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., Second Quarter 2022 Analyst Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions]
I would now like to turn the conference over to Jill Fountain, Vice President, Investor Relations. Please go ahead.
Thank you, operator, and good morning, everyone. Welcome to Extendicare's Second Quarter 2022 Results Conference Call. With me today are Extendicare's President and CEO, Michael Guerriere; and Senior Vice President and CFO, David Bacon.
Our Q2 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 August 26. The replay numbers and passcodes have been provided in our press release, and 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 suggest that you refer to those filings.
With that, I'll turn the call over to Michael.
Thank you, Jillian, and good morning. I'll begin our presentation today by recognizing the unprecedented times we find ourselves in.
In my 30 years in health care, I have never seen the system so strained. Record low unemployment in Canada is leading to labor shortages that are constraining growth and disrupting operations in many sectors of the economy. The situation in health care is particularly challenging as hospitals, home care providers and long-term care homes experience staffing shortages with many examples of service reductions or temporary closures making headlines on a daily basis. Like others in the health sector, we are subject to these market realities, most notably in our home health care segment where we can't find sufficient caregivers to meet the strong and growing demand for care. Home health competes with other service industries for workers. So in the context of record low unemployment, it is a credit to our team that we have been able to maintain our current volume of service.
In addition to labor shortages, COVID-related absenteeism has been a significant challenge this year. Sick leave due to COVID peaked in Q1, then declined significantly in Q2. As we enter Q3, a 7th wave of the virus got underway. These recurrent COVID impacts are adding further pressure to an already constrained workforce.
Inflation is also contributing to operating challenges, putting pressure on our operating margins and on construction costs and thus impacting progress on our redevelopment program. While rate increases and one-time funding are alleviating some of the associated cost and margin pressures, we in fact expect our operations will continue to be impacted by rapidly changing market conditions.
On Page 3 of the presentation, we can see the impact of the pandemic in the quarter. This is the 10th consecutive quarter that has been impacted by COVID-19, although decreasing community transmission rates contributed to less impact on operations and costs and resulted in improvements over Q1 in our occupancy levels and home health care volumes. Outbreaks in our homes dropped to just 1 by the end of June before community infections began to increase again as we exited the quarter. The emergence of the BA.5 subvariant in July has resulted in a resurgence of the virus in the community, leading to new outbreaks in our long-term care homes and rising levels of staff absenteeism in our home health segment once again.
On a positive note, vaccinations and boosters continue to be effective at reducing the incidence of serious illness and hospitalization among our residents and have generally led to milder symptoms in caregivers and those we employ. We remain vigilant and focused on key prevention and control measures to minimize the spread of the virus, including a renewed focus on the promotion of vaccine boosters with the knowledge that even milder variants poses a serious risk to the most vulnerable members of our community. As at August 9, 15 of our 58 long-term care homes were in outbreak.
Since the beginning of the pandemic, we have received funding to cover 90% of our COVID-related costs, leaving the cumulative unfunded COVID costs from continuing operations at $22.4 million. Clearly, we are still operating in a pandemic environment, and until it ends, we will continue to experience volatility in our financial results.
Turning to Slide 4. We completed the sale of our retirement living segment to the Sienna-Sabra partnership for $307.5 million, resulting in realized net proceeds of $128 million, marking significant progress on our strategic transition to focus on growth in our long-term care and home health care segments.
In regard to the Revera and Axium transactions that we announced in the first quarter, we have submitted all regulatory filings and are awaiting approval in Ontario and Manitoba. Total aggregate consideration to be paid on closing of these transactions remains approximately $70 million, customary to -- to customary adjustments, the consideration consisting of cash and debt assumed through our 15% ownership stake in the joint venture with Axium.
These agreements set us up to double the size of our assist management business and provide us with greater flexibility to pursue growth initiatives and our redevelopment program using a less capital-intensive business model. Together with the sale of the retirement business, these transactions create flexibility to allocate capital strategically. We are well positioned to make the necessary investments in people, technology, redevelopment and acquisitions to drive growth in our long-term care and management services segments. These initiatives will complement the organic growth opportunities already present in our home health care segment.
