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 Inc. First Quarter 2021 Analyst Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions]I would now like to turn the conference over to Jillian Fountain for any opening remarks. Please go ahead.
Thank you, operator, and good morning, everyone. Welcome to Extendicare's First Quarter 2021 Results Conference Call. With me today is Extendicare's President and CEO, Michael Guerriere; and Senior Vice President and CFO, David Bacon.Our first quarter 2021 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 28. The replay numbers and passcodes have been provided in our press release. As well an archived recording of this call will also be available on our website.Before we get started, please be reminded that today's call may include forward-looking statements. 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 refer you to those filings. With that, I'll turn the call over to Michael.
Thank you, Jillian, and good morning, everyone. Before we get to our first quarter results, I will take a few moments to provide an update on our activities related to the pandemic.It has been more than a full year since the pandemic struck, and this pernicious virus remains a threat to our community and the world. Fortunately, vaccines have proven very effective. And we've seen a dramatic decline in the infection rates experienced by our long-term care homes and retirement communities. However, with the emergence of new more virulent virus variants and significantly higher rates of community transmission in the third wave, we must remain ever vigilant in our fight against COVID-19.We are focused on keeping our people safe, all the while remembering those we have lost, all of the much-loved friends, colleagues or family members. We recognize the tremendous toll that the past year has taken on our residents, team members and their families. We are hopeful that with increased vaccine supply and accelerated distribution, we're in the final phase of the pandemic. In the meantime, our devoted caregivers continue to work tirelessly to care for and support our residents and clients. And I thank each of them for their selfless commitment and ongoing effort.As the third wave brought significantly higher case numbers across the country, we have continued to invest in critical programs and support for our residents and staff. We have further enhanced testing protocols with rapid testing for all long-term care staff and visitors across Canada and have increased testing frequency, particularly in areas where there are high levels of community transmission. We are now administering over 24,000 rapid tests each week through our programs. Currently, approximately 90% of our long-term care residents and 86% of our retirement residents have been fully vaccinated with 2 doses.Our extensive education and awareness campaign for staff, along with the provisions of paid time off and reimbursement of travel expenses for vaccination, has resulted in 74% of our long-term care staff and 67% of our retirement staff having received at least their first dose as of last week. Community health care workers became eligible for vaccination more recently. So the ParaMed vaccine campaign is now also underway. Each week, hundreds more of our staff are joining the ranks of those vaccinated, coming together in a community effort to stifle the virus once and for all.We are very encouraged by the impact vaccinations and increased testing have had on our communities. As of today, There's only 1 active resident case of COVID-19 across our 69 long-term care homes and retirement communities. We also support our Extendicare Assist clients as they implement similar testing and vaccination programs. These have resulted in similarly positive outcomes.During the last year, Extendicare added more than 1,000 new frontline caregivers to our long-term care homes. We did this to support enhanced infection control protocols and to fortify our homes against COVID-19 outbreaks. As we look to the post-pandemic future, the expanded care team positions us well to enhance our quality of care in line with the Ontario government's long-term care staffing plan that targets 4 hours of care per resident day.We are also on track with our internal training programs that were launched last year within ParaMed. They will result in 600 new caregivers being added to the ParaMed team this year. Governments continue to do their utmost to support our COVID-19 prevention efforts. And we appreciate both the financial support we have received and the policy commitments they have made to address long-standing challenges in the long-term care sector.With that, let's turn to some first quarter highlights, starting on Slide 4. As with the past few quarters, our results continue to be significantly impacted by COVID-19. Our costs to combat the pandemic in Q1 totaled $46.2 million, exceeding related government funding by $2.3 million in the quarter. $18.8 million of the government support recorded in Q1 was for reimbursement of costs incurred last year, which resulted