and our shareholders.
Earnings for the quarter were up over 13.3% at an adjusted $0.34 per fully diluted share, right on track with our annual guidance of $1.46 to $1.53 per adjusted diluted share for 2017.
Revenues were a record $441.7 million, an increase of 15.3% over the prior quarter and in line with our annual guidance of $1.76 billion to $1.8 billion.
We're reaffirming both our EPS and revenue guidance for the year today.
More importantly and certainly as part of a clear cause-and-effect relationship, we continue to achieve outstanding clinical performance as an organization in the quarter.
It's been truly gratifying to see the continued focus on quality across the organization resulting in positive market responses in occupancies, skilled mix growth, star ratings and state survey results.
With the focus on strengthening outcomes, lowering readmission rates and extending our capabilities to care for more complex patients across the post-acute continuum, we've continued to invest in the best care pathways and new clinical programs in post-acute care.
As a result, we're seeing significant improvements in key indicators related to outcomes and satisfaction, which helps drive occupancy and skilled mix.
We're pleased to report that despite the recent changes in the CMS star rating system that have made it more difficult to achieve 4- and 5-star ratings, the number of operations carrying that designation improved dramatically during the quarter.
In fact, 8 more of our skilled nursing operations achieved 4- and 5-star ratings during the quarter.
And with those additions, 94 of our skilled nursing operations carry that designation at quarter-end.
We continue to work very hard to improve the clinical performance of our newer operations, most of which were 1- and 2-star operations at the time that we acquired them.
We again paid a cash dividend of $0.0425 per share during the quarter, which was an increase of 6.3% over the prior year.
This is the 14th consecutive year we have increased our dividend.
We also continue to remain vigilant and responsive as changes occur around us.
In the meantime, we remain financially sound with one of the lowest debt ratios and strongest balance sheets in the industry, a solid cash position and very manageable real estate-related costs.
We remain committed to keeping our cash flow strong and our debt relatively low, and we continue to commit capital to our ongoing acquisition and renovation programs as we look to the future.
And with that, I'll ask <UNK> to give us an update on our recent investment activity and growth.
<UNK>.
Thank you, <UNK>.
During the quarter, we announced the acquisition of the operations and real estate of Parklane West Healthcare Center, a 124-bed skilled nursing and 9-unit assisted living facility in San Antonio, Texas.
This operation, which is subject to a 40-year long-term ground lease, represents an ideal turnaround opportunity because it combines outstanding physical facilities with a solid core of providers that truly care about the residents and their families.
Our Keystone team is planning on offering a wide selection of high-quality post-acute and assisted living services to residents of the 400-unit independent living operation already located on the campus and to the health community at large.
On March 1, 2017, a subsidiary of Cornerstone Healthcare, Inc.
, Ensign's home health and hospice portfolio company, acquired Hospice of the Pines, a provider serving Prescott, Sedona, Cottonwood, Dewey and other communities across Yavapai County in Arizona.
Hospice of the Pines continues the growth of our Cornerstone operations across Arizona, offers the opportunity to provide an outstanding continuum of care with our existing nursing and assisted living operations in Prescott, and reflects Cornerstone's commitments to meeting the expanding need for hospice service in strategic locations.
With this acquisition, Cornerstone subsidiaries now operate 20 hospice operations, 17 home health operations and 3 home care operations in 9 western states.
On March 17, 2017, we acquired Desert View Senior Living, a 100-unit assisted living and memory care facility in Las Vegas, Nevada.
This asset, which is subject to a long-term lease, was in a very tough situation when we acquired it, and we were able to work very closely with the owner of the property to quickly enter the building and to begin stabilizing the operations.
This operation has a very nice physical plant and it's an excellent complement to our existing assisted living operation in Las Vegas and demonstrates our unique ability to step into challenging circumstances on very short notice.
Our team of local leaders are amongst the most experienced operators in the senior living industry, and much like our skilled nursing operators, have demonstrated over and over again that they know how to transition poor-performing assisted living operations under difficult circumstances.
The response from the community so far has been amazing, and in a matter of a few weeks, they've improved census by 10%.
On April 1, 2017, we acquired Rehabilitation Center of Des Moines, a 74-bed skilled nursing operation in Des Moines, Iowa.
The facility is also subject to a long-term lease and is our sixth operation in the state of Iowa.