We also initiated a normal course issuer bid to provide us with additional flexibility to manage capital, acquiring approximately 985,000 shares for cancellation since its inception in June.
Moving to Slide 5. We continue to advance our long-term care redevelopment program. We have bed allocations for 20 projects, 3 of which are under construction. Given the construction cost inflation and rising interest rates being experienced across the sector, enhancements to the government's capital funding program are needed before we can start construction on more homes. We are actively engaged with our industry partners and the Ontario government to obtain the enhancements needed to make these projects economically feasible. We are committed to our redevelopment strategy and believe that the demographic need for long-term care beds will motivate the changes required to unlock our pipeline of projects. In the meantime, we will advance planning and approvals for the other 17 projects expeditiously with the goal of having 6 more ready to break ground by the end of 2023.
Now we'll turn to a few operational highlights on Slide 6. With lower rates of COVID-19 during the quarter, long-term care average occupancy increased by 160 basis points from Q1, and home health care average daily volumes improved 2.5% on a sequential basis. We also continued to see solid growth in our SGP customer base in Q2, up 3.4% from Q1 and 22.4% year-over-year.
Pandemic-related spending dropped during the quarter to $22.1 million, down $20.1 million from Q1 as the number of COVID-19 outbreaks declined in the quarter. Our costs were largely funded, resulted in net unfunded costs of $600,000 in the quarter. Although the Ontario government announced an increase to flow-through funding for long-term care effective April 1, there was no increase to the accommodation envelope to help offset the impact of inflation and the tight labor market.
During the quarter, the Ontario government made the $3 per hour PSW wage enhancement permanent and is adjusting our funding in both our long-term care and home health care segments to make this much needed change in caregiver compensation.
In April, the Ontario government announced $1 billion in additional funding over the next 3 years to expand home care services. A portion of this funding was allocated to rate increases retroactive to April 1, consisting of 3% for personal support services and 5% for nursing and allied health services. These increases help to offset inflationary pressure on wages and benefits, higher overtime and travel costs and increased recruiting activity in our home health care segment. This funding is an important investment by the government and will help us to drive the recovery needed in staffing across the sector to meet the growing demand for home health care. We look forward to future announcements on how the government intends to allocate the remainder of the new funding.
With that, I'll turn it over to our CFO, David Bacon, to provide commentary on our consolidated and segmented financial results for the second 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 liquidity position.
As we mentioned last quarter, our retirement living and Saskatchewan long-term care operations have been classified as discontinued and held for sale. As such, these operations are excluded from our results from continuing operations in our financial statements and MD&A. Further details on our results from discontinued operations can be found in our Q2 MD&A and Note 14 of our interim financial statements.
As Michael mentioned, we closed the sale of our retirement operations on May 16 and realized proceeds of approximately $128 million, subject to customary post-closing working capital adjustments. We recorded an after-tax gain of $67.9 million, which is included in our Q2 results through discontinued operations. The after-tax gain on the sale is excluded from our AFFO. We continue to work towards exiting from our Saskatchewan long-term care operations by the end of the year.
Turning now to Slide 8 and our consolidated results. As in prior quarters, we have included a detailed schedule on Slide 17 of the estimated impact of COVID on our revenues, operating expenses, NOI and EBITDA. We continue to receive funding support under various provincial programs. Our net unfunded COVID costs impacted our consolidated adjusted EBITDA from continuing operations by $600,000 this quarter and an estimated after-tax impact on AFFO of approximately $400,000.
On a year-over-year basis, our consolidated revenue increased 5.3%, or $14.9 million, to $296.6 million. This increase was driven primarily by long-term care funding increases to add staff, home health care billing rate increases and growth from our other operations, partially offset by lower COVID funding of $11 million and the impact of the timing of long-term care flow-through funding.
