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Healthcare Services Group Inc (HCSG -0.31%)
Q3Â 2020 Earnings Call
Oct 21, 2020, 8:30 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Ladies and gentlemen, thank you for standing by. And welcome to the Healthcare Services Group, Inc. Third Quarter Earnings Conference Call. [Operator Instructions].
At this time, I would like to hand the call over to your host today, Mr Ted Wahl, President and Chief Executive Officer.
The matters discussed today on today's conference call include forward-looking statements about the business prospects of Healthcare Services Group, Inc. within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are often preceded by words such as believes, expects, anticipates, plans, will, goal, may, intends, assumes or similar expressions. Forward-looking statements reflect management's current expectations as of the date of this conference call and involve certain risks and uncertainties. Forward-looking statements are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments, and other factors that we believe are appropriate under the circumstances.
As with any projection or forecast, they are inherently susceptible to uncertainty and changes in the circumstances. Healthcare Services Group, Inc.'s actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors. The forward-looking statements are not guarantees of performance.
Some of the factors that could cause future results to materially differ from recent results or those projected in the forward-looking statements are included in our earnings press release issued prior to this call and in our filings with the Securities and Exchange Commission, including the SEC's ongoing investigation.
There can be no assurance that the SEC or another regulatory body will not make further regulatory inquiries or pursue further action that could result in significant costs and expenses, including potential sanctions or penalties as well as distraction to management.
The ongoing SEC investigation and/or any related litigation could adversely affect or cause variability in our financial results. We are under no obligation and expressly disclaim any obligation to update or alter the forward-looking statements, whether as a result of such changes, new information,. subsequent events or otherwise.
And presenters, you may begin.
Ted Wahl -- Chief Executive Officer
Thank you, Sharon. And good morning, everyone. Matt McKee and I appreciate all of you joining us for today's conference call. This morning, we released outstanding third quarter results and plan on filing our 10-Q by the end of the week.
During the quarter, our customers and their caregivers continued to meet the challenges of the pandemic, with innovation, resolve and compassion. Our HCSG heroes have been right there with them on the front lines since the beginning, tirelessly supporting our customers and helping to ensure the wellbeing of America's most vulnerable.
The health and safety of our employees and the communities we serve will remain our highest priority.
Our strong financial results underscore our ability to thrive in even the most challenging environments. We were particularly pleased with our service execution during the quarter as our relentless focus on customer satisfaction, systems adherence and regulatory compliance delivered extraordinary operational outcomes.
While the pandemic continues to create uncertainty around near-term occupancy and cost trends, the industry is much better prepared for the fall and winter months, with increased access to PPE, point of care testing and enhanced operating protocols.
Additionally, we continue to be encouraged by the government's ongoing financial support of the industry, which we view as a necessary bridge from the short-term challenges to a more stable operating environment and, ultimately, a vaccine and census recovery.
As the industry continues to adjust to the new normal, we maintain our sharp focus on delivering strong operational and financial results in Q4. While the current environment necessitates a cautious view on growth, longer term, our outlook remains positive as our value proposition is more compelling than ever before. Above all, we remain committed to making decisions that best position us to deliver shareholder value.
With those introductory comments, I'll turn the call over to Matt for a more detailed discussion on the quarter.
Matt McKee -- Chief Communications Officer
Thanks, Ted. Good morning, everyone. Revenue for the quarter was $435.9 million, with Housekeeping & Laundry and Dining & Nutrition segment revenues of $223.4 million and $212.5 million respectively. Revenue included $9.3 million of COVID-related supplemental billings, primarily related to employee pay premiums, which were initiated by and passed through to customers.
Net income for the quarter came in at $27.6 million and earnings was $0.37 per share.
Direct cost of services was $365.4 million or 83.8%. The Q3 decrease in direct cost of services compared to Q2 was driven by lower levels of CECL bad debt expense as a result of our continued strong cash collections and more efficient management of labor and food purchasing as the result of census-driven cost reductions, the benefit of which was passed along to our customers as a credit to recurring billings. Overall, our goal remains to manage direct cost at or below 86%.
Housekeeping & Laundry and Dining & Nutrition segment margins were 11.1% and 9.2% respectively.