We are especially pleased to be joining Des Moines' vibrant and well-regarded health care community for the first time as we seek to become the operation of choice in the largest metropolitan market in Iowa.
This morning, we acquired Meadow View Nursing and Rehabilitation, a 112-bed skilled nursing facility in Nampa, Idaho; and Utah Valley Healthcare and Rehabilitation, a 99-bed skilled nursing facility in Provo.
Both operations will strengthen our existing operations in those markets and will add to our ownership of real estate.
Also during the quarter, we began operating 2 newly constructed skilled nursing facilities, both of which were under development at the time of the Legend acquisition which closed last year and was part of that Legend acquisition.
We currently sublease these facilities from Legend and expect that both will be purchased by National Health Care Investors, Inc.
, or NHI, approximately 1 year following the completion of construction, and they will be added to our master lease with NHI at that time.
These 2 operations are the last of the newly constructed Legend buildings that we have committed to operating.
We also announced during the quarter that we entered into definitive agreements to simultaneously sell and lease 2 skilled nursing facilities and 1 assisted living community to Mainstreet Health Investments, Inc.
, or MHI, which is a publicly traded health care REIT in Canada.
Upon closing the transaction, we will lease the properties from NHI under a triple-net master lease with an initial 20-year term and CPI-based annual escalators.
The properties are located within high-density neighborhoods of the Los Angeles and Phoenix Metro markets and have been owned and operated by our affiliates for many years.
Our real estate ownership gives us significant flexibility with respect to many of our operations.
Because of almost all the real estate assets we acquire are underperforming at the time we acquire them, each owned asset provides us with a significant opportunity to create value and to use that value to help maintain a healthy balance sheet and to prepare for future growth opportunities.
This transaction is one of many ways we have to capture some of the value we've created in our real estate assets while simultaneously strengthening our already healthy balance sheet and ensuring that we will continue serving each of these communities for decades to come.
As with the spin-off transaction that we completed in June 2014, we took a very conservative approach to both the sale price and the lease structure with an anticipated lease to EBITDAR ratio that will exceed 2x as of the commencement date.
The proposed transaction is subject to certain closing conditions, and it is anticipated that it will close before the end of the second quarter.
Simultaneously, MHI has also agreed to release us of our ---+ well, release our operating subsidiaries from their lease obligations on 3 transitional care facilities in Kansas and Texas that are currently under development.
Upon closing the transaction, the number of health care resorts that will be operated by an Ensign subsidiary and that were developed by Mainstreet property group will include 5 in Texas or ---+ I'm sorry, 5 in Kansas, 1 in Texas and 1 in Colorado.
With the completion of the last 2 Legend new builds and the terminations of the only remaining Mainstreet developments, we will be left with one more outstanding commitment to operate a new development.
This project is located in Utah and is separate and apart from the Mainstreet developments or the Legend new builds.
We expect the construction to be completed in the second or early third quarter of 2017.
While we are very excited about each of the health care resorts, the Legend new builds and our other newly constructed properties, we do not anticipate any more new developments during the year or in 2018.
Finally, we also disclosed that we incurred some expenses related to certain facility closures.
In each case, the physical plants had gotten to a point that they required significant capital expenditures to keep the operations going.
We determined that rather than incurring those expenses, that it was better to exit the operations and to reserve many of those beds and to reuse them at our other locations.
The state allows us some leeway in making a final decision on what to do with beds held in reserve, and we are in the early stages of that process.
As of today, we now own the real estate of 53 of the 215 health care facilities within the portfolio with 20 hospice agencies, 17 home health agencies and 3 home care businesses in 14 states.
As we mentioned last quarter, we are making progress on taking some of our own assets to HUD for financing.
As with any HUD financing, the process is long and complex, but we expect to complete this HUD-based mortgage transaction during the third quarter.
This will allow us to pay down most of our revolving line of credit and to establish long-term, fixed financing at very favorable rates.
As we do so, we add to our liquidity and our ability to acquire well-performing and struggling skilled nursing operations, assisted living operations and startup or early-stage hospice and home health agencies.
We are evaluating a collection of several smaller attractive acquisition opportunities and believe that more favorable pricing is on the horizon.
As we've seen many times before, potential changes to reimbursement have and continue to generate a lot of buying opportunities at very attractive prices.
We expect to acquire some of those operations later in the second quarter and in the third quarter.
And we continue to be very picky buyers and will remain true to our locally driven approach to each and every acquisition.