NOI increased by 5% from the prior year quarter, which included $7.7 million of Canada Emergency Wage Subsidy received by ParaMed. Excluding the effect of the subsidy, NOI would have increased by $9.1 million to $30.3 million with a consolidated NOI margin of 10.2%, up from $21.2 million and a margin of 7.5% in Q2 of 2021. NOI improvements were driven by a decline in net COVID costs of $5.9 million and aggregate workers' compensation rebates of $3.9 million received in the current quarter, partially offset by higher operating costs.
Our consolidated adjusted EBITDA increased 10.4%, or $1.6 million, to $17.1 million due primarily to the higher NOI. Higher strategic transaction-related fees of $1 million in the quarter were largely offset by lower COVID-related administrative costs.
AFFO per share was $0.10 in Q2, up from $0.09 per share in the prior period, reflecting the improvement in earnings from continuing operations and lower maintenance CapEx, partially offset by the loss of earnings from the disposed retirement segment of approximately $0.02 per share.
Turning to our individual business segments on Slide 9. Long-term care operations saw revenue increase by $7.9 million or 4.6% in Q2, driven by funding enhancements, including $14.7 million in Ontario flow-through funding. This was partially offset by lower COVID funding of $7.7 million.
NOI increased by $6.5 million in Q2 to $17.6 million, represented 9.7% of revenue, largely due to a net COVID recovery of $6.3 million, funding enhancements and one-time workers' compensation rebates of $1.8 million. These increases were partially offset by higher cost of labor, utilities and insurance.
Our NOI margins, adjusted to exclude the impact of COVID and the workers' compensation rebate received this quarter, were 9.1% compared to the 11.1% in Q2 of 2021. The 1.75% government funding increase received in our Ontario LTC operations effective April 1, 2022 did not extend to our accommodation envelope, despite inflationary cost pressures. The flow-through funding increases, which include the shift towards 4 hours of care and the now permanent 3-hour wage increase for PSWs, resulted in an additional $14.7 million of flow-through funding in Q2, which impacts our LTC NOI margin percentage by approximately 90 basis points.
In our Alberta long-term care operations, we received a 5.5% inflationary increase on accommodation rates that will be effective July 1. This is estimated to increase our annual revenue in our Alberta long-term care operations by $2.3 million.
Turning to LTC occupancy. We experienced improvement in the quarter as the prevalence of the virus in the community subsided, resulting in a 160 basis point increase for Q2 over Q1. However, as Michael mentioned, recent increases in outbreaks driven by the new omicron variants may impact this positive trend in Q3. As we mentioned last quarter, occupancy protection in Ontario long-term care homes expired at the end of January, and we are required to achieve 97% occupancy over the remainder of 2022 to receive full funding, excluding ward-style beds no longer in use. Our adjusted -- our average adjusted occupancy for the 3 months ended June 30 was 96.6% and 96% for the 5 months ended June 30, 2022. There remain a small number of LTC homes in Ontario that are currently tracking below the 97% requirement for full funding. Each have targeted plans in place to attempt to recover the occupancy shortfall over the balance of 2022.
Turning to Slide 10. In our home health care segment, revenue grew $5.7 million or 5.6% in Q2, driven by billing rate increases, including approximately $4.4 million in additional funding to support the government's decision to make the $3 per hour PSW wage enhancement permanent at the end of April. The increase in revenue was partially offset by lower COVID and pandemic funding of $3.3 million and a decline in our average daily volumes of 0.4% from the prior year quarter.
Excluding the $7.7 million wage subsidy received in Q2 2021, ParaMed's NOI increased by $1.9 million to $8.2 million with an NOI margin of 7.7% from $6.3 million and a 6.3% margin in the same period last year. The improvement in NOI reflects billing rate increases and one-time workers' compensation rebates of $2.1 million, partially offset by higher wages and benefits, recruitment, travel, technology and training costs and an increase in unfunded COVID costs of approximately $400,000. On a sequential basis, excluding the impact of the net COVID costs and the workers' compensation rebates in Q2, our NOI margin was 7.3% in the quarter, up from 5.5% in Q1 2022, the improvement largely due to the billing rate increases and a 2.5% increase in our average daily volumes on a sequential basis, offset partially by higher operating costs.