in lower net COVID costs for Q1 than we experienced in the previous quarter.We were very gratified to see further recovery in our home health care volumes in Q1, overcoming the detrimental effects of significant wave 2 lockdowns. We are also seeing back-office efficiencies contribute to wider NOI margins, a direct result of the new system implementation we completed in Q4 last year. Occupancy levels in our retirement communities held up well and in Q1 in line with Q4, again, a great result in light of the lockdowns in the quarter.The SGP customer base continued to grow at double-digit rates, also contributing to NOI growth in the quarter. In April, we were also very pleased to be able to break ground on our second construction project in Ontario under the new capital funding program.More on that on Slide 5. Here, we see more detail about our redevelopment progress. We are advancing our plan to replace aging infrastructure with new modern homes that are designed to provide improved functionality, safety and comfort for our residents. Of the 22 long-term care redevelopment projects we have proposed to the Ontario government, requisite beds have been granted for 9 so far. After so many years of advocating for replacement of aging facilities, it is gratifying to see these projects move forward. Those 9 projects with bed allocations represent a $500 million investment by Extendicare in the future of long-term care in the province. We are targeting to have 6 of these projects under construction by the end of '22, with an additional 3 projects planned for 2023.Construction of our Sudbury home continues, joined now by the new project underway in Kingston. This new 192-bed long-term care home will replace an existing 150-bed Class C home in that city. It will feature 114 private rooms and 78 semi-private rooms. Our investment in this home totals $45.4 million, with completion expected in the first quarter of 2023.Our third project is just outside Ottawa in Stittsville, Ontario. It is advancing through the approval process, and we expect to begin construction on that home later this year. This is the first of 4 projects being planned for the Ottawa area and is a new 256-bed home that will replace C beds from other Extendicare homes in that region.Subsequent to quarter end, we entered into commitment letters for $95.9 million in committed construction financing for our Sudbury and Kingston redevelopment projects. This will bolster our strong liquidity position and clearly demonstrates the financing community support of the sector and the new Ontario capital funding program.Moving to Slide 6 and our long-term care segment. The pandemic continued to significantly impact our operations. As a result of the numerous outbreaks experienced at the height of the second wave in the early part of the quarter, costs incurred to protect our residents and staff from COVID-19 were $48.1 million, up almost $14 million from the Q4 levels.Occupancy at our long-term care homes continued to decline in Q1 as a result of ongoing pandemic restrictions. Average occupancy declined to 82.9% in the quarter. Despite the lower occupancy levels, our revenue base was largely preserved, as governments continued to support the sector through the challenges associated with new admissions during the pandemic.In Ontario, the government has extended basic occupancy protection funding until August 31. The Ontario government is also working with the sector to incorporate revised occupancy models that will enable homes with ward-style 4-bed rooms to maintain a maximum of 2 residents per room until they are redeveloped to modern building standards. We anticipate that funding for these ward-style rooms will continue at the current level beyond August 2021.Through April, we have seen long-term care occupancy start to recover. Given the success of the vaccination program and the growing waiting list of people waiting for long-term care, both at home and in hospital, we anticipate that occupancy will increase steadily in the coming months.The Ontario government has continued to demonstrate a commitment to support the long-term care sector for costs related to the pandemic. In Q1, we received a total of $18.2 million, fully reimbursing us for COVID-related costs incurred in 2020 in our Ontario homes. In addition, the recent Ontario budget provided for an additional $600 million in COVID response funding for the fiscal year starting on April 1.We have invested in the safety of our people since the beginning of the COVID-19 pandemic without knowing whether we would be fully reimbursed for our costs, but with a view only to doing everything possible to protect our staff and those in our care. Over the past year, various governments have stepped up to provide funding to cover these substantial costs, and we are deeply grateful for the support we have received.On April 30, 2021, the Ontario Long-Term Care COVID-19 Commission delivered its final report, which included 85 recommendations. On the whole, the report calls for greater attention and resources for seniors care and