Extendicare Inc
TSX:EXE
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Extendicare Inc
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Thank you for standing by. This is the conference operator. Welcome to the Extendicare First Quarter 2020 Results Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Jillian Fountain, Vice President, Investor Relations. Please go ahead.
Thank you, and good morning, everyone. Welcome to Extendicare's First Quarter Results Conference Call. With me today is Extendicare's President and CEO, Michael Guerriere; and Senior VP and CFO, David Bacon.Our first quarter results were disseminated yesterday and are available on our website. The audio webcast of today's call is also available on our website along with an accompanying slide presentation, which viewers may advance themselves. A replay of the call will be available later this afternoon until May 29. The replay numbers and passcodes have been provided in our press release. An archived recording of this call will be available on our website.Before we get started, please be reminded that today's call may include forward-looking statements regarding our future operations. Such statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied today. We have identified such factors in our public filings with the securities regulators and suggest that you refer to those filings.As we discuss our performance, please bear in mind that all figures are in Canadian dollars, unless otherwise noted.With that, I'll turn the call over to Michael.
Thanks, Jillian, and good morning, everyone. Before we get into our first quarter results, I want to take a moment to talk about the current COVID-19 situation, review how we are managing through this pandemic and recognize the outstanding work of our exceptional team. Our residents, clients and frontline workers have borne the brunt of this pandemic, and we remain focused on doing everything possible to protect them, while also continuing to provide the high-quality care and support they have come to expect from us. While the vast majority of our homes have been able to keep the virus at bay, our community has experienced great loss in recent weeks. Our sincere condolences are with all of the families and friends both in our community and outside of it, who have lost a loved one to this aggressive virus. Our hearts are with them in the exceptionally difficult time. As of today, of our 69 owned long-term care homes and retirement communities, 13 long-term care homes and 2 retirement communities have 1 or more active cases of COVID-19, with the majority of these outbreaks limited to less than 10 residents and staff. In addition, 5 long-term care homes previously an outbreak have been declared clear the virus by public health. We are also working with our Extendicare Assist clients to help them manage any outbreaks in their homes. As conditions and government directives have evolved, we've adapted our operations to safeguard those in our care and to protect our 22,000 employees. We have implemented enhanced infection control and management protocols throughout our operations and adapted our procedures and staffing models to various government directives. We've limited all essential visitors to our homes, put in place a universal masking policy, increased use of personal protective equipment across the organization, implemented enhanced screening of all residents and staff within our long-term care homes and retirement communities as well as enhanced protocols in our home health care operations. As testing becomes increasingly available, we have ramped up testing of both residents and staff, improving our ability to detect and quarantine infected persons. We will continue to focus on the safety of our residents, clients and staff as our top priority. Our staff have shown tremendous strength and compassion during this difficult time, often working long hours and covering shifts for coworkers. Their commitment is truly inspiring and makes a world of difference to those in our care and to the families that are unable to visit their loved ones. We are very happy to see our staff receive the recognition they deserve in the form of pandemic premium pay funded by several provincial governments. We hope that all governments will adopt this practice. To further recognize the extraordinary effort of all employees working in senior living facilities across Canada, we were pleased to participate as a founding member in 2 initiatives established to address both financial and safety needs of frontline workers. We are a founding partner in the recently announced senior living cares fund, which provides financial support for workers in the senior living sector in recognition of their extraordinary efforts during COVID-19 crisis. The fund will provide onetime financial assistance to Canadian employees of any senior living operator who work in either long-term care or retirement, for emergency or unforeseen expenses related to COVID-19. Extendicare, along with the other founding partners, donated $0.5 million to establish the fund with a starting $2 million endowment. The Board of Directors of Extendicare will also be contributing a portion of their fees for the balance of 2020 to add a further $200,000 contribution to the fund. The second initiative is the Canadian Alliance to Protect and Equip Senior Living, or CAPES, which was launched in April 2020. The through this initiative, Extendicare came together with a number of senior living operators to act as a joint purchasing group to source and supply much needed personal protective equipment for frontline employees. We've leveraged our purchasing [ heist ] and procurement expertise to buy difficult-to-find equipment and make it available to smaller senior living operators. As we work through this challenging time, we continue to monitor developments and government directives carefully. We are adapting our response to best protect our people, to keep the virus out of our homes and communities and to move those homes that have experienced an outbreak into recovery. With that, I want to turn to our first quarter results, starting on Slide 4. For ease of comparisons throughout this call, David and I will be discussing our results, excluding the impact of our BC home health care operations, which we exited as previous announced in January of this year. Our first quarter results improved across our lines of business with the exception of ParaMed. Revenue and NOI increased in our long-term care, retirement living and other business segments. These were offset by lower volumes and higher operating costs in the Home Health Care segment. The financial impact of COVID-19 started to be felt in the latter half of March. We felt this most acutely in our ParaMed operations, where we have experienced