As Michael mentioned, the Ontario home health care billing rate increase effective April 1, and our estimate -- and is estimated to increase our annual revenues by $13.1 million based on our trailing 12-month volumes and mix of services. This increase will help offset in part increased labor costs and recruitment efforts to address staffing challenges.
Turning now to Slide 11. The underlying demand for our Assist contract services and SGP purchasing services continues to be strong. SGP now supports over 102,000 third-party beds as of the end of Q2, up 22.4% from a year ago and up 3.4% from Q1 of 2022. Q2 revenue increased by $1.3 million, or 18.7%, to 8.2% from Q2 2021, largely due to growth in our SGP clients and the timing and mix of Assist consulting services, which contributed to an $800,000, or 20.2% growth, in our NOI to $4.5 million.
Turning to Slide 12 and our financial position. Extendicare remains well positioned with strong liquidity, which included cash and cash equivalents on hand increasing to $238 million with the realized proceeds from the sale of the retirement operations and access to a further $76.7 million in undrawn demand credit facilities at the end of the quarter. In addition, the company has undrawn construction financing available in the aggregate of $146 million for our ongoing redevelopment construction projects. Our maturity profile has improved with only modest debt maturities coming due over the next 2 years, and our debt to gross book value improving to 34.5%.
Our liquidity position provides us with flexibility to allocate capital strategically, whether in respect of our long-term care redevelopment program, the Revera transactions, other potential acquisitions or capital structure initiatives.
We initiated a normal course issuer bid on June 30, providing us the ability to purchase up to 10% of our public float or 7.8 million common shares for cancellation through June 29, 2023. To date, we've purchased for cancellation 985,000 shares at a cost of $7.1 million, or a weighted average share price of $7.22. Decisions regarding the timing of future purchases of common shares will be based on market conditions, share price, capital needs and other factors.
With that, I will pass the call back to Michael for his closing remarks.
Thanks, David. Despite facing headwinds in the form of labor shortages, inflation and continuing effects of the pandemic, Extendicare continues to position itself for growth with a focus on long-term care, home health care and management services. Proceeds from our recent divestiture will be put to good use as we grow through building new long-term care homes, completing our recent acquisitions and organic growth in home health. The pandemic has presented recurring challenges for Extendicare and the healthcare industry at large, and we remain committed to working with our partners and stakeholders to provide the care that our residents, patients and clients so desperately need. We appreciate the renewed sense of urgency and substantial commitment we have seen from our government partners and look forward to continuing to play a central role in the renewal and expansion of high-quality long-term care and home health services.
Of course, none of this is possible without the continued exceptional dedication of Extendicare's team members. I thank everyone across the organization for their efforts, and I thank those of you listening in today for your continued interest in our progress.
With that, we'd be happy to take any questions you might have. Operator?
[Operator Instructions] Our first question comes from Scott Fromson of CIBC.
Question on staffing. Have you seen early signs of success from the various government and industry programs to bring new people into the potential staffing pool?
We haven't seen any real meaningful change from Q1 this year. I think Q1 was really very tough on the sector overall with the omicron variant. It caused waves of infection across our society, but also across all of the caregivers in health care that were substantially larger than anything we had seen before. And since then, the system has really been struggling. So we have a combination of people leaving the healthcare professions all together, together with absenteeism that's just due to continuing infection rates.
And I think this is piled on top of a lot of fatigue after 2 years of fighting the pandemic and people just really needing to take vacation. So we're in a peak vacation period. Even in normal times, I think it's compounded by what we've been dealing with the last couple of years. So all that to say, Scott, it's really too early to see any permanent benefits of any of those programs. And so far, we really haven't seen much in terms of relief as yet.