long-term care in particular. We welcome these recommendations and look forward to working with the government and our industry partners to make them a reality.Turning now to Slide 7. Our ParaMed volumes continue to recover from the impact of the pandemic, with the rate of growth constrained somewhat by workforce capacity limitations. Our Q1 volumes are up 1.7% from Q4 2020 levels. And we have continued to see further growth in April, with our average daily volume for the 4 weeks ending May 2 up 2.7% from Q1. Ongoing lockdown measures, particularly prolonged school closures in certain regions, have impeded the ability of some of our home health care caregivers to continue working, which has slowed the pace of recovery in our volumes.To meet the continued growth in demand for home health care services, we continue to make long-term investments in training new health care workers. Since their inception in Q3 of 2020, our in-house and college partnership training programs have graduated approximately 400 new caregivers, including over 100 who graduated in Q1. We expect to add approximately 600 new caregivers from these programs throughout 2021.Demand for home health care services continues to be robust, with new referrals exceeding levels experienced before the pandemic. We believe we are well positioned for further growth as we emerge from the crisis and address the gap between referrals and supply that has widened over the past year.We are also seeing the benefits of our completed cloud-based scheduling and clinical management system, particularly with improved efficiency in our back-office operations and growing volumes of virtual care services. We expect that as the impact of the pandemic abates and volumes further recover, the scalability of the new system will drive further margin improvements.I'll now turn to David Bacon, our Chief Financial Officer, to provide insight into our financial results for the first quarter. David?
Thanks, Michael. I'll start by providing an overview of our consolidated results for the quarter, followed by some financial highlights of our individual business segments and our liquidity position.As Michael mentioned, we continue to experience a high level of volatility in our financial results due to the impact of COVID-19. Our pandemic costs this quarter were higher than expected due to the magnitude of the third wave. However, government support received this quarter included reimbursement for costs incurred to the end of 2020, helping to offset the impact of higher costs. Details of our net COVID costs by business segment are outlined on Slide 18 of our presentation.In Q1, we continued to experience occupancy pressures in our long-term care and retirement segments and lower volumes in our home health care segment as compared to our pre-pandemic levels. As in previous quarters, revenue declines in our home health care segment on a year-over-year basis qualified our ParaMed subsidiary to receive additional funding under the Canada Emergency Wage Subsidy program, which totaled $9.7 million this quarter. As in 2020, this subsidy is recorded as a reduction of operating expenses in our home health care business.Turning now to Slide 9 and our consolidated results. In the first quarter, we incurred approximately $46.2 million in COVID-related costs and received $43.9 million in government funding for a net reduction of adjusted EBITDA of $2.3 million. The balance of our COVID-related revenues and expenses in Q1 relate to the various pandemic pay programs currently in place.We are encouraged by government's continued funding support. And as Michael mentioned earlier, we received $18.8 million in COVID funding in Q1 in our LTC segment for reimbursement of costs incurred in 2020. Until the effects of the pandemic are behind us, we expect ongoing volatility in our results, as the quantum and timing of the funding is not always known in the period the costs are incurred, but are optimistic that further reimbursements of costs incurred in our LTC segment in Q1 and beyond will be substantially covered, particularly in Ontario.Our consolidated revenue in the first quarter increased by 18.6% or $50.6 million to $322.4 million, driven by increased COVID funding of $55.4 million to offset in part the $56.5 million of COVID-related expenses incurred. Revenue also increased as a result of LTC funding enhancements and growth in our SGP and Assist operations, partially offset by lower home health care volumes, timing of long-term care flow-through funding and lower preferred accommodation revenue.Consolidated NOI was up $9.9 million to $40.3 million, reflecting the wage subsidy received by ParaMed of $9.7 million in Q1. Consolidated NOI was otherwise largely in line with Q1 of 2020. Despite higher net pandemic costs and increased cost of resident care and lower home health care volumes, our improved home health care back-office efficiencies and growth in our SGP and Assist operations helped offset these impacts. Our consolidated NOI margins improved to 12.5% from 11.2% in Q1 of 2020, driven largely by the