SG&A was reported at $37.3 million or 8.6%. After adjusting for the $3.2 million increase in deferred compensation, actual SG&A was $34.1 million or 7.8%. And we expect SG&A to remain in the 7.5% to 8% range in the near term as those costs are largely fixed, but continue to ultimately target SG&A of 7.5% excluding any COVID or SEC-related costs, with the primary pathway to leverage that existing in top line growth.
Investment and other income for the quarter was reported at $4 million. But again, after adjusting for the $3.2 million change in deferred compensation, actual investment income was around $800,000. We reported an effective tax rate of 25.6% for the quarter and expect our tax rate for 2020 to be in the 24% to 26% range, including WOTC benefits.
Cash flow from operations was $49.2 million. This includes an $18.7 million decrease in the accrued payroll, offset by a $17 million increase in deferred payroll taxes under the CARES Act. And because we previously called out the quarter-to-quarter impact of the 2020 payroll accruals, for Q4, we're expecting a payroll accrual of 12 days. Ultimately, that payroll accrual only relates to timing, with the impact washing out through the full year.
Additionally, we expect an incremental $15 million or so for payroll accrual in Q4, resulting from the payroll tax deferrals under the CARES Act to be paid back at the end of 2021 and 2022. As such, this amount is now classified under other long-term liabilities rather than other current liabilities.
DSO for the quarter was 58 days, down 2 days from the previous quarter.
And we are pleased with the ongoing strength of the balance sheet and the ability to support the business, while continuing to return capital to our HCSG shareholders.
We announced that the Board of Directors approved an increase in the dividend to $20.50 per share payable on December 24, 2020. The cash flows and cash balances supportive and with the tax rate in place for the foreseeable future, the cash dividend program continues to be the most tax efficient way to get free cash flow and ultimately maximize return to shareholders. This will mark the 70th consecutive cash dividend payment since the program was instituted in 2003 and now the 69th consecutive quarterly increase, which is now a 17-year period that's included four 3-for-2 stock splits. We recognize the dividend is important to our shareholders and we have increased it in line with our performance track record.
With those opening remarks, we'd now like to open the call up for questions.
Questions and Answers:
Operator
[Operator Instructions]. First question comes from Andrew Wittmann with Baird.
Andrew Wittmann -- Robert W. Baird -- Analyst
Great. Thanks for taking my questions. I guess, guys, given that the gross margins were up here so significantly, it would be probably helpful to drill into that a little bit more. And I was wondering if you could just quantify the benefit from bad debt and how much the comment on more efficient use of labor was driven by any contribution from the excess managers. I know that you started to kind of get the utilization of your managers better last quarter. Was there more pull-through of that? Or what are the other kind of key drivers and quantification of any of those, if you could, including the one on bad debt in particular?
Ted Wahl -- Chief Executive Officer
Hey, good morning, Andy. Yeah. There was certainly some pull-through with some of the management capacity as we've talked about last quarter. But, really, overall, I think we've called out our laser focus on customer service and experience in the past. And as part of that ongoing focus, it includes managing the services as efficiently as possible, especially in light of the census pressure that many of our customers are facing. So, I think that maybe the simplest way to walk through the margin drivers would be, first and foremost, just calling out what I think is a powerful testament to our operational team and that unwavering commitment that they have to our operational imperative -- customer satisfaction, systems adherence, regulatory compliance, and budget to actual performance. That has been and will continue to be a tailwind to our overall results, operationally and otherwise.
Beyond that, if you were to use Q2 as a baseline, if you pull out about $17 million or so of costs and the $17 million or so of revenue, that would put you right around 85% cost of services. And then again, with Q2 as that baseline, once you factor in the $3 million in US about the change in the bad debt quarter-to-quarter, about $3 million less of CECL bad debt expense as a result of those continued strong cash collections Matt highlighted, you've got a pretty clear idea of how we landed below that target, well below that target of 86%.
Andrew Wittmann -- Robert W. Baird -- Analyst
Got it. That's helpful. And then, I guess, my follow-up question is on free cash flow. I think, last quarter, you mentioned that you thought you've come in about $15 million to $20 million. You did better than that. I saw the DSO at 58. You haven't been in the 50s here for a while. So, that's good. Was there anything besides the AR collections there that drove the upside to the quarter in terms of the cash flow performance versus what you were expecting earlier?