a 22% decline in our average daily volumes since the middle of March. At the same time, our back office and frontline operating costs have increased as our home care offices coped with the upheaval that followed the pandemic declaration. Our retirement living operations have experienced a decline in occupancy, as access to our retirement communities has been restricted. Our long-term care segment also experienced modest declines in occupancy but the funding framework in Ontario protects income when occupancy is impacted by an outbreak, and we anticipate the same to be true in other provinces in which we operate. Given the uncertainty created by COVID-19, we have taken steps to improve our liquidity during and following the quarter, including securing additional mortgage financings and deferring nonessential capital expenditures. We continue to monitor the financial impact of COVID-19, including the welcome relief measures announced by various levels of government across Canada. We believe that the financial impacts that we are experiencing will reverse as we emerge from the pandemic. However, due to the uncertainty of its duration and magnitude as well as government's response to it, it is difficult to predict the extent of its impact on our operations and financial results and condition. Turning to Slide 5. We continue to implement our ParaMed transformation agenda to improve efficiency. Central to this has been the implementation of our new cloud-based system, aimed at improving our ability to meet the increasing demand for home health care services, with improved scheduling, automated work processes, reduced staff turnover and better support for our valued staff. As a result of COVID-19, we decided to pause the implementation of our new system leaving Alberta, which represents approximately 5% of our business volume to be converted into the new platform at a later date. Prior to COVID-19, our ParaMed operations had started to experience year-over-year improvements in volumes in our Ontario operations, which are now fully converted to the cloud-based platform. The COVID-19-related impact on our volume started to be felt in the last 2 weeks of the first quarter, with social distancing becoming the norm and the cancellation of all nonurgent care services and elective procedures in hospitals. As of May 10, our average daily volumes have dropped 22.5% from those in early March. We also experienced higher operating costs as back-office staff were required to rearrange schedules and manage rapidly changing workflows. This trend has continued into the second quarter. Like everyone else, we don't have a clear picture of how long the impact of COVID-19 will last. But we do expect that once the risk is reduced, and particularly as elective healthcare services resume, we will see increased daily volumes and can refocus our transformation agenda on back-office efficiencies. Moving to Slide 6. Despite the impact of COVID-19, long-term care operations continue to provide a stable foundation for our business. The average occupancy at our long-term care centers was 97% for the first quarter compared to 96.9% for the same prior year period and 97.8% at the end of the fourth quarter. Funding enhancements provided earlier in 2019, along with COVID-19-related funding of approximately $400,000 helped us address increased costs in the quarter. Previously, the government had indicated plans to eliminate structural compliance premium funding for eligible beds this year. However, we recently learned that this funding will continue with the introduction of a replacement program. This means the annual structural compliance premium funding of $1.3 million will continue beyond April 1 in a new form. There have been several COVID-related provincial funding announcements across provinces in which we operate. While we are appreciative of their support, we do not have all the details on these programs yet and are still evaluating the degree to which they will help address our increased costs and lower occupancy resulting from COVID-19. The critical shortage of long-term care and the pressing need for additional long-term care beds in Canada has not changed. However, for now, everyone's focus has to be on managing the current situation. Once these immediate concerns have subsided, we believe that discussions regarding the redevelopment projects will come back to the forefront. The challenges the COVID-19 pandemic has highlighted will, at least, in part, be addressed by building new long-term care capacity and decommissioning older facilities. Turning to Slide 7. Our retirement living segment continued to perform well in the first quarter, with revenue and NOI growth and strong NOI margins, despite the impact of COVID-19 in the latter part of the period. Average same-store occupancy increased compared to the same quarter last year and lease-up activity at the Barrieview also contributed to the strong performance. However, toward the end of the first quarter, our occupancy levels began to be impacted by COVID-19 as move-ins and tours for prospective residents were restricted. Stabilized occupancy at the end of the first quarter dropped from 95.1% at the end of the fourth quarter to 92.8% at March 31. Since then, it has decreased further to 91.7% as of the end of April. We expect continued pressure on occupancy due to normal course attrition until move-ins and tours can resume. Expansion plans at our Empire Crossing Retirement community in Port Hope, Ontario have been put on hold as a result of COVID-19. Once the risk to our communities has passed, we expect to continue with this project. On Slide 8, our assist contract services and SGP group purchasing services continue to show strong growth with revenue up by 9.6% in the first quarter year-over-year. Currently, we provide contract services to 53 long-term care residents and retirement living communities for third parties through Extendicare Assist, representing approximately 6,600 beds. At the end of Q1, SGP provided cost-effective products and services to approximately 73,000 senior residents across Canada, up 27.8% from the same quarter last year and 12.5% from the end of 2019. This business leverages the purchasing power of its large network to supply other senior care providers. Over the past few months, we've also used this broad purchasing reach to help supply our operations and those of our clients with personal protective equipment, so necessary to protect our staff and those in our care. We continue to develop opportunities to expand SGP and Assist through additional services and product offerings and by expanding the reach of our sales team into other geographies. We'll now turn to David Bacon, our Chief Financial Officer, to provide insight into our financial results from the first quarter.