improvements in the home health care operations.Our consolidated adjusted EBITDA was up 37.7% or $7.6 million compared to Q1 2020 due to the impact of the ParaMed wage subsidy and the underlying improvements in NOI, partially offset by increased administrative costs due to higher wages and insurance as well as higher COVID administrative costs.Our AFFO was up 68% or $7.9 million compared to Q1 2020 due to the improvement in adjusted EBITDA and lower maintenance capital expenditures, partially offset by higher current income taxes related to the ParaMed wage subsidy and net interest costs.Our quarterly results continue to experience volatility and with the impact of COVID expenses and related funding and subsidies. The estimated basic AFFO per share impact in Q1 of our net COVID costs, net of tax, is $1.7 million or $0.02 per share. And the similar impact of the ParaMed wage subsidy, net of tax, is $7.1 million or $0.08 per share.Turning now to our individual business segments on Slide 10. Our long-term care operations in the first quarter saw revenue grow by $44.9 million or 28% to $205.1 million, which included COVID funding of $46.6 million, partially offset by lower preferred accommodation revenue due to lower occupancy secondary to pandemic restrictions.In Q1, our LTC NOI declined by $2.1 million or 11.6%, largely due to higher unfunded COVID costs, increased cost of resident care and lower preferred accommodation revenue, which is not included in the Ontario basic occupancy funding protections. Excluding net COVID costs, our LTC NOI margin was 11% this quarter.As a result of the impact of COVID, with limitations on move-ins and a maximum of 2 residents per room, overall occupancy in the quarter was down to 82.9% and in Ontario down to 80.3%. As previously mentioned, our LTC revenue has been largely protected despite the lower occupancy levels. In the most recent budget in Ontario, basic occupancy funding protection has been extended through to August 31, 2021, which provides us an opportunity to recover our occupancy in the coming months as the vaccination rollout and our ongoing testing and other IPAC protocols continue to minimize cases and transmission within our LTC homes.Turning to Slide 11 and our Home health care segment. NOI increased by $11.6 million to $16.3 million. And our margin improved to 16.3% from 4.6% in Q1 2020, reflecting the impact of the wage subsidy of $9.7 million and lower back-office cost, offset by lower volumes of 1.3% and higher net COVID costs. As a result of cost efficiencies, our NOI margin in Q1, excluding the impact of the wage subsidy and our net COVID costs, was 7.3%, up 150 basis points from 5.8% in Q4 of 2020 and 270 basis points higher than Q1 of 2020. Average daily volumes in the first quarter were 1.3% lower than the same quarter last year, but have improved sequentially from Q4 2020 by 1.7% and have continued to improve into April, as Michael noted earlier.Turning to our retirement living operations on Slide 12. Our retirement operations have continued to perform well in Q1 despite the ongoing impacts of COVID on our occupancy levels and costs. In Q1, revenue increased marginally, while NOI was down slightly as a result of the ongoing pressures on occupancy levels and operating costs from the pandemic in addition to increased cost of labor and utilities. NOI margin reflected the impact of increased costs declining to 28.3% in Q1, down from 30.8% in Q1 2020.Throughout the pandemic, our stabilized occupancy has remained above 90%, averaging 90.7% in Q1, down 60 basis points from Q4 2020. Stabilized occupancy levels improved towards the end of the quarter, ending with 91% occupancy as at March 31, 2021. For the month of April, we have seen a modest uptick in average occupancy by 20 basis points to 84.3% from 84.1% in Q1, driven by improvements in our lease-up communities.Turning now to our final business segment on Slide 13. Our Assist contract services and SGP group purchasing services continue to perform strongly, with consistent growth in revenue and NOI up 15% and 16.4%, respectively, in Q1. This growth has largely been driven by SGP client growth and lower travel and marketing expenses due to pandemic restrictions. The underlying demand for our services remain strong. And SGP, together with its partners, now provide cost-effective products and services to over 81,000 third-party residents, an increase of 11.3% over Q1 of 2020 and up 2.8% from the end of 2020.Finally, turning to Slide 14. We remain in a strong financial position. At the end of Q1, our consolidated cash and short-term investments on hand were $141 million, with $71 million in undrawn credit facilities and no scheduled debt maturities until the first quarter of 2022. As Michael mentioned earlier, subsequent to quarter-end, we signed commitment letters for $95.9 million in committed construction financings for our Sudbury and Kingston LTC redevelopment projects that are now under construction, further strengthening our liquidity position.With that, I'll pass it back to Michael for his closing remarks.