Ted Wahl -- Chief Executive Officer
No, that was really the primary driver. We came in nearly $20 million higher on the cash collection side than we maybe otherwise would have expected. Our goal continues to be to collect what we build each and every quarter. Here we are five of the last six where we've done just that, again, largely due to the leadership and the work of the financial services team in implementing the weekly payment initiative, which has been transformational to this part of the business. Here we are today with over 60% of our customers paying us at a frequency of greater than monthly.
And then, certainly, in this environment, Andy, having timely conversations with clients, particularly over the past couple of quarters, as some of them have found themselves maybe in stronger cash positions than they have in years past with some of the funding, although, again, we're committed to continuing to follow the path that we've been on in terms of contract integrity and ensuring the customer lives up to not just the operational side of that contract integrity, but also the financial one.
Andrew Wittmann -- Robert W. Baird -- Analyst
Okay, good. I'll leave it there, guys. Thanks.
Ted Wahl -- Chief Executive Officer
Take care.
Operator
Next question comes from A.J. Rice with Credit Suisse.
A.J. Rice -- Credit Suisse -- Analyst
So, just to understand again on the gross margin, which seems to be the main place of the outperformance in the quarter, when you think about moving forward then the lower level of bad debt, which is a portion of it, certainly not all of it, do you think the drivers that led to that level of uptick in gross margin are going to stay in place as you go into the fourth quarter and think about next year?
Matt McKee -- Chief Communications Officer
Yeah, I think with respect to kind of the segment margins, A.J., I would kind of call out the Dining margin there, specifically some of the contract restructuring that we did in the back half of '18 and into '19. And we'll continue to evaluate on an ongoing basis, but those adjustments have made us a bit lighter, a bit nimbler and have provided a real strong base from which to grow. And we have outstanding leaders on the registered dietitian side of the business who have really taken our RD team and services to a whole other level, which contributes not only to client satisfaction and patient resident outcomes, but also to the bottom line.
So, the reality is we're less focused on some of the quarter-to-quarter variability and really taking that long view, making decisions and taking steps that really best position the company for the future. And we'll continue to have that discipline. So, as to the sustainability of those margins, we'll continue to drive efficiencies, continue to assess the impact of COVID and census. And although one quarter certainly does not a trend make, our goal is to always manage the services as efficiently as possible. So, 86 remains the target, but we're, of course, committed to identifying ongoing opportunities for improvement as well.
A.J. Rice -- Credit Suisse -- Analyst
Okay. I guess I'm just trying to figure out. I know you have sort of a bandwidth where you're sharing some of the upside with your customers and all. I'm trying to -- and your margin within a target range. I'm just trying to figure out, is there something about that that's changed and we're now going to operate, especially, like you said, in dietary to a higher level profitability than it has been through in the past? Or is there something about the dynamics of what's happening in the midst of this pandemic and so forth that have allowed you to step up on this quarter, but we should expect some moderation as we go forward? I guess I'm not sure I understand where you are landing on that. Or is it too early to tell?
Ted Wahl -- Chief Executive Officer
It's too early to tell. One quarter does not a trend make, I think is what Matt said, and I couldn't agree more with that. We've done a lot of work, particularly on the dining side, over the past couple of years. Matt called out the contract restructurings that we've done, all the revamping of our registered dietitian team, the leadership that we have in place there. So, there is a lot that goes into it, not the least of which is execution. But too early to tell. We'll be in a position maybe after another quarter or so to be able to more confidently say, yeah, we will be able to sustain these margins. But again, we're committed to always identifying opportunities and we couldn't be more pleased with where we came out today.
And then, in terms of your comment about sharing, really any efficiencies that we've identified as they are passed along to customers, we're always looking for ways to manage the services more efficiently for them, right, to make us a more attractive partner on either the housekeeping or dining sites. So, as census recovers, when census recovers, the hope would be that we've not only identified efficiencies on the way down, but on the way up maybe we're able to do things even more effectively or efficiently than we were prior to.