And with that, I'll hand it back to <UNK>.
Thanks, <UNK>.
Before <UNK> discusses the financials, I'd be remiss if I didn't take a moment to explain more about how our frontline leaders and their teams produce these record results in such a difficult operating environment.
As I've often noted, even more than our strong balance sheet and solid operating history, it's the strength of our talented leaders at the local level which makes such results possible quarter after quarter.
These leaders, who immerse themselves in their individual markets and push daily to make their operation the operation of choice in the market they serve, makes Ensign unique.
As you know, the Ensign operating model affords these impressive local leaders the latitude they need to be nimble and respond to the demands of their unique markets.
Ensign simultaneously supports them with a world-class systems, technologies and specialists.
While we certainly share best practices across the organization and monitor both financial and clinical performance in these distinct operations, we do not attempt to impose a single set of top-down, one-size-fits-all operating methodologies across each market.
The discipline inherent in this model continues to produce superior operating results in spite of general market conditions.
The remarkable results produced by these leaders build up over time as they and their operations mature and grow to excel in their markets.
We firmly believe that financial performance follows clinical quality, and each of the following examples illustrates that point.
In Brookfield Healthcare Center, located in Downey, California, is an example of the improvement we have seen amongst one of our same-store operations.
Under the leadership of CEO David Howell and Director of Nursing [Analou Delos Santos], Brookfield continues to achieve outstanding clinical and financial performance despite the fact that there are other facilities in this market that have better locations and newer physical plants.
In response to the demands in the local health care community, Brookfield developed a cutting-edge stroke and diabetes rehabilitation program.
They've also managed to maintain a CMS 5-star rating for the fifth year in a row, even when the CMS standards have become more and more difficult.
As a result of their efforts, Brookfield increased its EBIT by 149% with a 68% increase in Medicare census over the prior year quarter.
Brookfield was also regionally chosen to participate in a national quality pilot program due to its consistent clinical outcomes, low readmission rates and length of stay and high patient safety satisfaction.
Chandler Post Acute and Rehabilitation located in Chandler, Arizona, is an excellent example of the improvements we're seeing in our transitioning bucket under the leadership of Executive Director Chandler Monks and Director of Nursing [Jamie Jurdy], this operation has improved in almost every metric.
As a result of their relentless focus on quality measures and 2 strong surveys, Chandler Post Acute has improved from a CMS 1-star facility at the time we acquired it to 3 stars in just a short period of time.
By systematically controlling ancillary costs, eliminating nurse registry staffing and improving culture, this operation has improved occupancy by 270 basis points and skilled census by 14 percentage points, resulting in an increase in EBIT of 208% over the last quarter.
We're also encouraged by the progress we're making in many of our newly acquired operations, including in the Legend portfolio.
For example, Legend Oaks Healthcare and Rehab, located in West Houston, has seen remarkable growth over its first 3 quarters under the leadership of CEO [Trevor Cardon] and COO [Elizabeth Gutierrez].
They've consistently delivered high-quality outcomes transitioning patients back to home quickly and safely without the unnecessary bounce back to the acute setting.
With exceptional physical occupational and speech therapy services, along with expert clinical care, Legend Oaks has garnered the trust of the market, which is shown in their remarkable growth in occupancy.
Over their first 3 sequential quarters, overall occupancy has grown to 94%, an improvement of 340 basis points.
Additionally, because they have developed a tremendous reputation for short-term rehab outcomes, lower lengths of stay and a very low hospital readmission rate, they've seen their skilled census grow by 44% from our first quarter following acquisition to our most recent quarter, resulting in skilled mix revenue at 55%.
Because of their disciplined growth, they've also seen remarkable EBITDAR expansion of 92% since acquisition, all while improving clinical results and patient outcomes.
There are many, many other stories like these across the organization.
We'd also like to remind you that we have 99 recently acquired and transitioning operations as of May 1, which is the largest number of operations in those buckets in the organization's history.
These opportunities, together with the momentum we've seen, will result in much better performance, we believe, in the coming quarters.
With that, I'll turn this time over to <UNK> to provide more detail on our financial performance and our guidance, and then we'll open it up to questions after a few last comments.
<UNK>.
Thank you, <UNK>, and good morning, everyone.
Before I go into the numbers, I wanted to clarify a few points on our quarterly results and disclosures in the press release filed earlier today.
