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TWST: Can we start out with a history and a quick overview of
ElderTrust?
Mr. McCreary: ElderTrust is a healthcare real estate investment trust
that was founded in 1998. We were sponsored by Genesis Health Ventures,
one of the largest long-term care providers in the United States, and
70% of our assets and revenue are involved in transactions with Genesis
or one of its subsidiaries, The Multicare Companies. Currently, Genesis,
like many companies in the long-term care industry, is under Chapter 11
bankruptcy protection. However, we were able to reach agreements with
them in late November of last year, and those agreements were approved
by the bankruptcy court in January and executed in January. And,
therefore, we have not experienced revenue interruption, and provided
Genesis exits Chapter 11 successfully, we will have a fairly stable
future. TWST: Why is Genesis in Chapter 11?
Mr. McCreary: Back in 1997, Congress, in attempting to balance the
budget, passed a Balanced Budget Amendment Act of 1997 and significantly
changed the reimbursement structure for long-term care providers and for
the uninitiated, long-term care in nursing homes. And through the
Balanced Budget Act they eliminated reimbursements from many programs,
scaled back reimbursements for others, and effectively took a
reimbursement program that was cost plus, ensuring a profit for the
operators, and transformed it into a fixed price environment almost
overnight. And these businesses were just not in a business mode to be
able to adapt to that so rapidly. There were also mistakes made in the
reimbursement changes that the government had since it began to change
and reimbursements are flowing back into the industry, not at the level
they were before, but much better than what they were right after the
1997 Act. Also, in connection with that act, there were seven long-term
care companies, five of them filed for Chapter 11 protection, and many
of the private entities did as well, so it wasn't just a Genesis
situation, it was industrywide.
Tickers included in this excerpt: ETT
For more information call (212) 952 7400. The
Wall Street Transcript does not endorse any of the comments made by interviewees, and does
not make stock recommendations.
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