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Ensign Group Inc (ENSG 0.02%)
Q3Â 2020 Earnings Call
Oct 29, 2020, 10:00 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 Ensign Group, Inc. Q3 2020 Earnings Conference Call. [Operator Instructions]
I would now like turn the conference over to your host, Mr. Keetch. Sir, you may begin.
Chad A. Keetch -- Chief Investment Officer, Executive Vice President And Secretary
Welcome, everyone, and thank you for joining us today. As always, before we begin, I have just a few housekeeping matters. We filed our earnings press release and 10-Q yesterday. This announcement is available on the Investor Relations section of our website at www.ensigngroup.net. A replay of this call will also be available on our website until 5:00 p.m. Pacific on Friday, December 4, 2020. We want to remind anyone that may be listening to a replay of this call that all statements made are as of today, October 29, 2020, and these statements have not been nor will be updated subsequent to today's call. Also, any forward-looking statements made today are based on management's current expectations, assumptions and beliefs about our business and the environment in which we operate. These statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today's call.
Listeners should not place undue reliance on forward-looking statements and are encouraged to review our SEC filings for a more complete discussion of factors that could impact our results. Except as required by federal securities laws, Ensign and its affiliates do not undertake to publicly update or revise any forward-looking statements where changes arise as a result of new information, future events, changing circumstances or for any other reason. In addition, The Ensign Group, Inc. is a holding company with no direct operating assets, employees or revenues. Certain of our wholly owned independent subsidiaries, collectively referred to as the service center, provide accounting, payroll, human resources, information technology, legal, risk management and other services to the other operating subsidiaries through contractual relationships with such subsidiaries. In addition, our wholly owned captive insurance subsidiary, which we refer to as the Captive, provides certain claims made coverage to our operating subsidiaries for general and professional liability as well as for workers' compensation insurance liabilities.
All of our operating subsidiaries, including the service center and the captive, are operated by separate wholly owned independent companies that have their own management, employees and assets. References herein to Ensign are the consolidated company and its assets and activities as well as the use of the terms we, us, our and similar terms used today are not meant to imply nor should it be construed as meaning that The Ensign Group, Inc. has direct operating assets, employees or revenue or that any of the subsidiaries are operated by The Enzyme Group. Also, we supplement our GAAP reporting with non-GAAP metrics. When viewed together with our GAAP results, we believe that these measures can provide a more complete understanding of our business, but they should not be relied upon to the exclusion of GAAP reports. A GAAP to non-GAAP reconciliation is available in yesterday's press release and is available on our 10-Q.
And with that, I'll turn the call over to Barry Port, our CEO. Barry?
Barry Port -- Chief Executive Officer And Director
Good morning, everyone. We're pleased to announce another record quarter despite the continued challenges arising from the global pandemic. With the surge of COVID-19 that occurred during the third quarter in some of our largest states, including Texas, Arizona and California, our local teams were faced with an unprecedented challenge and have again demonstrated incredible agility and responsiveness to the evolving landscape. True to form, they remain as committed as ever to the cause of quality outcomes in excellent patient care. They come to work each day in the most difficult circumstances to serve our nation's most vulnerable on the true front lines of this worldwide trial. They deserve all the praise that we could possibly provide them for their courageous and selfless service. As a result of their heroic efforts, our local operators and caregivers have translated their passion into record-breaking results.
For the third quarter in a row, we achieved record earnings, which came in at $0.78 per share, an increase of 95% over the prior year quarter. We also reported a 95% increase in our adjusted net income of $44 million. The strong results came from quarter-over-quarter improvements and skilled mix across the portfolio, improved admission trends, availability of more frequent and broader Covid testing, increased managed care revenues, cost-saving initiatives, improved collections sequestration suspension and improved medicaid rates. Our local leadership teams continue to make clinical and operational improvements that are tailored to conditions they face in their local market. Our operations have continued to see an increase in the number of higher acuity patients, including some COVID-19-positive patients and an increasing number of managed care patients. With the surge in COVID-19 patients in many of the surrounding communities we serve, we continue to see state and county health leaders and local hospital systems turned to Ensign affiliated operations to care for all varieties of high-acuity patients that can be safely admitted to or remain under our care.