Yes. It's certainly a strange time. I think you used the word unprecedented in your earlier comments. That is certainly the case. Now on the flow-through wage increases, do you see that being sufficient to cover inflation?
Well, certainly the flow-throughs are covering the total cost. They are matched to the salary increases. That's how they're calculated. So we file for those costs back with the government. So that flow-through will cover those particular increases. But on top of that, we still have our regular collective bargaining and other wage pressures. We've been encouraged to see some larger changes in rates, particularly in home care over the last few months.
So I would say in the short term that they are covering the costs. I think as David talked to earlier, the one place where we're not seeing costs covered is in the occupancy funding for long-term care. We did not see an increase this year, which is unusual. And frankly, we're not sure what was the basis for that, but we'll be watching that carefully.
And just a final question on the occupancy target. If you do fall short of the 97% target, do you have a, say, a range estimate of the potential impact on NOI?
Yes. Scott, it's Dave here. We've taken a provision year-to-date for sort of what we think the outcome would be. It is not significant. I mean, it's less than $1 million in NOI to date. And as I said, it's a handful of homes. We do have mitigation sort of plans with the operations teams to try and address those local market issues in the specific homes. So we've at this point provided where we think we will end up. And barring sort of any further changes or a ramp-up in another wave of COVID that might interrupt our progress there, that's kind of where we're at. So it's sub-$1 million, and it's in our numbers year-to-date, and we're monitoring sort of how we're progressing on our plans.
Our next question comes from Jonathan Kelcher of TD Securities.
First question. Maybe could you give us a little bit of color on the WSIB rebates that you got this quarter in home health care and LTC?
Sure. I think those weren't unique to us, Jonathan. So I think there was a, I'd say a pre-election workers' compensation rebate payments made across multiple sectors in Ontario. So they weren't necessarily unique to us or based on experience ratings, our experience ratings. It was more of a broad refund of premiums across all industries. So there wasn't anything special about it coming to us, in particular. It was just our share of the larger payout that was given.
Okay. So just a one-time thing.
Yes. Yes.
So on the home health care, I guess sort of a 2-part question here. It seems like 25,000 hours seems to be kind of the sticking point for your average daily volume. What do you think it would be if staffing were not an issue for you?
Yes. That's a tough one. We are-- obviously, we've been sort of hovering around the 25. Like we've kind of come back to where we were a year ago now, albeit with a huge amount of effort and work in the last year. I think that there is a lot of opportunity for growth. We've talked about this in the past in terms of the demand is there. Our referral acceptance, the industry-wide referral acceptance has dropped significantly because of the collective labor constraints. So it's really hard to say how big it could get. We do believe in a normal labor market with some of the headwinds against us. Our -- the sector, the demographic growth is, as we've talked about in the past, is 4%. We think we should be able to beat that, given our size and scale and technology and programs. So when we get this headwind away from us, that's where we think we should be tracking, beating that 4% on an annual basis with a good margin. But it's really hard to say what an ADV would be.
Okay. And then I guess the second sort of related one to that is where do you think you can drive it from -- like, can you get to 26,000, 27,000 hours over, say, the next 2, 3, 4 quarters?
Jonathan, I'd say that all depends on what happens in the labor market. So if the labor market stays the same, then our ADV will stay the same. If we're able to recruit more -- and actually, it's more of a retention issue. We are recruiting a lot of people. The issue is retention, people move on to other opportunities and to other organizations in health care, in hospitals, long-term care, et cetera. So there's a lot of movement. A much higher level of turnover over the last 2 quarters than we've seen previously. So it's really dependent on the labor market.
I'll add one more kind of metric that was reported in the Toronto Star yesterday. The President of the Home Care Ontario association was quoted as saying that referral acceptance across the province of Ontario is at 55%. So that means all the new requests for home care that are coming out of various hospitals and other healthcare organizations, only 55% of them are currently being met by the care providers like us. So there's a really large unmet demand that's there, in addition to the demographic growth that David talked about. So the issue is entirely one of the labor market, and it's just very difficult to predict how that's going to progress.