So, again, too early to tell in terms of sustainability to a precise number or percentage, but, certainly, we are on the right path from an operational and financial perspective.
A.J. Rice -- Credit Suisse -- Analyst
Sure. You mentioned, obviously, about the importance of the COVID -- or CARES Act money relative to the underlying customer base supporting them and that census sounds like it's still somewhat pressured. Do you have a sense of how the industry is doing, your underlying customer base, long-term care facilities relative to what they were faced with in the second quarter? How much of a rebound that occupancy rates or whatever your underlying customer base is seeing?
And then, I know that was partly the question of the gating factor of getting back on the growth trajectory is, A, they were dealing with the crisis and they weren't really making changes and outsourcing dining or even to the extent on the housekeeping and it sounded like there is a little bit of your side of it wanting to see how people fared coming out of this pandemic. Are we at that point now where you feel like you can assess or is it still going to be a couple more quarters before we're at a point where you really sort of see how the underlying customer base looks coming out of all of this?
Ted Wahl -- Chief Executive Officer
Yeah. I think in terms of occupancy, pretty wide range of what we're seeing. And we've seen some areas of recovery, other areas of continued pressure. The data that we're seeing within our customer base and obviously within the industry are suggesting a 10% to 15%. But you have some areas, some geographies that are unimpacted, others that are more pronounced, particularly in the Northeast and Mid-Atlantic. And then, there is differences between segment, the long-term care segment of the patient population or resident population and then the acute, the post-acute side with the patient population. So, there is variability there.
In terms of how -- A.J., I think you were asking about revenue. I think in this environment, it's difficult to forecast revenue for the next month, let alone the next quarter or year. I think heading into Q4, we're thinking of revenue really in two categories. And you alluded to them, our existing business and new business opportunities.
For existing business, again, in this environment, census is unpredictable, but if there is continued census decline or erosion, we're committed to being as flexible as possible in reducing our labor and supply cost and then passing along those efficiencies to our customer. And I think, conversely, when and if census recovers, depending on the timing, our staffing and supply cost will increase again as will our revenue.
The second category for us, heading into the quarter, would be the new business and how that impacts revenue and it's pretty straightforward as to why it's more difficult to add new business in this environment. The reality is, the industry has strict rules for visitors. Some operators are reluctant to make any changes for fear of disruption. And in some of those geographies I referred to earlier that are less impacted where demand for our services is literally through the roof, which it is in many parts of the country. The current environment necessitates that we take that more cautious view. And we're going to continue to be disciplined in that regard.
So, they're really the revenue puts and takes that are in play. So, until we cross that bridge ultimately from where we are today to stabilization and then ultimately the vaccine and census recovery, I think revenue is going to be more difficult to forecast. It doesn't mean we're not going to grow and it doesn't mean we're not going to take advantage of opportunities as they present themselves, but there's just other factors that are different than years past that impact any given quarter the top line.
A.J. Rice -- Credit Suisse -- Analyst
Sure. Maybe one last question. Just on your cash and marketable securities, you've obviously built that out nicely year-to-date. You're at about $200 million. Is this environment just better to have more cash on the balance sheet or does it make you think in terms of maybe share repurchase or upping the dividend in any way? Just some thoughts about that.
Ted Wahl -- Chief Executive Officer
Yeah, we're going to continue to evaluate our capital allocation strategy, which we do on an ongoing basis. But I would say, organic growth, A.J., remains number one on that list, followed closely by the dividend, which we believe after organic growth is the most tax efficient way to return that value to shareholders. Again, I know we've talked about this before. There's no payout ratio per se. So, nothing within kind of our dividend program would preclude us from increasing the dividend further. But we are staying true to those guideposts of consistency and sustainability of the dividend over the long term. And here we are this quarter, 70th consecutive and counting.
So, we have explored and will continue to explore some of the other alternatives that are out there, but, again, for the moment, heading into Q4 and next year, deeply committed to continued organic growth and the dividend.
A.J. Rice -- Credit Suisse -- Analyst
All right. Thanks a lot.
Ted Wahl -- Chief Executive Officer
Thank you, A.J.
Operator
Next question comes from Sean Dodge with RBC Capital Markets.