As we expected when positivity rates for COVID-19 increase in the surrounding community, we see occupancy decline and skilled mix increase. In July, we saw overall occupancy decline, particularly in areas of high COVID positivity rates like Texas, Arizona and California, while skilled census remained strong. Then when COVID-19 cases began to stabilize during the quarter, occupancy began to recover, and that trend has continued in October. After living in the COVID environment now for 2.5 quarters, we are encouraged by the recent strength in occupancies. If there is another surge in COVID during fourth quarter or in 2021, we are confident that lower occupancies will be offset by higher skilled mix. In early July, we returned all of the Cares Act provider relief funds we received from the government, and our results do not include any benefit related to these relief funds. In doing so, we joined other well-capitalized healthcare providers by returning approximately $109 million in provider grants and announced yesterday that we will also be returning approximately $23 million in the latest round of relief funds.
Accordingly, we either have returned or plan to return all provider relief funding under the CARES Act rounds one through four. As we said last quarter, we take the responsibility that comes from receiving revenues, which are largely funded by American taxpayers very seriously. In addition, as a for-profit healthcare company, our organization pays tens of millions of dollars a year in taxes. When we consider our healthy balance sheet and liquidity which we have taken great care to protect. And when we reflect on the financial performance during the pandemic, we decided not to accept any CARES Act funds. If there are additional future grants, we will reevaluate the purpose and needs of those grants, specifically considering potential costly testing requirements or other newly mandated regulations and the terms and conditions that accompany those funds. The third quarter presented continued challenges as we experienced a significant surge in cases in some of our largest states.
We are grateful that we were able to apply many of the lessons learned in the second quarter to prevent and treat COVID in our operations in these geographies. As of October 14, 2020, the company's 217 affiliated skilled nursing operations across 13 states had 207 confirmed COVID-19 patients in-house. Also, as of October 14, 2020, eight operations had over 20 COVID-19-positive cases, 48 operations had less than 20 cases and 161 operations had no confirmed cases of COVID-19 in-house. To add some additional context, two of our operations have at the request of the local healthcare community, proactively and intentionally dedicated their entire campus to the care of COVID positive patients and another 36 operations have dedicated entire wings to COVID-positive patients. Our local leaders and caregivers with the assistance of their service center resources continue to methodically acquire sufficient levels of PPE and other supplies and equipment and are providing the latest best practices in both clinical protocols and safety measures at a significant expense, including taking advantage of more readily available testing.
We continue to learn a great deal through this process and our local leaders are proactively preparing for and executing on plans to provide care for all patient types, whether COVID positive, negative or unknown. We are pleased to report that these efforts are going very well, and we have seen improved clinical outcomes and infection control practices among our patients and caregivers. We reported yesterday that during the quarter, combined same-store and transitioning occupancy declined by 2.4% and skilled mix increased by 2.9% from second quarter as the pandemic worsened in many key states. The vast majority of these declines in occupancy occurred in early July. However, from mid-July to mid-September, our census remained flat with a slight decrease in skilled mix days. Towards the end of the quarter and ended October as elected care procedures picked up in the number of COVID-19 cases in the community stabilize, we experienced an increase in our occupancy and skilled mix days.
Between mid-September to mid-October, combined same-store and transitioning occupancy increased by approximately 1% and skilled mix increased by 4%. This increase in skilled days was driven by an increase in overall facility acuity, which includes complex nursing services for COVID-19 patients and other skilled patients. We are also encouraged to report that admissions continue to progressively increase throughout the quarter, demonstrating that the flow patients has improved as certain markets have begun to loosen restrictions on admissions and as the sentiment toward post-acute care has continued to improve. We've been watching our admissions trend very closely and are encouraged to see those numbers trading up as healthcare communities move away from a hunker-down approach to one of operating more carefully and effectively within the context of the pandemic. Another trend we've been watching closely relates to our managed care census. We are pleased that our managed care census has also begun to make some meaningful improvement with our overall managed care days increasing by 7.3% in combined same-store and transitioning operations during the quarter.