Okay. That is helpful. Just turning to LTC. I guess if we take away the COVID benefit and the WSIB rebate, your NOI would have been roughly $14 million for the quarter. Is that a good way to think about it, then we can get sort of grow it from there as you lease up and get more private room revenue, and obviously bearing in mind the seasonality of the business?
Yes. I think that's right. I think if you adjusted for the one -- the COVID impact and the WSIB, we'd be just $15 million, $14.7 million. So $15 million in the quarter. So our -- there is obviously some overhang of preferred occupancy, getting that returned, and starting to see inflation level off. As Mike indicated, I indicated, we did not get an accommodation increase in Ontario this year, which is unusual. So not sure exactly why they didn't extend the typical rate increase across accommodation. But I think over the longer term, these things tend to even themselves out, and sometimes there's a bit of catchup there.
So yes, I think -- that's the quarter. It backs into an NOI margin of 9.1%. I think what's important there to note, and I did, just to add further emphasis to it. The impact of all the flow-through funding and the $3 pandemic wage, it's really good that that funding is there and the increase in care hours. But from a historical margin percentage perspective, it is going to impact that historical view of margin percentages by about 90 to 100 basis points. So just in terms of readjusting kind of our expectations around the percentage side of things.
But back to your first point, in the quarter, we're $15 million when you back out the one-time. And we need to see sort of inflation level off, recovery of our preferred occupancy, potentially some recovery on our basic occupancy, working towards those plans to narrow that potential occupancy shortfall I mentioned earlier. We're still not giving up on that, obviously. We're going to try and get that recovered. And then we will need a little help, particularly on the Ontario segment, on some inflation relief effectively in the accommodation side that we did not get for April 1.
Okay. Like any chance the Ontario, you get a retroactive on the OA?
Really hard to say. We were surprised we didn't get it as a sector, given the worst inflation we've seen in decades. And it was -- they chose not to do it when they've done it like clockwork for the last number of years. So there is a budget out now. There's a fall economic statement coming out. You never know if they maybe come back and rethink that decision. But again, if it's not imminent, I feel like these things over the medium, longer term do average out and they catch up on some of these things.
[Operator Instructions] Our next question comes from Tal Woolley of National Bank Financial.
Just wanted to start with the long-term care redevelopment. You sort of mentioned that you've got the 3 projects in the works, but you are sort of limiting progress on the remaining redevelopment activities just because of the change in the economic environment and the construction costs. What are the formula changes you would like to see made to be able to proceed with the rest of the projects?
Yes. There's a lot of conversation going on with the other operators that have projects and the Ministry and the OLTCA. There isn't one silver bullet to fix the issue. The new program that did come out a couple of years ago that we're utilizing for the 3 projects that are underway had the traditional capital funding subsidy that gets paid out over 25 years, and they introduced a new component that gave us a portion of the costs upfront as a grant as well. I think one of the missing components of that program, which we advocated for but weren't successful at the time, was that it needed an indexation or it needed some type of inflation protection built in in order to address things. So here we are, fast forward 18 months later, 2 years later, and inflation's running rampant, rates are starting to rise.
So what are we looking for in the end? The construction costs, depending on what study you read and what you're looking at are up anywhere between 20% to 30% over where they were a year or 2 ago. And so we need additional capital funding. If they want to keep the same construct, we'd need higher CFS, whether that's all in the payment that comes over 25 years or a portion of that is in sort of an increased upfront grant. We're all collectively have our own models, but we're all solving for sort of an expected type of NOI yield that's in the range of the ones that -- the first 3 that we started. And we all -- each operator has its own views of what they need. But it could also come in additional operating funding as well.
But -- so there's multiple levers to pull, but I think we all recognize the issue. We have -- there's been a renewed focus with the government, given the inflation, and we're back at the table, and the same group that was there 2 years ago talking is talking again. So we're confident in the need for these beds. Exactly what the program, the changes made. But it's very simple; it's costs are up 20% to 30% versus where they were when they designed the program that doesn't have anything mechanically built in at the moment to adjust for that.