In an effort to provide additional insight in the progress we have started to make in our skilled nursing segment, we have added additional disclosures with respect to our first quarter 2017 as compared to the fourth quarter 2016.
These sequential results can be found in the financial tables filed together with our press release.
While we do not undertake to provide sequential quarter disclosures in every quarter, we believe that this disclosure will demonstrate the improving trends we are seeing in several areas.
I also wanted to point out that our GAAP results for the quarter were significantly impacted by certain unique expenses that were incurred during the quarter, including the losses related to certain facility closures and a wage-and-hour class action settlement.
Our press release, [though], today contains a detailed summary of these adjustments.
Detailed financials for the quarter are contained in our 10-Q and press release.
Highlights for the quarter ended March 31, 2017, as compared to December 31, 2016, included: Same-store skilled revenue mix grew by 5.1% to $120.9 million, and same-store skilled mix as a percentage of revenue grew by 154 basis points to 52%.
Same-store managed care revenue grew by 11% to $42.1 million, driven by census growth of 11.8%.
Transitioning skilled mix revenue grew by 6.4% to $43.8 million as a result of the growth in our skilled revenue mix of 97 basis points to 57%.
And transitioning managed care census grew by 10.3% and transitioning Medicare census grew by 10.9%.
For the quarter ended March 31, 2017, consolidated GAAP net income was $2.8 million and consolidated adjusted net income was $17.9 million, an increase of 14.7% from the fourth quarter.
GAAP diluted earnings per share were $0.05 and diluted adjusted earnings per share were $0.34.
In addition, Bridgestone Healthcare, Inc.
, our assisted living and independent living subsidiary, grew its segment revenue by $2.2 million or 7.2%, segment income by $1.2 million or 36.2% and EBITDA by $1.74 million or 40.2%, all over the prior year quarter.
Cornerstone Healthcare, Inc.
, our home health and hospice subsidiary grew its net income by 35.2% to $4.3 million and revenue by 20.5% to $32.1 million, all over the prior year quarter.
Other key metrics include cash and cash equivalents of $31.5 million as of March 31 and $193 million of availability on our $300 million revolving line of credit as of the quarter-end.
As <UNK> mentioned, we are reaffirming our guidance for 2017.
We are projecting revenues of $1.76 billion to $1.8 billion and adjusted earnings of $1.46 to $1.53 per diluted share.
The 2017 guidance is based on: Diluted weighted average common shares outstanding of [53.7 million], the exclusion of acquisition-related cost and amortization costs related to patient-based intangibles, the exclusion of losses associated with the development of new operations and startup losses which are not yet stabilized, the exclusion of legal and charges associated with the class-action lawsuit, the exclusion of costs associated with the closed operations, the inclusion and anticipated Medicare and Medicaid reimbursement rate increases net of provider tax, a tax rate of 35.5%, the exclusion of stock-based compensation and the inclusion of acquisitions closed and anticipated to be closed in the first half of 2017.
Additionally, other factors contribute to our asymmetrical quarters, including: Variation in reimbursement systems, delays and changes in state budget, the seasonality in occupancy and scope mix, the influence of the general economy on our census and staffing, the short-term impact of our acquisition activities, variations in insurance accruals and other factors.
As we indicated last quarter, we want to remind you that we anticipate the momentum to build over time and that we do not anticipate that our performance will be split evenly between each quarter.
As we've said before, we expect to return to our typical pattern of stronger performance in the later half of '17.
And with that, I'll turn it back over to <UNK>.
<UNK>.
Thanks, <UNK>.
Before we turn the call over to Terrence for questions, we want respond to some recent news from CMS that some of you may have read about last week.
We typically don't like to comment too much on the many iterations of what CMS puts out there.
We're really focused on driving clinical outcomes, but we feel that there is some misinformation out there that deserves a few moments.
Last Thursday, CMS issued its proposed annual update regulation, establishing a net market basket increase of 1% for fiscal year 2018, which starts on October 1 of this year.
The update is a result of last year's permanent doc fix, which required all post-acute care providers to receive the maximum market basket update of 1% in fiscal year 2018 to offset part of the cost of the bill.
The fiscal year 2018 update would have otherwise been a net increase of 2.3%, but this was expected.
Included in this announcement, a proposal to revise and rebase the market basket base year from federal fiscal year 2010 to 2014, this is consistent with historical practice, of note, CMS has taken a more granular approach to developing the cost category weights for the 2014 base SNF market basket.