Thanks, Michael. I'll first provide an overview of our corporate financial performance for the first quarter, and then I will get into some highlights of the individual business segments. Turning first to Slide 10. Revenue grew to $268.8 million in the first quarter, an increase of 2.3% from Q1 of 2019, largely driven by LTC funding enhancements, COVID-19 funding, growth in the Retirement segment and the effect of the leap year this quarter, partially offset by lower home health care volumes. Net operating income in Q1 of 2020 was down slightly at $30.4 million and represented 11.3% of revenue compared to 11.7% in Q1 of 2019, reflecting increased revenue, offset by lower home health care volumes, increased back-office operating costs and higher costs due to COVID-19. Adjusted EBITDA increased by $300,000 to $19.9 million in Q1 of 2020, representing 7.3% of revenue compared to 7.1% for the same prior year period, impacted by lower ParaMed transformation costs of $900,000, partially offset by higher other administrative costs. For the 3 months ended March 31, 2020, AFFO decreased by $1 million to $11.6 million compared to the same prior year period, driven by higher maintenance CapEx and current taxes, partially offset by higher earnings. In Q1, we declared dividends of $10.7 million, representing a payout ratio of 92%. In March, we chose to suspend our dividend reinvestment plan as we believe that the dilution this plan would create at our current share prices is not in the best interest of our shareholders. Turning to Slide 11. NOI from our home health care operations was $4.3 million for Q1 of 2020, representing a decrease of $3.5 million from the same prior year period. NOI margin in the first quarter was 4.8% compared to 8.6% in Q1 of 2019. Lower NOI and NOI margin in the current quarter were driven by lower volumes, which included the impact of COVID-19 in the latter half of March and higher back-office operating costs. Volumes from our home health care operations declined by 3.1% from Q1 2019 and 2.5% from Q4 of 2019. As Michael mentioned, prior to the impact of COVID-19, we started to experience year-over-year volume increases in our Ontario operations and continue to believe that the new cloud-based system, along with the steps we are taking to improve our back-office processes and procedures to leverage the new platform will ultimately lead to the expected benefits of increasing volumes followed by improving margins. Turning to our long-term care operations on Slide 12. In the first quarter, our revenue grew by $4 million or 2.6%, and our NOI increased by $1.6 million or 9.5% from the same prior year period, with an NOI margin of 11.5%, up from 10.8% in the first quarter last year as long-term care funding enhancements, timing under the Ontario flow-through envelopes, COVID-19 funding and incremental funding for the leap year this quarter were partially offset by increased cost of residence care, higher operating and labor costs and COVID-19 costs that have yet to be refunded. Turning to retirement living on Slide 13. Net operating income from the retirement living operations increased $1.1 million to $3.7 million for the first quarter as compared to the same prior year period. This improvement was driven primarily by growth in average occupancy from same-store operations to 86.7% for the first quarter compared with 79.3% for the same prior year period and the contribution of the Barrieview community, which opened in Q4 of 2019. We typically see a decline in stabilized occupancy levels over the winter months. However, this quarter, we were further impacted by COVID-19 and resulting in a 230 basis point drop in stabilized occupancy at the end of Q1 as compared to the end of 2019. Turning to Slide 14 and looking at our final business segment. Net operating income from the contract services, consulting and group purchasing operations increased by $ 500,000 to $3.9 million in the first quarter compared to the same quarter last year. Due to growth in clients served in our SGP division to almost $73,000, partially offset by increased costs to support the operations and timing of consulting revenues in our Assist division. Turning to Slide 15 and our financial position. We are in a strong financial position with good liquidity. It's important to note that government funding underpins a significant portion of our business, and we are continuing to evaluate the various new government funding announcements -- announced to address the increased costs associated with COVID-19. We are confident that we'll be in a strong position to return our focus on the future when the pandemic is behind us. At March 31, 2020, our consolidated cash and short-term investments on hand were $105.8 million, with $70.2 million of undrawn availability on our credit facilities. After quarter end, we added a further $32.3 million in liquidity as we finance several of our retirement communities and remain well positioned for the balance of the year with only $23 million of scheduled debt maturities in Q4 remaining, and our credit metrics are largely in line with the levels at the end of the year. With that, I'll pass it back to Michael for his closing remarks.