These managed care increases are being driven by increasing confidence by managed care payers that their patients can be safely cared for in the post-acute setting and in a cost-effective way that is not always -- and that it is not always necessary to hospitalize COVID positive patients. It is also a reflection that certain elective procedures that have been put on hold are beginning to occur even in the context of the pandemic. While occupancies are lower than they were a year ago at this time, our results this quarter demonstrate again the resilience of our model and the local leaders' ability to adapt to changing circumstances in their local healthcare markets. While the future of this pandemic remains unclear, we are confident that our local leaders, caregivers and other frontline staff will continue to provide amazing service to their patients, families and our society as a whole.
Their endurance and strength is truly inspiring and we can't thank them enough for their selfless service as they continue to earn the trust of acute care providers, physicians, managed care payers and most importantly, their patients and families. They truly are heroes and doing some of the hardest work during one of the most challenging times in our industry's history. We hope our communities will join us in recognizing and thanking them for all that they do. We are increasing our 2020 annual earnings guidance to $3.04 to $3.12 per diluted share and maintaining annual revenue guidance of $2.42 billion to $2.45 billion. While we have seen and expect to continue to see a significant impact from the pandemic on the fourth quarter and beyond, we are confident that we can continue to perform well in the context of additional COVID-19 surges. We are also providing guidance for 2021 with annual earnings per share guidance of $3.44 to $3.56 per diluted share and annual revenue guidance of $2.62 billion to $2.69 billion. The midpoint of this 2021 guidance represents an increase of approximately 14% over the midpoint of our newly increased 2020 guidance.
We are confident that we can provide this guidance for several reasons. We are excited about the enormous upside that still exists in all of our newly acquired operations, which have seen delays in the transformation that we typically see in our newly acquired bucket, coupled with the solid acquisitions that we see on the horizon. In addition, we are seeing marked improvement from some of our newer markets and struggling operations, which represents significant additional upside. But more importantly, we believe when this pandemic is behind us, that our operations are prime to rebuild occupancies and gain additional market share as a result of the deepened relationships with acute providers and other healthcare partners that have developed because of our response in the pandemic. As with this year, the road to achieve these results could vary dramatically based on how the pandemic plays out in the coming months, but we see several pathways to reaching this guidance.
And with that, I'll ask Chad to give us an update on our recent investment activity. Chad?
Chad A. Keetch -- Chief Investment Officer, Executive Vice President And Secretary
Thank you, Barry. The company paid a quarterly cash dividend of $0.05 per share of Ensign common stock. Due to our strong liquidity, we are pleased to continue our long-standing practice of paying a dividend to shareholders. Ensign has been a dividend-paying company since 2002, and we look forward to continuing this practice as one of many, many ways we can provide a return to our shareholders. We had a relatively quiet quarter on the acquisition front as all operators were focused on dealing with the summer surge. However, in August, we announced the acquisition of the real estate and operations of a post-acute care retirement campus located in Tempe, Arizona, which included 10 peoples acute, a 62 bed skilled nursing facility and Desert Marigold Senior Living and Tempe, a senior living center with 72 assisted living beds and 90 independent living units. This was one of several acquisitions that we had in the works when COVID appeared on the scene and is the first closing we've had since the pandemic started. Our transition process was a little different to time, but we are confident that our one-at-a-time clinical and operational plan will allow us to selectively acquire in this current environment.