With that, we expect to see the typical back-and-forth on each cost category, which could actually benefit us in some areas, including therapy rates.
Additionally, CMS released a separate release in the form of an advanced notice of proposed rulemaking, or pre-rule, which asks for comments and feedback on potential revisions to the SNF payment system.
The pre-rule is based on research conducted under SNF payment models research project.
This is essentially just a preview of the research conducted and what a new reimbursement system could look like.
As with any pre-rule, CMS may or may not take action on the proposal discussed in the pre-rule, and we fully expect a very robust comment process on this particular CMS pre-rule.
We certainly do not expect the pre-rule to be implemented before 2019 at the soonest and definitely not in its current form.
Historical experience, experience is important, is that these pre-rules always look very different upon implementation as compared to the original language, and we expect this one to go through many, many, many iterations before it is finalized.
Our industry experts and network of health care associations have been and will continue to be very involved in commenting, shaping and possibly coming up with an entirely different approach to the changes proposed by this pre-rule.
The pre-rule would move the industry from RUGs calculation based on services delivered to one based on patient characteristics.
Accordingly, the focus of payment would be based on resident characteristics and care needs.
As a result of the change in focus, this pre-rule states that CMS would also expect a significant reduction in regulatory burdens or costs.
In this regard, the pre-rule highlights potential changes to MDS assessment and therapy delivery that could actually lower the cost of services.
Any changes to the reimbursement system would come with enough lead time that would allow each local operation to take steps to mitigate any financial impact of a final rule, if it is actually finalized.
As Ensign has demonstrated over and over again throughout our history, our unique, facility-centric operating model has allowed us to make significant progress in managing through many varieties of reimbursement changes while planning for others that may come.
As we've said before, we are actually encouraged by the path that CMS is driving towards alignment with excellent patient-centric care.
To the extent the payment system incentivizes clinical performance, we welcome it.
In fact, over the last 18 to 24 months, we have benefited from various value-based payment models, including BPCI, capitated rate models with our managed care providers, quality base state Medicaid incentive programs and similar value-based programs.
It makes sense that CMS is driving this direction, and we're excited to help shape a new model that encourages and compensates higher quality standards.
But they are not the first to do so.
Despite the efforts, some have made to calculate the financial impact ---+ despite the efforts some have made to calculate the financial impact of this pre-rule on our results, we believe that it's way too early to know what the impact of this pre-rule could be, and attempting to calculate those changes based on simulation modeling and projected resonant classification not only would be misleading, but would also ignore the significant reduction in regulatory burden mentioned in the pre-rule, as well as the many, many levers we would have at our disposal to impact those results.
In fact, we viewed the CMS as nothing but positive.
We apologize for taking so much time today to discuss this, but we felt it was important to give our perspective.
We also feel that it's important to remind ourselves and you that we are firmly committed to taking the long view in the decision-making processes that affect this company.
Our operational philosophy emphasizes sustainable results and is in the best interests of our patients, our company and our shareholders.
We want to again thank you for joining us today and express our appreciation to our shareholders for their confidence and support.
We're also appreciative to our colleagues in the field and the Service Center for making us better every day.
Terrence, I'll turn the time over to you for Q&A, if you would instruct the audience on how to proceed.
Good.
Yes.
So there's a couple, both in Texas.
And essentially as I said, they are ---+ were facilities that were having some significant physical challenges and the CapEx investment that they would require just didn't make sense.
And so the plan there is to reserve the beds in 1 case so that we can move them to a facility in the same community, actually, to use some of those beds to add to the existing facility.
But this ---+ these are decisions not driven by anything other than the physical plan.
And <UNK>, just so you know, in one place, we knew this was going to be a challenge at some point in time.
And it got to a point where we realized, look, we either are going to have to put millions into this facility that still might have problems after we put it in or we can just use the beds somewhere else and probably more wisely deploy capital.
Then we already have a facility not too far away in this town, and so we thought that we would find a better site and use those beds elsewhere versus really wasting CapEx money in this particular case.
It's hard for us to do this because that team is important to us.
We were able to take some of them and move them elsewhere, but it just didn't make any sense for them or for us.
No, not all of them.
Some of them, which means we'd have to ---+ we'd probably have to do something else with the rest of the beds.
But a big portion of them, we can move over to the other facility as we add to it.
But some of them, we'll have to deploy elsewhere, not in that particular town.