Thank you, David. While we're extremely encouraged by the impact of vaccinations and the lower COVID-19 infection rates in our homes, we remain vigilant in our efforts to protect residents, clients and team members. We know that we cannot let our guard down until this virus is no longer a threat to the people we care for.In addition to keeping our people safe, we are actively working to create a better future. We are investing in our people and in new homes to provide state-of-the-art services to meet the needs of our residents and clients. We are ready and willing to play our part to build a better future for seniors across Canada.With that, we welcome any questions you may have. Operator?
[Operator Instructions] The first question comes from Jonathan Kelcher with TD Securities.
First question just on the staffing generally. I guess, it's been an issue for the industry. It's going to continue to be an issue with 4 hours of care coming. Government has obviously been supportive. You guys are as well with your programs. Are you seeing as much take-up with new people entering these training programs as you would have thought or anticipated?
Yes. We're seeing good uptake with those programs. We've had very good luck in terms of fully populating those programs. And I think we're getting the volumes that we expected as we set those programs out. So of course, they're welcoming new people into the sector. And of course, we've got a significant laxity in the labor market that is helping us with those recruitment efforts. Don't forget, though, that we have a lot of people that are still on long-term leads since the beginning of the pandemic that we're looking forward to welcoming back.We still see a couple of hundred people coming back on a quarterly basis. We've seen that pick up with the vaccinations. Now that's certainly helping the lockdowns. And the online schooling are not helping those efforts. We definitely see a reduction in availability of staff every time a lockdown occurs. But as vaccination efforts pick up and the third wave seems to be cresting, we're looking forward to getting a lot of those people back into the workforce.
Okay. And then 1,000 new frontline workers to long-term care, is that a net number? Or is that new hires?
That is a net number. So that's actually additional people working. We hired a lot more than 1,000 people over the last year to deal with attrition. That's the net increase.
Okay. And how has attrition or turnover trended the last couple of quarters?
Well, it's been higher certainly than what we saw pre-pandemic. But we've seen a lot of movement of people into leaves of absence and then coming back as well. So the attrition is not necessarily permanent, but just people who are having to take leaves for child care purposes or health purposes. And we expect that, of course, will end as the pandemic subsides.
Okay. And then my -- just secondly on your development. I guess, your costs are probably mostly fixed on Sudbury and Kingston and maybe Stittsville. But how do you think about the other 6 projects you're targeting being under construction with costs -- development costs, obviously, increasing? And how do you think about your returns on those projects?
Yes. Jonathan, I think you're right on Kingston and Sudbury. We're into fixed-price contracts on those and construction is underway. We're, I think, confident in the near term here on Stittsville and potentially a fourth project that could come a bit early of the 6 that we're targeting. But it is -- the construction costs are rising for sure. So we are watching that closely. We do think that -- we're hopeful that if we can move through the final stages of the balance of the projects here that we want to have up and running into construction by the end of next year that we can hopefully outrun that a little bit, but it is a concern that we'll -- I think the sector will have to watch on cost escalations.The current program, while it's -- there's a lot of great features to the current program, the new program that's out. The one thing it does not still currently have included is any kind of CPI or cost inflation protection built into it. So it will be something I think we're going to all have to collectively watch over the next year or 2 as we all try and get as many of these projects into the ground as we can.