With this addition, our growing portfolio is now comprised of 226 operations, 24 of which include senior living operations and other ancillary businesses across 14 states. Ensign now owns 94 real estate assets, 64 of which we operate. This portfolio of owned assets took less than five years to acquire as compared to the 15 years it took us to acquire the 94 assets we spun out to CCRE in 2014. As we indicated last quarter, We had several deals in the pipeline that we halted temporarily as we responded to the COVID threat. A handful of those operations are now slated to close in the fourth quarter and in early 2021, while others will require a fresh look later this year and early next. Everything is taking a little longer than usual, including the due diligence process as access to buildings is still limited. Despite all of that, our pipeline remains strong, and we continue to see new opportunities coming to us every week. In some cases, some of the deals we expect to see this year have been delayed as CARES Act funding has provided additional capital to provide temporary assistance to undercapitalized or struggling operations.
However, we anticipate that there will be a significant influx of older and newer deals that come out of this pandemic. Whether we are acquiring the real estate or entering into long-term lease arrangements, the health of our balance sheet will always remain paramount. We will continue to focus on paying fair and reasonable prices using historical performance not pro forma or future results that we create through our own performance. We also want to remind you that most of the operations we acquire start out with lower occupancies and lower CMS star ratings, which is built into the purchase price. So when our occupancies go down, we have significant cushion built into our model. As we mentioned in our release yesterday, we have well over $300 million in available capital right now, which we could use to grow. In addition, we have 74 completely unlevered real estate assets. We continue to work on unlocking some equity value in seven or eight of our owned and unlevered real estate assets through long-term fixed-rate HUD debt.
This process takes several months and will not be completed until next year. But we are preparing now for a wave of new acquisitions we see on the horizon and are excited about the deals we are working on now and the new opportunities that are on their way. We also remind you that in addition to the five operations we've acquired so far this year, we added 26 operations last year. If you look back in our history, we often take a breather on new additions after a large growth year to allow us to transition and integrate the newly acquired operations into their local clusters and to rebuild our leadership pipeline. These periods are very important and part of our disciplined growth strategy. And this year, with the COVID outbreak that no one could have predicted, this slower growth has been very helpful as we've used the extra bandwidth to focus on the existing portfolio and driving organic growth.
And with that, I'll pass the call back over to Barry for some more additional detail around operations.
Barry Port -- Chief Executive Officer And Director
Thanks, Chad. We're very pleased to report that we continue to see some very encouraging clinical outcomes across the organization while simultaneously limiting the spread of the virus, reducing pressure on local hospitals and doing so, in a cost-effective manner to further benefit the overall expense to Medicare and Medicaid programs. While this continues to be a dangerous virus, our caregivers have worked tirelessly to provide excellent care to their patients, adopting the latest advances in intervention and treatment to maximize patient outcomes, which is only added to the confidence of their local healthcare communities. By applying the best practices across several geographies and by providing the local leadership with tools and resources rather than directives, not only are we accomplishing high-quality outcomes but our operations have been able to build census among all payer types, including with managed care patients.
To help illustrate this, let us offer an example. One of our subacute facilities located in Upland, California, Upland Rehabilitation and Care Center, led by CEO Kit McMillan and COO, Ria Genting, have been laser-focused on driving market-leading metrics like low return to acute percentages, compressed lengths of stay and improved responsiveness during pandemic conditions. They have leveraged these outcomes through consistent and transparent data sharing and regularly scheduled joint review meetings with all the prominent local managed care providers. This has not only strengthened existing partnerships but has also led to new relationships as has happened with Kaiser earlier this year. As a result, their managed care ADC has grown by 54% and along with overall occupancy growth of 280 basis points, both compared to third quarter of 2019. This has contributed to earnings growth of 172% year-over-year during an unprecedented time in the market. We've also seen impressive overall census recovery in many of our key markets.
For example, the Healthcare Resort of Colorado Springs, where CEO, David Danion, and COO, Shannon Collins have led their team in reaching all-time highs in skilled and overall census over the past quarter. Despite the traditional summer census headwinds and additional challenges presented by the pandemic, the Healthcare Resort has bucked all trends in their market to reach 100% occupancy. The facility's strong results came from an unrelenting commitment to clinical excellence and strong relationships with acute and downstream providers. At multiple points during the third quarter, the 97 skilled bed facility not only achieved full occupancy, but did so with over 60 skilled patients. And for the quarter, it achieved a 6.5% improvement in occupancy, which translated to a 17% increase in revenue and a 41.9% increase in EBITDAR compared to the third quarter of 2019. As we continue to remind you, our local leaders and our operational model are the reasons why we have adapted and will continue to adapt during this unprecedented time and it's one of the reasons why we have seen our acuity and outcomes improve.