Yes, <UNK>, just for your ---+ the state does give you several years to kind of hold those beds and evaluate exactly what you're going to do with them, so we do have some time to look through that and decide what the best use of those beds would be.
And I should also add because we didn't.
In that particular case, <UNK>, the real estate-related cost was very small.
This was not a high-priced facility or one that we spent a lot of money on.
Yes, I think it's all of those levers and more.
I mean again, we ---+ I'm probably tired of talking about this, but it's important that you know this.
I think we probably had so many things going at once that it was very difficult to continue to do the things that we've done so well across time.
And we feel like we finally wrapped our arms around those things towards the end of last year and we're able to begin to do the things that we've done for essentially decades, I guess ---+ for 18 years.
And so we're pulling those levers again and we're doing much better in the Legend portfolio.
We're doing much better in many of the new acquisitions that we took between '15 and '16, and as those do better, they become sources of help instead of sources of dilution.
And the momentum has swung and we're pretty excited about what we're seeing in most of those markets.
Do you have a couple of hours.
I mean, that is a large discussion.
I wish it were some secret sauce or some small lever that we pulled or some great speech somebody gave, but it isn't like that.
There were just a lot of different things that were done.
And most of it was returning to the fundamentals we know so well.
But having sufficient resources in performing, it's a momentum thing.
As we start to do well in certain facilities and in certain areas, we just ---+ look, some of these things were new to us.
Opening up new buildings was new to us.
Taking on a large portfolio was new to us.
And it saddens me that the conclusion is that we can't do that.
It's just that we need to learn how to do it.
And it's not something we're going to do.
We still love the small portfolios, we still love the turnarounds, but I want to remind people that we did take a 9-facility deal 2.5 years ago in Southern California that's performed beautifully.
Nobody's heard anything about it because it's been doing great.
And so there were just some mistakes that we made as an organization.
I talked about the decline that had occurred prior to taking that over, that probably should have been different decisions made on my part in delaying that transaction.
But it's exciting to see how everybody's rallied and what's happened with discipline on costs and occupancy and skilled mix and just the overall culture in these areas.
Yes, so what that is, remember, it's not ---+ in fact it's the only bucket that's not apples-to-apples.
And so when you're looking at the recently acquired, you really can't compare the numbers, and that's why we have that symbol, the not meaningful symbol, on there because it really happens to be (inaudible) facilities, entering that and bringing those numbers down because it's not a comparable number quarter-over-quarter.
So some of the ---+ for instance, some of the acquisitions that <UNK> mentioned, we took on the ---+ some of those were as low as 35% occupancy.
And so when you add a couple of operations ---+ actually 2 of them were under 45% occupancy.
So when you add a couple of those into that mix and then a few others that are much lower than our average in the newer acquisition bucket, it's going to alter that number significantly.
So it isn't ---+ I don't know ---+ we don't know how to change that because you'd have to have all kinds of categories, you'd have to have the less than recently acquired but recently acquired and the brand-new acquisitions.
And it's just ---+ it's a difficult number to track, but obviously, it all normalizes out as it moves into the transitioning bucket.
Yes, I'd love to say it's been fully implemented.
It's been partially implemented.
We're still ---+ that's exciting.
I mean, the exciting thing is we made movement without the full implementation of it.
But it's still happening.
I'm afraid I'm going to be called the boy who cried wolf at some point, but it is happening.
We had many discussions with them in other states about Utah.
And also, we have some folks in Utah that have great relationship with the 2 key areas, one in particular is the dominant player.
But the good news is we move by a significant amount without full implementation.
So when that is fully implemented, we hope any day, that we're going to see some massive movement, we think, in Utah.
Yes, like we talked about in the last call, it is a continuous process.
So every quarter, more and more of the locations start to turn on as fully collectible.
And then as we get the managed care providers on board, as well after we get the state and feds on board, then those collections start to turn on and get better and better.
And so we're making continued progress every single quarter.
You'll also see that accelerate as we slow in opening up new builds.
That's a significant drag on our cash flow.
And so as that slows, as <UNK> said, our cash position will improve as well.
Because you just ---+ you don't do well out of the gate in these new builds.
Terrence, we appreciate your help with the call.
And thanks to everyone who took the time to join us.
I know it's kind of awkward to do on Monday morning and the way we did this, but we appreciate you accommodating us.
It was important that we get this information into your hands.
So have a great, great rest of the week.