Thanks, David. Needless to say, it has been a challenging time for all of us, residents, clients, patients, team members and families, our focus remains steadfast on providing the care and support our community needs and expects, keeping everybody safe as our #1 focus. The Extendicare team is stepping up to the challenge and our resolve remains strong. Over the longer term, once this pandemic has passed, we continue to believe the demographic tailwinds and the investments we have made in our businesses will provide us with a variety of opportunities for the future. With that, we'd be happy to take any questions youMay have. Claudia?
[Operator Instructions] Our first question is from Lorne Kalmar TD Securities.
Just quickly, thank you to you guys and your whole team for all the wonderful work you guys are doing on the frontline in this pandemics. Just a quick one from me off the hop. How many of the LTC homes are still fully funded right now?
The -- Ontario, with the program on the pandemic, all of our homes are at -- with the exception of 2 or 3 homes below the 97% threshold as it is, which is the full funding threshold. So we don't -- at this point, none of our homes are in a position to have clawbacks.
Okay. And then you guys got about $400,000 of COVID-related funding. How much more do you guys kind of expect to get? And is the understanding that the goal is to sort of cover all of the COVID-19-related costs?
Yes. In the quarter, we recognized $400,000, which offset the cost that we incurred in long-term care in the provinces where funding was received. So in the first quarter, we actually received about $1.3 billion of funding in Ontario, and we took $400,000 of that in to offset the costs. And we -- since then, in aggregate, up until -- we've received about $2.5 million then in Ontario and a further 2 -- just over $2 million is coming in, in April and May. So in aggregate, just about $4.5 million to date received in Ontario. And Alberta just started flowing some funds literally this week for us to, again, to help offset in part the pandemic cost. The second part of your question around the intent. We think on the long-term care side, we do anticipate that the various programs that governments have rolled out, the intention of those programs will be to cover the cost of COVID. We don't have all the exacting details, but it's encouraging that both Ontario and Alberta, which are our 2 biggest markets, on the long-term care side funding starting to flow, but still waiting for all the particulars about how that will eventually will be accounted for.
Okay. That was actually really good color. And then maybe could you give a little bit of color on why you've decided to defer the last 5% of the ERP implementation? Is it something cost base? Or is it a strain on resources?
Yes, Lorne, I think that the key reason is everybody is really, really busy. So the thought of doing an implementation and doing training and making those kinds of changes in the midst of this, we really try to reduce the nonessential changes during this period of time, just so that everybody can stay focused on responding to our clients' needs, implementing the new procedures and workflows for safety purposes. A great example of that is we have to phone every client before we visit them, to talk to them about symptoms, to screen them for any telltale signs that they may have the virus. So it just adds a huge workflow on top of our normal operations to be able to do that. So that was a big change with literally days to implement the change. So it was just a matter of putting that off so that people could focus on what's critically important right now.
Okay. And then maybe just one last one for me on retirement homes. When do you guys think that you'll be able to start reopening for tours and nonessential, I guess, residents?
Yes. We're not sure about that, probably pretty soon. It really is going to be different in different parts of the country because I think each province is going to have their own opening up kind of strategy and time line, which will be dictated by the frequency of infections that's occurring in that local environment. That said, to suggest that, that's going to be some kind of a straight-line function is probably not the case. Everybody is predicting that there might be waves or surges of infections at various times, and governments may be forced to throttle back the opening up. So it's pretty unpredictable. But that said, I think we'll be ready for whenever those windows of opportunity open up.