Okay. Is there a level where you'd look at the return, say, you know what, we'll pause on this until we can -- until either construction costs come back a little bit or the government redoes the deal?
Yes. I think we look at returns on projects a number of different ways. I mean you can see our first 2 projects are in and around that 8% NOI yield target range, which I think is you're seeing consistent in other LTC projects that are getting greenlit here under the new program. So that's a good barometer. I mean would we move off of that slightly in the right set of circumstances? I think there's obviously a range, plus or minus, around that. But I think that is a good proxy for how we think about things, and we wouldn't want to see things move too materially off of that.
The next question comes from Tal Woolley with National Bank Financial.
Just to talk about ParaMed for a second. Now that we're seeing sort of volume growth return, it looks like labor availability is going to get a little bit better. Prior to the pandemic, you had a lot going on in this business. Just wondering if maybe we can sort of recap like what the destination sort of is supposed to look like for this business once we kind of get back to normal. What -- we're running at a more reasonable average kind of volume that you would see in the past. What are your hopes for the NOI margin in this business?
Yes. Tal, I think a few things there. There has been a lot going on, as you know. We were happy to get the systems part of the equation finalized in ParaMed last year with the finalization of the rollout of the new platform. The new recruiting programs are critical. I think we are seeing volume recovery, but we still don't have the staffing where we want it to be to fully take advantage of the return in demand that we're seeing. I think if you go back historically, into, say, 2019 pre-pandemic and look at the business then, the margins at that point were in the 9% range. I think, look, we don't know exactly when we'll return to those levels. But I think the key for us right now is the focus on building the staff capacity.We have seen 3 quarters of sequential volume growth, albeit a little bit slower in Q1. We're trending potentially a little bit higher here in Q2 with the 2.7% we're seeing in the last sort of 4 weeks up to early May. So I think we're going to still see some progression on volume, and that will be the focus for us this year, and get back to pre-pandemic levels and start having sequential volume growth quarter-over-quarter.And as we've seen with the investments now in the back-office and some of that -- some of the efficiencies starting to kick in there, where as we add that volume, we can hold steady on fixed costs and indirect costs really start driving that model. But we have said in the past and longer term, I mean, we do believe that this should be a double-digit NOI business. But I can't tell you today exactly when we will hit that. And we need to see our way still out of the effects of the pandemic here and through the balance of 2021.
And just -- is there a lot of operating leverage in the margin? Because I'm just thinking, like, obviously, your biggest variable cost and probably the chunkiest one of the P&L for that business is the labor. And so every time you have another hour, you need another hour of labor too. Like this isn't like a business that we should expect like would go -- if it was running at 9%, like as hours go higher, it would go up like to the mid-teens kind of thing?
I think there's definitely room for improvement, where we are today, as I mentioned. I mean this should be a double-digit business. I don't -- I think that there is a lot of leverage in the operations from revenue growth. I mean revenue growth is driven by the volume. The investments we've made have got us, I think, into a very good place where -- and automated a lot of what was manual and the efficiencies in the scheduling platform. So there is more leverage there.I don't -- I think I'm not sure it goes ad infinitum into higher and higher margins as we go, because I think to get some of that -- those huge revenue or volume gains you're sort of imagining there, I think other things are probably going on in the business in terms of expansion geographically and things like that to -- that would have some fixed cost component that come into it. But we do think this should be back into a low-teens double-digit business, like it was back in '17 -- '16, '17 after we did the Revera acquisition before we had the downturn that we're pretty comfortable we've rectified now.
Okay. Okay. And just to go back to the Long-Term Care Commission report, I had asked someone at an earlier call today, but it did seem like, particularly when it came to new development, the splitting off of the model into construction versus care, the minister did seem somewhat supportive of that initially coming out of the reports released. And I'm just wondering like how you feel about that going forward. And what sort of subsequent dialogue have you had with the government about maybe this operating model changing?