So if we're just crudely saying like I think most people were sort of expecting project yields to be around 7% to 8%. Just with the construction cost inflation, like, those would probably be dropping to somewhere between 5.5% to 6.5%. Does that sound about right?
Yes, probably even a bit lower than that, potentially. But we factor in some of the movement in interest rates at the same time. So, yes. It's -- everybody has their own models. The projects are different, different size, different markets. But a dramatic drop off into return outlooks that I don't think are really in the -- aren't anything that are certainly going to have anybody building at those levels.
Right. Okay. And then if the -- like I'm expecting it's going to take some time to sort of hash this out with the government. How does that impact how the Axium JV will work? So you sent 3 projects to the JV. Is there like -- I guess, what happens now is that like until the formula works, you're not really going to be moving any other projects into the JV? Is that the way we would expect that to work, or is there a --?
Yes.
Okay. Got it.
Yes. As it relates to the redevelopment pipeline, yes, we would -- together --. I mean, Axium, they're a big player in the sector as well, right? We're working with us, and they were working with Revera. They're doing a transaction with Chartwell. So they're actually part of these conversations with us with the government and the OLTCA as well, right? So they're part of -- they're working alongside us to find that program. But yes, absent a change, we just -- the first 3 will go in once regulatory approval is there, and we will all be collectively working to move as many through the pipeline. Between our projects and Revera's pipeline, which we have first right of, there's upwards of almost 50 projects that we would love to see come to realization and buy them into the joint venture and increase our size of our operation there.
Okay. And then just with the lack of the accommodation premium increase this year, setting aside like the costs that are effectively flow-through, what are the key costs where you're getting -- that you have to bear your own self, where you're seeing the most challenges?
Well, the accommodation side of the equation, Ontario is dietary, housekeeping staff, maintenance staff, et cetera. So there's wages on that side of the equation that have annual increases, and some of them are -- there's unionized folks on that side of the house. So there's just keeping up with general collective bargaining and rate increases. That's -- the other big elements there are just maintenance costs, cleaning costs. So all the cost of goods to do all of that are in there as well. Insurance is in that side of the equation, and insurance premiums have gone up exponentially over the last couple years as well. And yes, utility costs are the last big piece of the puzzle. So cost of all of our inputs there have gone up as well.
So those are the big drivers. They're hard to -- we can't control natural gas prices and electricity rates. Insurance is, again, it's not something we can control. So those are the things. So there is a wage element, but the big things driving are our utilities, insurance and just the cost of the goods to maintain a home and clean it, et cetera. So all of those things are in the inflation basket that we're trying to manage through. So that's where we need some help on accommodation increase on the rate.
Okay. And then just more of a medical question, I guess. Wondering how -- we're having successive waves. I don't know the right medical terminology here, so forgive me if I blow this. But like, if the virus becomes sort of more endemic, should the operating protocols during COVID outbreaks change?
Well, certainly our -- the impact is already changing. Certainly, the severity of illness that we're seeing has changed, and the rapidity with which the waves or the outbreaks go through our homes seems to be picking up speed. So there's certainly an evolution there. At some point, these waves have to peter out. At least every pandemic in past human history, that's what's happened. I suppose there's always a chance that this is unique in some way. But this is -- while this is unprecedented in many ways, one of the things that's unprecedented about this pandemic is the degree to which we can measure it and track it. There's never been a pandemic in history that's been tracked this way.
So we are in uncharted territory in that regard. And so we're all experiencing this without much ability to predict how many waves there would be. I think if we took a vote of the medical establishment around the world 2.5 years ago at how many waves we would see and how long it would last, nobody would be predicting a 7th wave of the BA.5 variant 2.5 years in, in the dead of summer. It's incredibly uncharacteristic to see that happening. So I'd say it's very humbling from a clinical perspective in terms of our ability to predict what happens next. But we are seeing that the clinical impact is dampening over time, and so I think we are seeing a downward trend overall. But as to how many more waves we'll see and how long it'll last, really, really difficult to tell.