Sean Dodge -- RBC Capital Markets -- Analyst
Thanks. Good morning. Ted, you mentioned with the deployment of most of the spare managers now, where are you from a new manager development standpoint? Are you continuing to recruit and train new ones? Is it kind of business as usual there? Or given the uncertain state of things, you've paused a lot of that activity for the time being?
Ted Wahl -- Chief Executive Officer
No, that's business as usual. And again, we continue to deploy managers within the existing business and in those new business opportunities that we bring on board. That's why I wanted to at least share some of the insights into revenue and what impacts revenue in this environment that's different than other environments, namely census. So, we could be adding business, but because we're providing existing customers with census-related relief, it may not be reflected in the top line, but it doesn't mean we're not growing.
Sean Dodge -- RBC Capital Markets -- Analyst
Got it, OK. And then, you've talked before about some of the adjustments you've made to services for some clients that were experiencing big declines in occupancy. Where do you stand with that? Now, you mentioned continuing to be flexible there. Has there been more of that in some of the regions that are experiencing spikes in cases? And maybe the ones that you've adjusted early on, are any of those recovering? Have you staffed any kind of the early adjusted facilities back up to more of a normal, I guess, density?
Matt McKee -- Chief Communications Officer
One factor, Sean, that I'd point to as a significant driver, it may be obvious in some regards, but geography, right? There is key differences in different parts of the country and providers that Ted had mentioned. The Northeast and the Mid-Atlantic and even the Pacific Northwest or a state like Minnesota have been significantly impacted by COVID, whereas other geographies like the Southeast and Southwest, although there has been some ebbs and flows, continue to show improvement and increased elective procedures and census is moving in a positive direction.
The other component, of course, that Ted had alluded to was the difference within even a specific facility in true long-term care resident population and that sort of elective procedure, elective surgery-related, post-acute patient within the walls of that facility. And most customers have a mix of both long-term residents and short-term rehab patients, but typically are more weighted in one direction or the other.
And overall, though, we'd like to see -- we likely will see additional near-term occupancy pressure until a vaccine. Right? That's the most significant milestone that lies ahead. But, ultimately, do expect a recovery industrywide as it relates to census because of, of course, the demographic trends and the needs-based nature of this industry.
So, as it relates to Healthcare Services Group and our billings, Sean, it's a mixed bag. Really heavily dependent upon everything that I just touched on, primarily geography, but also specific kind of patient mix within the walls of the facility. So, while we do see some ongoing downward adjustments in some geographies, and there's some timing-related issues there as well, from the time that a customer experiences a census dip to the time we're able to adjust our cost structure and then ultimately pass that along to the customer by way of a billing adjustment, there can be a bit of a lag, which suggests that we may see some ongoing pressure in that downward direction, but at the same time, in other geographies, we'll likely see ongoing recovery, which we are in fact seeing in some areas to date, but again perhaps with a bit of a lag as it relates to ultimately us adjusting our cost structures and corresponding billing to customers.
Sean Dodge -- RBC Capital Markets -- Analyst
Okay, very helpful. Thank you again.
Matt McKee -- Chief Communications Officer
Thanks, Sean.
Operator
Next question comes from Ryan Daniels with William Blair.
Nicholas Spiekhout -- William Blair -- Analyst
Hey, guys. Nick Spiekhout on for Ryan. Thanks for taking my question. So, you said kind of management recruitment is pretty much business as usual. I was wondering, as far as recruitment goes, has anything changed there in that dynamic? Have you seen a little bit harder to find talent or maybe potentially easier? Wondering if anything has changed there.
Ted Wahl -- Chief Executive Officer
If you're speaking specifically about kind of management level recruiting, Nick, again, for us, we're back to business as usual, which just to remind everybody means that all of those recruiting and targeting efforts are happening at the local levels, which is a good thing. Right? That's the model that we've built. That's what we've relied upon for years. And as much as there is a need in a particular geography that's more pronounced than another, they will take the appropriate steps to appropriately recruit, interview, now more than ever provide as much of a transparent view into our world as possible, but we're not hearing of challenges in hiring folks into the management training program. I think you have to assign part of that dynamic to the overall labor environment, right? Still a challenging labor market in many parts of the country. Slower recovery in some geographies than in others. So, inasmuch as that serves us well and creates a larger expanded pool of candidates, that's been beneficial. But I would say we've not seen any significant challenges in hiring the management employees, and that trickles down to the line staff employees as well, who are obviously hugely important for us in normal course and certainly even greater importance during a pandemic for us to be able to fully staff every facility and staff it appropriately, adjusting up and down as is appropriate based on census. And we've been fortunate that we've been able to attract, hire and retain employees at the line staff levels as well.