Our leaders have used universal testing to identify infected patients earlier and more consistently, which has resulted in fewer outbreaks in our buildings and lower mortality rates. In addition, by keeping patients in place, we have been able to reduce the risks inherent in moving these vulnerable patients and further exposing them to possible carriers of the virus. Not only has this resulted in better clinical care, but both of these efforts have resulted in savings that are possible only as a result of available testing, the waiver for the three-day hospital stay and select managed care relationships. Most importantly, our CEO caliber leaders and their clinical partners with the support of a world-class service center are very carefully working with local governments, hospitals and their managed care partners to be a solution during this pandemic.
Now I'll pass the call over to Suzanne to provide more details around the quarter in our guidance. Suzanne?
Suzanne D. Snapper -- Chief Financial Officer, Executive Vice President
Thanks, Barry, and good morning, everyone. Detailed financials for the quarter are contained in our 10-Q and press release filed yesterday. Some additional highlights for the quarter include: GAAP net income was $43.1 million, an increase of 94% over the prior year quarter. Adjusted net income was $43.7 million, an increase of 95% over the prior year quarter. Same-store skilled revenue increased by 19% over the prior year quarter and by 8% sequentially, fueled by an increase in Medicare days of 34% and 10%, respectively. Transitioning skilled revenue improved by 27% over the prior year quarter with a 20% increase in managed care revenue and a 27% increase in Medicare revenue. The company's liquidity remained strong for the nine months ended September 30, with cash generated from operations of $282 million and free cash flow of $244 million. As of September 30, we had cash and cash equivalents of approximately $175 million and $342 million of available capacity under the revolving credit facility.
As Chad mentioned, we also owned 94 assets, 74 of which are unlevered with significant equity value that provided us with even more liquidity. In March 2020, the federal government began to undertake numerous legislative and regulatory initiatives designed to provide relief to healthcare providers during the COVID-19 pandemic, including a waiver of the three-day qualifying stay, CARES Act funding, which provides, among other things, direct relief funds and an advanced payment program for Medicare, which for us totaled approximately $104 million. As Barry mentioned, we have a plan to return all provider release funds under the CARES Act. More specifically, in addition to the approximately $109 million received as part of rounds one, two and three, the company recently received an additional $23 million in round four. As with the first three rounds, we have determined to reject round four for the very same reasons we rejected the first three rounds. We are grateful for the assistance, but we believe we have the resources to meet the testing requirements and determined it impropriety to return these funds at this time.
Through January, we expect to receive millions more related to rounds four infection control funding, and we'll also return those funds to the government. As we said before, we will continue to evaluate future special funding that comes from the government, and we will decide to accept or reject based upon the situation related to the funds in a responsible way. In addition, the CARES Act temporarily suspended the automatic 2% reduction of Medicare claims reimbursement, otherwise known as sequestration for the period of May 1, 2020, through December 31, 2020. This suspension of sequestration had and will continue to have a positive impact on our revenues, depending upon how the pandemic affects our Medicare census through the remainder of the year. The federal government also increased SMAC by 6.2%, which depending upon the state, will provide an increase in Medicaid reimbursement. The temporary increase in funding and the timing of payments varies by state. but eight of the states in which we operate have approved funding.
With this latest surge, this funding has been extended into January 2021 to coincide with the federal declared state of emergency. As Barry mentioned, we are increasing our previously announced 2020 annual guidance to $3.04 to $3.12 per diluted share, up from our previous guidance of $3 to $3.10 per diluted share. And we are maintaining our previous annual revenue guidance of $2.42 billion to $2.45 billion. The midpoint of this increased 2020 guidance represents a 58% increase over our 2019 spin-adjusted results. We are also providing our 2021 annual earnings guidance yesterday of $3.44 to $3.56 per diluted share and annual revenue guidance of $2.62 billion to $2.69 billion. The midpoint of this 2021 guidance represents an approximate 14% increase over our 2020 guidance. Our 2020 and 2021 guidance is based on diluted weighted average common shares outstanding of approximately 55.7 million and 57.7 million for 2020 and 2021, respectively.