Our next question is from Chris Couprie with CIBC.
I echo Lorne's comments on the thanks. With respect to the home care business, when you look at the -- I'm not sure if you have this type of information really available. When you look at the decline in volume since March, how much of that is a function of just an overall decline in referrals made to you from the LHINs? And how much of it is just due to the fact that maybe labor is less available?
Yes. Chris, I think that the biggest drop -- the biggest portion of the drop is still the referrals versus the labor constraint at this point. So we have seen significant drop in those referral since. And we have, I think -- I won't say, bottomed out because nobody knows for sure, but that -- as you see from our -- the drop in the volumes, we're at sort of 22.5%, which slightly different than what we -- the update we gave back in early April. So -- but that's largely principally referral drop impacts at this point, the vast majority.
And when you look at the kind of mix of the volumes, are -- I'm just guessing that volume declines are starker for, say, just PSW versus nursing type of visits? Is that fair?
Yes.
Yes.
And what your kind of mix generally be between the -- if you think about the spectrum of care that you provide in home care, you referenced the cancellation of elective surgeries and so on. Is there just any kind of way we can think about how it might come back?
Yes. I mean I think the -- I mean the PSW is the vast majority of our volumes, it's probably about 80%. And that's probably the area from a nonelective type home care where people would have dropped from. The nursing is down but not as much on a relative basis. We have a very small piece of our volume on the therapy side, physical therapy type work that has really dropped off, but it's a very, very small piece of our business. So we think as the hospitals and the elective procedures reopen and some of the services that -- where we are focused on things like hip replacement, knee replacements, those types of things that will drive care on the nursing side, but also on the PSW side, just people need help sort of nonnursing type help in those situations. So we really need to see that reopen to get -- have that volume start to recover.
And then just last one for me on this topic. In terms of the costs, the incremental costs that you experienced during the quarter as it related to COVID-19. Was there anything kind of quantified in the home care business? And then just lastly, with respect to just government funding and assistance to the various health care sectors, has there been any kind of -- anything that's explicitly directed at the home care sector?
Chris, our agreements with various government agencies on the home care side, have very specific pandemic clauses in them that talk about compensation for increased costs around particularly protective equipment. So we're expecting that those clauses will cover our costs in that regard. There are some costs, back-office costs, which we don't think we're going to recover, just related to the challenge of rescheduling a lot of visits, like when everything started to shuffle around and things got canceled and people were exposed in the field to travelers or people that had tested positive for COVID-19. We had a lot of people in self-isolation at home. And of course, every time, one of our home care workers is confined to their home, it means that all of their work has to be rescheduled. And scheduling, of course, is a function of geography as well as time. And so optimizing that means that you're reshuffling all of the schedules. So it was a mammoth task to do all that rescheduling. We're seeing that calm down somewhat, but we're still finding that there are people who are affected, go out of commission for 2 or 3 weeks. And then we have to reschedule all of their visits. So those kinds of costs -- those kind of back-office logistical costs, we think we won't get any kind of special compensation for those.
Any idea how much that contributed to cost in the quarter?
On the back-office side, I mean we've seen a spike in overtime, for example. So that probably is running in the sort of $200,000 a quarter run rate as an example. Some of the other costs are harder to -- extra hours are harder to look at, but OT is one thing we're looking at.
Our next question is from Pammi Bir with RBC Capital Markets.
Just, again, maybe on ParaMed. Can you provide some context on the increases in volume that you referred to, I guess, pre-COVID for January and February?
Yes. Pammi, we -- I mean one of the things we're looking at, I know we've talked about in the past, and people have been interested in at what point are we going to see that inflection point where we start to have some year-over-year growth. So without getting into sort of weekly specifics and numbers, we did have a -- we were starting to see through February and early March, weekly at/or above last year's sort of equivalent weekly period from a volume perspective. So they weren't dramatically higher, but given where we've been at for the last while, having something coming in at that level or modestly above it, it was an encouraging sign back to the sort of rollout of procure. I mean we've got all the Ontario business, which is 95% of our -- 93% of our business probably is Ontario, and all of that was in the new system. So that was encouraging, and then we were hit with the disruption.
Got it. That's helpful. Just on long-term care, same-property NOI was obviously quite strong. Is that really, again, just timing with respect to some of the funding and I guess, expenses? And should we expect that, that will normalize over the course of the year?