Nicholas Spiekhout -- William Blair -- Analyst
Great, thanks. And then, kind of going on DSOs, I guess, how much would you say this improvement in DSOs and, I guess, the lack of any sort of big issues with some of your clients is related to kind of government assistance [Phonetic]? And then, as that sort of dries up, would you expect kind of a recommencing of what was kind of happening prior to the virus?
Ted Wahl -- Chief Executive Officer
Yeah, I'm not sure I understand your question. I know we've collected what we've billed five of the last six quarters and we have over 60% of our customers paying us at a frequency of greater than monthly, the vast majority of which are weekly. So, most of this, we're closing. And if you look at the trends prior to this year and into the first quarter, it was evident the direction we were going from a cash collection perspective. That's not to say that there is not going to be a quarter where we fall short of what our goal could be. But in terms of the systems that we have in place, the team that we have leading it and the notion of contract integrity with our customers, that's all here to stay.
Opportunistically, if a customer does have, as a result of the funding, maybe some benefit that we've accommodated them in the past and they're willing and able to true up maybe arrearages, that may exist to a lesser degree. But, again, the majority of it is DSO related. And I think that's reflected in the numbers.
Nicholas Spiekhout -- William Blair -- Analyst
Got you. So, the general positive trend we see this year, regardless of kind of government assistance, that trend should keep going straight [Phonetic]?
Ted Wahl -- Chief Executive Officer
Yeah, that's our expectation. When we look out over Q4 and into next year, again, our goal is, simply said, to collect what we bill and that hasn't changed. To the extent we're over that, we'll call it out, like we saw this past quarter and prior quarters, not just Q2, but also in Q4 of last year, Q3 of last year. We will call that out. But otherwise, our goal is, very simply said, again, to collect what we bill.
Nicholas Spiekhout -- William Blair -- Analyst
Awesome. Great. Thanks, guys.
Ted Wahl -- Chief Executive Officer
Thank you.
Operator
Next question comes from Brian Tanquilut with Jefferies.
Brian Tanquilut -- Jefferies -- Analyst
I guess I'll just follow up on that last question from Ryan, the first question as well. You called out bad debt as a driver of margin expansion for the quarter. If you don't mind, just quantify that and how you're thinking about that as it relates to CARES Act funds [Indecipherable]. As your clients get squeezed on the cash side again, do you think that there is variability in that bad debt accrual as we think about 2021?
Matt McKee -- Chief Communications Officer
Yeah. We don't think there could be. We know there is bad debt -- or variability in bad debt expense because of the very nature of the new accounting guidance, CECL, that was implemented at the beginning of the year. So, us and all companies, I think to a degree, have maybe a higher level of variability in that particular line item. It's really driven off of collections; for us, collecting what we bill based on a track record of years. So, as better performing years come into the trailing periods and worst performing years fall off, that could have one type of impact. And conversely, if there is a poor performing year that comes in and a better performing year falls off, that could have an impact the other way. But by and large, CECL is what's driving and the accounting guidance is what's driving a more, I'd say, mechanical, less subjective bad debt expense. Again, for us and for the rest of the public company universe that adopted it.
Brian Tanquilut -- Jefferies -- Analyst
Understand. Any quantification you can give on that for the quarter?
Matt McKee -- Chief Communications Officer
Yeah. I mentioned that earlier. We had bad debt expense of right around $1 million.
Brian Tanquilut -- Jefferies -- Analyst
Got it, OK. And then, I guess, my last question, since your last earnings call, obviously, your largest client called it out and said the industry or they need government funding to remain solvent or be a growing concern. So, what are those conversations like with Genesis and how are you thinking about the risk that you face as they struggle financially?