So a couple of things on this one. First of all, we would agree with the commentary in the report that operators and seniors care should be mission-driven, using their words. And the Commission specifically contemplated for-profit mission-driven organizations. They did address that. They also highlighted the colossal task that's ahead of us to meet the demand for seniors care, and that's driven by demographic realities. So we really need all hands on deck to solve that issue. And I think the Commission raised creative options for bringing more capacity to the table, but I don't think we should read that as being to the exclusion of existing models.None of the 85 recommendations are a barrier to for-profit operators getting on with the urgent task of replacing C bed homes. And we have certainly seen no pause or no change in our work with government in advancing those 9 projects that I referred to earlier.So for the last couple of weeks, we've had a number of correspondence with the government on a number of those projects. And things are moving forward as anticipated. So I really think that this should be read as being an effort to bring some new models in to expand capacity in the sector, because the need is so urgent. But I think we should also pay attention to the commentary in the Commission report that specifically says the need is colossal and it is urgent and that we need everybody contributing to it.
And Michael, as a doctor, I'm just wondering if you can help me sort of understand sort of a risk question. The investment that the government is going to make in increasing care hours. How much -- because I mean there were issues -- there were resident issues prior to the pandemic that would crop up in different facilities, and a lot of it had to do with staffing and labor availability and things like that. The investment in care hours that the government is sort of planning to make, how much do you think that will reduce the operating risk in the current LTC model with respect to -- when it comes to resident care?
Yes, it's a good question. It's a great question. I think it will have a material impact on reducing risk. And predominantly because it will increase the resiliency in the sector. I mean what's happened over 20 years is that the funding has just ever so slightly been behind inflationary labor costs. And as a result, we have quite thinly staffed homes right across the country. And of course, that's the same, whether you're talking about not-for-profit or for-profit entities were all funded the same way. And 4 hours of care per resident day as an average is really an internationally recognized standard.And so this is the first time that we are setting a target or an objective in terms of the ratio of staff to residents, which not only helps us from the perspective of having more staff on hand to address any issues that come up in a home such as an outbreak, as we've seen more recently, but there's other things that can happen as well, say, people booking off sick. And so then that puts stress on the staffing in a home. So having more staff to begin with just adds that resiliency.But I also think it's very important that the funder is now making an implicit commitment to fund those 4 hours of care. So not only does it derisk the operations, it also derisks the sector from the perspective of that erosion in the staffing levels if funding doesn't keep pace with wage inflation. So I see this as a sea change in the sector. Everybody has been lobbying for this for 20 years. And when I say everybody, I'm thinking about unions, political parties, operators, everybody has seen this as being a step that really entrenches a certain kind of quality commitment in the industry. So this is an incredible step.And by the way, I mean, it is Ontario that's done that. We haven't seen any other provinces do that. But I say that from the perspective that the federal government now has stepped in with this idea of national standards, and they've struck a group to define what those might be. They've put $3 billion in funding in the most recent budget behind that and have made a comment that there's potentially more to come in the form of the health transfers to the provinces.So I think there's a realistic possibility that, that 4 hours of care standard might be adopted across the country and backed by the federal government. So as tragic as the pandemic has been, the movement, from a government policy perspective, has been historic. And so we're incredibly buoyed by it, and we're very excited about it.
All right. That's a great answer. Just wanted to say to you, I really enjoyed reading your testimony to the Commission. It was very interesting, just hearing you speak to the doctor too as well.
Thank you.
[Operator Instructions] This concludes the question-and-answer session. I would like to turn the conference back over to Jillian Fountain for any closing remarks.
Thank you, operator. That concludes our call for today. This presentation is available on our website as are the call-in numbers for an archived recording. We're looking forward to you joining us at our virtual AGM on Thursday, May 27 at 10:30 a.m. Further details are posted on our website.Thank you, everyone, for joining us today. Please don't hesitate to give us a call if you have any further questions. Goodbye.
This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.