A tax rate of approximately 25%, the inclusion of acquisitions closed in 2020 and in the first half of 2021, the exclusion of losses associated with start-up operations, which are yet stabilized; inclusion of anticipated Medicare and Medicaid reimbursement rate increases, net of provider tax; recovery of the COVID pandemic and the principal and primarily exclusion comes from stock-based compensation. Additionally, other factors that could impact quarterly performance include variations in reimbursement systems, delays and changes in state budgets, seasonality in occupancy and skilled mix; the influence of the general economy on our census and staffing, the short-term impact of our acquisition activities, variation in insurance accruals, surges in COVID-19 and other factors.
With that, I want to turn the call back over to Barry. Barry?
Barry Port -- Chief Executive Officer And Director
Before we move on to questions, we want to thank our operational leaders and their frontline teams for their inspirational efforts that require more than most ever really imagine. As they care for our country's most fragile and vulnerable in the most intimate healthcare settings, they continue to show up to work each day, dining an uncomfortable mass gown, eye protection and other protective equipment to do some of the most challenging but important work during the most difficult time in our industry's history. We want to thank each of them from the bottom of our hearts for doing so with the utmost professionalism and selfless dedication. Our leaders, caregivers and other frontline staff are deserving of all the praise we can muster. We're also grateful to our shareholders for your confidence and support We cannot adequately express our appreciation to our colleagues in the field and the service center for making us better every single day. So thank you all.
And with that, we'll turn it over to the Q&A portion of our call. I'd also like to introduce Spencer Burton, our COO, who will join us for Q&A. Sri, can you please instruct the audience on the Q&A procedure?
Questions and Answers:
Operator
[Operator Instructions] We do have a question from Frank Morgan with RBC Capital Markets. Please go ahead.
Frank Morgan -- RBC Capital Markets -- Analyst
Thank you. I guess, I would love to go to the commentary about the skill mix and the growth in the managed care census. Is that -- when you think about that census, is it mainly COVID? Or is it just business that might otherwise have been treated in the hospital? Any kind of color about what's the driver behind the managed care growth?
Barry Port -- Chief Executive Officer And Director
It's not just COVID, Frank. It's really a mix. What we believe we're seeing is that managed care had some pent-up demand and a lot of those patients are now going through the healthcare system more normally. And so to us, it represents the start of a normalization and then an adaptation to kind of the new environment.
Suzanne D. Snapper -- Chief Financial Officer, Executive Vice President
Yes. And then when we drill down kind of looking at our diagnosis saves and other things, we can see that really what the patient's characteristics are are not associated in some of the growth is not associated with COVID, some of the growth is associated with other characteristics that are non-COVID related.
Frank Morgan -- RBC Capital Markets -- Analyst
Got you. And if you think about this phenomenon and assuming we have -- obviously, there seems to be a rise in COVID again going on right now in certain parts of the country, at least. Is there anything you've learned from the kind of, I'll call it, the first two waves, depending on how you count them. But anything different that you see you'll be doing for this wave, if what we have right now turns into be another big way. Anything different that you'll be doing or any learnings from this -- from your prior days or from the prior surge?