Yes. No, that's a fair comment. There's a lot of timing on the envelope spend. I mean traditionally, earlier in the year, we were -- those envelopes sort of more conservative on levels of overspend or underspend. So -- but I think that there's nothing to be read from that other than sort of the longer-term view of those margins in that 11.5% to 12% range as we've talked about prior.
Got it. And sir, one more on ParaMed. In terms of the -- what are the remaining costs to incur relative to the budget once the Alberta system gets rolled out?
Yes. We -- if you recall it, the total spend for that project over the 3 years is about $12 million. We've spent $11.6 million to date. I'm not sure Alberta will cost us the full $400,000 when we get to it. But -- so I mean, from an overall perspective, even with the deferral, Alberta, with that sort of money tucked away, we're still on track for that.
Okay. Just one last one. Going back to your comments around Assist and SGP. Can you just expand on some of the commentary there? Like what is the opportunity to expand that business? And you made some comments about seeing some incremental demand in terms of what's been happening. So maybe some color there would help. And after that, I'll turn it back.
Sure, Pammi. Thanks so much. Yes, the opportunity in that space is really twofold. So we've been expanding it geographically and bringing other service providers in other parts of Canada into the group. And of course, the larger the purchasing group becomes, the more leverage we have from the perspective of getting better terms and better pricing. And I think a good indication of that has been some of the big players that we've had joined the group over the last couple of years, like Amica and Schlegel, Verve, et cetera. These are big organizations, who are still seeing a significant pricing benefit and logistical benefit of joining the group. So it really has had some momentum as we've added some of these groups. But we're not operating anywhere east of the Ontario border. So we see significant opportunities geographically. And we also see opportunities in the scope of services that we're doing collectively. So most of what SGP is focused on today is product. But there's more in the way of services that we could be looking at. So think about things like property maintenance and insurance, things that we could be doing collectively. So we see both breadth and depth opportunities for expanding that partnership.
Our next question is from Tal Woolley with National Bank Financial.
I just wanted to start by asking a couple of questions about how the operating framework might change as we sort of come out of this? The LHINs obviously provide -- referred a ton of services into home health care. Are there any types of services that you expect, at least, for the medium-term because of what's gone on here that might not continue to be offered in that kind of setting and might go back into a hospital or another type of facility?
Well, Tal, the first comment that I'll make on this is that I didn't bring my crystal ball to the conference. So we're now into the realm of wild speculation. And John Toffoletto, our Chief Legal Counsel, is not in the same room with me. So he can't throttle me. So maybe you'll get an unplugged answer on this one. But what are the advantages of being distributed. But look, I think there's going to be a lot of really self-examination of the health care system after the crisis subsides. And so there's a lot of different things that could happen. But what I would say is that from a hospital perspective, our hospitals were running at 97%, 98% occupancy before this crisis started. And if you recall, there were pretty significant waiting lists for a lot of elective procedures as well. And now we've pretty much suspended everything elective for now 8 weeks and counting. So those waiting lists are getting longer and longer and longer than unprecedented rate. So the hospitals, as they ramp up, are going to face real pressure to work through that backlog. So the thought that they would expand their mandate into other areas is not very believable, at least, for the next few years. They're going to have to do their -- the tasks that they're uniquely set up to do. If anything, I expect more pressure on community-based providers, like us, to increase our volumes to take pressure off the hospitals, not the other way around.
Okay. And I guess for a similar question on the long-term care side. Any -- like is it feasible to think that some of these incremental efforts you're making right now would subside? Or does it kind of feel like maybe this will sort of be a more permanent kind of way to operate going forward until there's a much broader review of how long-term care is conducted under various provinces?
Well, look, a couple of things with long-term care. I mean the first thing is, is that the crisis has really put an exclamation mark on the need to replace the seabeds. If anything, I expect an acceleration of government efforts to get redevelopment underway as soon as conditions make that possible. So the capacity issue is still there. The pressure from the hospitals is really going to be felt as the need for beds for that sector is still there. So if anything, I'm expecting that to become a more urgent kind of activity. The other point to make is with respect to the newer facilities, they have a lot more physical space per resident. The residents are more spread out. There are private rooms and people are more effectively separated. So in dealing with outbreaks, newer homes have a huge advantage over the homes built 40 and 50 years ago. So I think that's part of the new normal in terms of being able to handle outbreaks and any future pandemics. I think people will be very attuned to making sure that we're able to do that. And I think the need to have access to the kinds of capabilities that a company like Extendicare has, which we supply to other players through our Assist operation is -- bodes well for our ability to expand that part of the service. So I do think we're in a difficult period of indeterminate length. I think until there's a vaccine, it's going to be very difficult to be "back to normal." So that could be quite a while. But that said, I think as we come out of this, the demand for our services is going to be higher than it otherwise would have been.