Ted Wahl -- Chief Executive Officer
Well, Genesis is a great partner. We have incredibly frequent communication with them and they've continued to pay us within terms. So, they're I believe -- they have a great leadership team and a management team that's committed to executing on their plan. We're going to continue to monitor that situation closely. But beyond that, there is really no updates to report.
Brian Tanquilut -- Jefferies -- Analyst
All right. Got it. Thank you.
Ted Wahl -- Chief Executive Officer
Take care.
Operator
Next question comes from James Terwilliger with Northland Capital.
James Terwilliger -- Northland Securities -- Analyst
Hey, guys. Can you hear me?
Ted Wahl -- Chief Executive Officer
Yeah, we've got you, James.
James Terwilliger -- Northland Securities -- Analyst
Okay, great. Nice quarter considering all the impacts of COVID. My first question -- I missed part of the call, so I apologize for that. Very quickly, when you look at the COVID supplement that's in the press release, how is that split between housekeeping and food services?
Matt McKee -- Chief Communications Officer
It's about 60/40 split, James of that 9-or-so-million dollars, 60 to housekeeping and 40 to dining.
James Terwilliger -- Northland Securities -- Analyst
Okay, good. And secondly, I guess this one is for you, Ted. And again, I want you to speak from the macro level and not as an individual customer. How is the health of the nursing home? If I look back to 2019, it seemed like it was turning and then we got hit by COVID. You've mentioned the CARES Act before. We're waiting on another stimulus from the federal government on a daily basis. How are your nursing home customers doing and how do you view your customers from the macro level in terms of their health? Not one individual customer.
Ted Wahl -- Chief Executive Officer
Yeah. Well, I think the industry, just the highest level, at that macro level, look, the industry shall remain a vital and ongoing part of the healthcare continuum. Right? And if you just look at what will be an ever-growing demographic pie, skilled nursing in particular, nursing homes that you called out, is going to be an absolutely critical component of that continuum, along with home health, along with independent and assisted living, along with the other points of care. So, at the highest level, it's got a bright future ahead of it, the industry. Clearly, it's gotten -- the industry -- SNFs specifically have gotten their share of bad press over the past few months, I think.
To go micro a little bit, I have to say often under-reported is the exceptional care, James, that's provided by the vast majority of caregivers and facilities, and we happen to have a front-row seat for these many inspiring stories. But I think it is yet to be determined if that heightened focus of the attention that the industry has had, what's going to be the impact on the regulations or the regulatory environment and what are those the resulting reporting requirements going to be.
I would only add, if that's the put, I'd say that take would be the focus that the industry has gotten has also shined a light on how important -- critically important adequate funding and responsible reimbursement programs are to patient resident care. And I think skilled nursing has always, I thought, been left behind in terms of priorities, and I think that's going to change going forward.
So, I think insomuch as there is an evolution in the regulatory and/or reporting landscape, I believe there is enough political will at this point that there would be a corresponding evolution in funding and payment structure as well.
Look, from my perspective, we're positioned to thrive in any environment. So, we're well situated. Our value proposition is more compelling than ever before. So, again, I feel good about how we're positioned. But I also feel very good, in spite of some of the headlines about, again, the future of the industry.
James Terwilliger -- Northland Securities -- Analyst
No, you're right on the frontlines providing care for a high-risk patient population. As much as the headlines are bad, I've got lots of stories myself from friends and family members who have been very pleased with the care at their age within these particular institutions.
My last question. So I thank you for that color. My last question is really on -- and I think you said it earlier in the call that the census recovery or the occupancy rates, which is something I focused on within your customers. Can you quantify it? I know it's a tough question from a macro perspective. Can you quantify any type of degree of hit that these facilities have been hit in terms of their census or occupancy with the factors associated with COVID from a macro level?
Ted Wahl -- Chief Executive Officer
Yeah. If you're looking for -- and again, there is significant variability geography to geography, even operator to operator. Even within the same geography depending on the type of patient mix, resident population, there can be variability. Overall, James, there's been about a 10% to 15% impact, closer to 10%. But, again, depending on the report or the data that one is looking at. I think maybe to help bridge that answer a bit to how we get back, I think the keys to making sure between now and when census recovery happens, which is inevitable, there is really a few different keys, but consistent point of care testing is one of them. That's been in place and that has been a game changer for the industry. Certainly access and availability of PPE, which I must say is substantially better than what it was six months ago.