And dare I ask the question, too, just for -- with sort of monkeypox now starting, the spread, what's the thought around that, given that you've got workers who are handling patients, all that handling residents, that kind of stuff? Is vaccination there something that needs to get discussed now?
No, I don't think so. We're watching it very carefully. We don't think that monkeypox is a threat in congregate living settings. It's much easier to control. It's not airborne. So from an infection control perspective, much, much easier to control. So I don't anticipate -- frankly, I don't anticipate seeing any cases at all in our homes.
Where we are more focused is on influenza. Influenza is a very familiar pathogen for congregate care settings where we would routinely see a surge every winter, and we have not seen that the last couple of years. We are seeing a surge of influenza in Australia where they are in mid-winter at this point. So we are preparing for potential for a heavier influenza season this year. But again, that's more of a routine experience for us, and we have a strong protocol around vaccination and infection control to be able to handle that. So we're more focused on influenza than we are on monkeypox.
Our next question comes from Pammi Bir of RBC Capital Markets.
You mentioned in the past that some of the initiatives that you've undertaken to increase staffing, I think some of those included some the college partnerships. But it seems like retention is maybe a bigger issue. So I'm just curious, what initiatives are you sort of in the process of maybe undertaking to improve the retention? And then the second part of the question is, is the retention more of an issue in -- more specific to ParaMed, or you're also seeing the pressures in long-term care?
Yes, great question. So we have quite a number of initiatives around retention that we are focused on. That includes compensation-related items, the number of supervisors that we have various programs that we've launched for helping people to get credentials while they're working at Extendicare. So there's a series of things. And we've talked before about, as you mentioned, the educational partnerships. We have more than 3,000 students doing some form of training on an annual basis in one of our locations. So that continues to be a significant focus for us.
I would say in Q1, we saw retention or turnover increase in both long-term care and home care. They were both elevated significantly. Since then, in Q2, we saw turnover in long-term care start to come down, but we've not seen it come down in home care yet. So the fact that the government has done things like making the $3 PSW wage premium permanent, the fact that they've given us significant flexibility by increasing home care rates by 3% and 5%, depending on the service, gives us a lot of flexibility to be able to do more on the retention front. And so we have been doing that, and we're monitoring very carefully the impact of those programs.
What I would say is that the external market conditions have escalated at the same time that we've put a lot of these programs in place. So we're just -- we're holding our own. I'm actually quite happy about that, given the fact that hospitals have been losing people to the point that they have to close their emergency departments. I'm actually relieved to see that we're able to hold our staffing levels and long-term care and hold our volumes in home care. Just the fact that we're maintaining our staff at its current level, I'm seeing as a win in this market.
Got it. Just maybe last question for me. You were active on the NCIB after the quarter, and maybe going back to some of your comments in your opening remarks. How are you thinking about the NCIB at this point, given where the unit -- sorry, where the share price is and balancing that with the development program and the Revera transactions coming up?
Yes. Pammi, it's Dave here. I think you kind of hit it on the head there. Like it's a balancing act between all those things you just mentioned. We did set it up at June. We're active. I'm not going to talk about sort of plans for using it. It'll really be driven by the market and the share price performance, really. But we've shown that we'll use it when we feel it makes sense. And we'll be watching all those other things like redevelopment, timing of the Revera acquisition, et cetera, and principally, though, the share price performance over the coming quarters. But it's there now. It's a tool we can use, and we'll use it when we think it makes sense.
This concludes the question-and-answer session. I would like to turn the conference back over to Jillian Fountain for any closing remarks.
Thanks, operator. That concludes our call for today. This presentation is available on our website, as are the call-in numbers for an archived recording. Thank you, everyone, for joining us. Please don't hesitate to give us a call if you have any follow-up questions.
This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.