Okay. And then just a regulatory question, too. One of the things we were talking about prior to all this unfolding was here in Ontario, the transformation of the LHINs into Ontario health teams and how that might play out going forward. Has that -- I'm assuming that kind of activity has basically been shelved for now.
For the most part, I mean there's a little bit of activity continuing, some meetings are continuing, but nothing substantial. I think regardless of how the -- those health teams evolve, the need for more integrated services across various sectors of health care will increase over time. And what that means is we need to be able to collaborate and cooperate better with doctors' offices, with hospitals, with public health offices, et cetera and not operate so independently as was the case in the past. And one of the interesting things that's happening through this, both in our home care and our long-term care divisions, is we've implemented virtual care services at a breakneck speed. I mean we're offering some of our home care services virtually now. The governments have set up the supports for that. We've already implemented that, and we're providing some services that way. We're able to get doctors on the phone through videoconferencing right inside our long-term care facilities to get advice right on the spot, to get prescriptions right on the spot. So there's some real innovations that were always possible, but now have been driven by necessity through this crisis that will persist long after. So that's really going to help with that whole concept of care integration where we're cooperating more effectively with other players in the market.
Okay. And then just lastly, I apologize if I missed this earlier in the call. The collection rates in retirement, have they been stable with what you've seen previously?
Yes, they have. Both our April and May rent cycles were in line with normal levels.
[Operator Instructions] Our next question is from Doug Loe with Echelon Wealth Partners.
Michael, I mean you've certainly talked comprehensively about trend lines within home health care and kind of explained the reduction referrals that seems to be contributing to your service hours. But I was thinking that the COVID-19 pandemic also provides an opportunity for you to provide home care services that would be directly germane to COVID-19 symptom mitigation. I'm thinking specifically about respiratory care or perhaps infusion therapy for intravenous drugs that are either available or in development. Just wondering what proportion of your service hours or higher acuity services of that general type? Or if not, if that was a category of services that you might be able to build out over time, either directly in response to the pandemic or just for future reasons?
Yes. Doug, we're not seeing much in terms of therapy directly related to COVID-19. People who need more acute care are really being cared for in hospitals. We're not set up in home care very effectively to provide, say, oxygen therapy or intravenous therapy for people experiencing an acute episode. And part of the reason for that is that if somebody is short of breath, for instance, because they have a viral illness, first of all, it comes on quite quickly. And secondly, it can deteriorate further. So -- because it's an acute episode like that, that would be handled in a hospital setting.The types of things we do with respect to intravenous therapy or oxygen therapy are situations where people are more stable. They have a chronic disease, for instance, that stays the same over weeks and months and is not in an active phase where it can be changing day-to-day. So that's more what a home care service provider would do. So I think what we're seeing is more situations where people want to avoid going into the hospital with their lung disease or for dialysis and that sort of thing and more interest in trying to set up those kinds of services in people's homes. But we're 8 weeks into this. So it's a bit early to declare any trends, but I do expect those kinds of higher acuity services to be increasing in a home setting.
No. That's good feedback. And then just one follow-up. I mean recall in your preliminary remarks, you made some reference to C-suite refurbishment and potential as funding there. I didn't catch whether that was with regard to the ministry sort of out its own initiative being willing to reflect on CapEx funding there, or if that's just you thinking about that as being an obvious program by which to mitigate social distance in your C-suite facilities?
No. Look, I think this is an area of active pursuit in the government. I think the government understands the need to upgrade. I mean the Ontario government, in particular, already had their program, as you know. And -- but they're also seeing quite directly in this pandemic the difference in performance between new homes and old homes. So that's just adding to the impetus that was already there to start addressing it.
There are no further questions registered at this time. I would like to turn the conference back over to Jillian Fountain for any closing remarks.
Thank you very much, Claudia. That concludes our call for today. This presentation is available on our website, as are the call-in numbers for an archive recording. Please do not hesitate to give us a call if you have any further questions. Thank you, again, everyone, for joining us. Goodbye, and have a good long weekend.
This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.