And what we've talked about really throughout the call is adequate funding. And I think even more recently, there has been a few different developments on the funding side that, just to highlight to you, because again it's bridging the gap to census recovery. One would be the $20 billion increase or phase 3 provider relief, which is more targeted funding for operators that have experienced those significant COVID losses.
And then, just over the past few weeks, there has been a couple of developments by CMS that's, again, going to target those providers or really disproportionately benefit those providers that were really impacted by COVID, especially in the Northeast and Mid-Atlantic. The first is postponing the Medicare advance payments that now do not have to be repaid until the end of the first quarter, which is a major cash flow benefit for providers, especially those who got hit early on, and the other extends the three-day hospital stay waiver and we all know how impactful that is until the end of January.
So, again, stimulus too could be another opportunity for the industry. And I believe the industry, from everything I understand, is going to be included in that in a potentially significant way. But testing, PPE and funding are those keys to bridging that gap between now and a vaccine.
James Terwilliger -- Northland Securities -- Analyst
Okay. Well, great. I'll jump back in queue. But again, guys, nice quarter considering the COVID environment that you're operating in. Thanks, guys.
Ted Wahl -- Chief Executive Officer
Thanks, James.
Operator
Next question comes from Mitra Ramgopal with Sidoti.
Mitra Ramgopal -- Sidoti & Company -- Analyst
Yes, hi. Good morning. Just wanted to get a sense, as you look to bring on new business and the conversations you're having with potential customers, if you're sensing a change in the mindset or a greater willingness to outsource in a post-COVID world.
Matt McKee -- Chief Communications Officer
I'd say the important add on there to your question, Mitra, was the post-COVID world. Right? I'd say, without a doubt, as it relates to demand for our services and more specifically our increasingly appealing value proposition, COVID has shone a very bright light on that. Right? If you think about delivering outcomes in operational outcomes, regulatory outcomes and financial outcomes, that's right in line with what we've always done. And in many regards, the market is moving to us when you think about the healthcare level cleaning, of course, in the healthcare facilities that we're servicing, but really across the country in many other industries. Right? You think about retail, you think about dining, you think about education, and healthcare level cleaning and disinfection, infection prevention, infection control will become the new norm. So, in many instances and through a wide lens, Mitra, that value proposition resonates more than ever. So, while in this moment of -- in the midst of a pandemic and approaching influenza season, with an election looming, as you can imagine there is not a significant appetite among our prospective customers to potentially disrupt their operations and engage with the new outsourcing partner in this very moment. But, certainly, as we look out to the time horizon that you called out, which would be post-COVID, we couldn't feel better about our prospects for continuing to cultivate and build that pipeline of significant new business opportunities.
Mitra Ramgopal -- Sidoti & Company -- Analyst
Okay. Thanks for taking the question.
Matt McKee -- Chief Communications Officer
Thanks, Mitra.
Operator
And at this time, I will turn the call over to Mr. Ted Wahl.
Ted Wahl -- Chief Executive Officer
Okay, thank you. Looking ahead, we will continue to innovate in managing our business and remaining flexible in responding to our client partners evolving service level, staffing and supply chain needs. And above all, we remain committed to making decisions that best position us to deliver shareholder value.
So, again, on behalf of Matt and all of us at Healthcare Services Group, I wanted to thank Sharon for hosting the call today and thank you to everyone for participating.
Operator
[Operator Closing Remarks]
Duration: 47 minutes
Call participants:
Ted Wahl -- Chief Executive Officer
Matt McKee -- Chief Communications Officer
Andrew Wittmann -- Robert W. Baird -- Analyst
A.J. Rice -- Credit Suisse -- Analyst
Sean Dodge -- RBC Capital Markets -- Analyst
Nicholas Spiekhout -- William Blair -- Analyst
Brian Tanquilut -- Jefferies -- Analyst
James Terwilliger -- Northland Securities -- Analyst
Mitra Ramgopal -- Sidoti & Company -- Analyst
