Partner – CEO
I anticipate that borrowers will feel more of the financial impact of COVID-19 as we progress into 2021. Many providers will continue to experience lower volumes with higher costs, which will result in the need for additional working capital. This will be especially true as CARES Act stimulus is spent and Medicare AAPP recoupment begins. Loan utilization for existing borrowers should increase as well as activity for new financing. These financial implications may drive some providers to exit the space entirely or divest assets while other providers will see this as an opportunity to grow. I expect that these dynamics will make for a very busy second half of the year for lenders and investors that are committed to and understand the space. At BY&S we were not immune to slowdowns caused by the pandemic but were able to weather the storm without any layoffs. We invested extra time and resources into training and staying ahead of issues facing the industry. This should allow us to be better prepared to help our clients manage the risks of lending to and investing in the healthcare industry.
Duke Slaughter, CPA
Partner – CCO
I am sure everyone is tired of hearing, “2020 was a bad year”. All walks of life were impacted as well as all healthcare segments. 2021 will likely have a slow start, but I believe that as the vaccine pushes through, we will see improvement across all sectors. We are an aging population, so the need for Senior Living and Rehabilitative services should drive volume back into the pipeline. However, we will have to see how each segment handles the additional costs of business (staffing, personal protective equipment, etc.) as well as how CMS will respond. As the various COVID-19 responses settle out, the need for financing will return along with greater scrutiny on outstanding credits.
The majority of the Quality of Earnings business that we did at the end of 2020 was in the Senior Living space and was primarily related to lenders exiting the healthcare space with other healthcare lenders refinancing the deals. Acquisitions were limited toward the end of 2020 given rising COVID-19 cases and uncertain occupancy. I expect that acquisitions may not materially increase until occupancy stabilizes. Occupancy should stabilize once prospective residents and their families feel confident that facilities will remain COVID-19 free. This will only occur when a high percentage of the senior population has been inoculated, which will hopefully happen sooner than later. I think the first quarter will generally be slow with deal flow slowly increasing back to more normal levels late in the 2nd quarter and into the 3rd quarter of 2021.
Jennifer Nipper, CPA
The one constant in healthcare is change, and the industry is resilient in adapting. Stay buckled up as I believe this year will bring even more oversight and scrutiny related to the reaction over our nation’s health crisis. With that, however, comes the benefit of the healthcare continuum being at the forefront of importance. In my 25 years of experience, that hasn’t always been the case. I think it’s worth the ride!
2020 proved yet again that the world of healthcare is ever changing and always evolving, which forces a dynamic response from our team at BY&S. As the COVID-19 pandemic continues to unfold in 2021, the information we provide our clients becomes even more important. We will continue to provide up to date information and suggestions to help clients be as prepared as possible to understand, manage, and monitor risk in such uncertain times. I anticipate that we will still have to do a significant portion of our work remotely and will need to continue to be flexible and agile to meet our clients’ needs. We continue to show that we can adjust and adapt, which speaks volumes to the type of employees and management we have here at BY&S.