Barry Port -- Chief Executive Officer And Director
Yeah. So I think that's a great question. There's a couple of things. Obviously, if we don't learn from our experience, we're not managing correctly, and we've learned a whole lot. We also have a number of tools at our disposal that we didn't have early in the pandemic. We're seeing less pressure on things like our PPE. We have much more availability of testing, including rapid testing that allows us to get diagnosis of COVID quickly for staff and also for residents, even new admissions that in the past, we had to wait longer to know their COVID status. So all those tools, having those arrows in our quiver, so to speak, really give us an advantage. We are seeing significant surges in the communities and research suggests that skilled nursing prevalence of COVID is very tied to community prevalence. But I do think that we're encouraged that with these additional tools, we're not only able to prevent its spread through infection and control techniques we've developed over the past six months. But also, we're able to catch things quickly, isolate more accurately and quickly and keep the spread more limited when it does happen. So encouraged that we have more availability to fight it spread.
Chad A. Keetch -- Chief Investment Officer, Executive Vice President And Secretary
Also encouraged Frank, that our admissions trends in spite of kind of the uptick in cases very recently has continued to be positive, which is another indicator that there's an adjustment in the healthcare environment to work with select partners and ensure that there's continued patient flow and treatment outside the acute setting.
Barry Port -- Chief Executive Officer And Director
And any particular areas, I mean, is this more of a West Coast phenomenon or is this Texas? Or is this just across the board where you're seeing this increase in managed care? Increase in COVID or the increase in managed care?
Frank Morgan -- RBC Capital Markets -- Analyst
Just the increase in overall volumes of managed care. I'm sorry.
Suzanne D. Snapper -- Chief Financial Officer, Executive Vice President
It's across the board, and I would say that's the same thing with the census. When we're looking at overall admissions, we're seeing a nice overall increase across the board on our skilled mix admissions.
Frank Morgan -- RBC Capital Markets -- Analyst
Got you. And then I guess on the rate side, obviously, the benefits of the relief from sequestration. And I do think there were some states that we're having -- adding incremental payments during the COVID period. Could you maybe give us an update on how long that runs? Is that through year-end? Or does it carry over the next year or any prospects that some of those payments would be extended further.
Suzanne D. Snapper -- Chief Financial Officer, Executive Vice President
Absolutely. So the sequestration, obviously, right now is approved for the end of the year, December 31st, moving on to the states for FMAP. You've got a couple of different things going on. Some states have been more of a what I would call a daily rate payment in all of those states, including some of our larger states like California, Texas, Washington, all of those will go to the end of the emergency right now on which is slated in the middle of January. And then states like Arizona as more of a lump sum payment. And so that -- the next lump sum payment is scheduled for Q4. And then other -- some other states just haven't done programs are just on CARES related programs. So we haven't participated in some of those other states.
Frank Morgan -- RBC Capital Markets -- Analyst
Got you. One more and I'll hop back in the queue. Looking at the cash flow from Ops, I think the number maybe worked out to about $110 million in the third quarter. I'm just curious, how much of a, how much of a benefit were some of the either advances or some of the other parts of the CARES Act to that number? And then when we think about -- obviously, you've given us some guidance for next year in terms of revenues and earnings. But any special considerations or call-outs we should think about on how cash flow from Ops might look next year? Thank you.
Suzanne D. Snapper -- Chief Financial Officer, Executive Vice President
Yes. Great question, Frank. With regards to kind of some of the help that continues, and one of the things that we do have is deferred payroll taxes of about $33 million year-to-date helping that out. That's the number that's growing. We did have some offsetting things in the current quarter actually though. We had to repay our overall federal tax payment. And so that actually pretty much offset that additional benefit we got from the deferred payroll tax. So that nets out basically to 0. We continue to have the accelerated payments of about $100 million that we won't have to repay back until April of next year. And so overall, some really good things that are in there. But I would highlight one of the biggest things that we have going for ours is just an improved collections in our AR front. And that is something that is sustainable beyond some of the helps that we're getting from the outside. And so that is a huge benefit that we continue to see coming through in the cash flow. And with regards to revenue and earnings for next year, I think obviously, it's the continuation of the same thing and themes that you've seen us do in the past, really executing on that local operator model.
Frank Morgan -- RBC Capital Markets -- Analyst
Okay. Thank you.
Operator
Thank you. And speakers, I'm showing no further questions in the queue at this time. I would like to turn the call back over to Mr. Barry Port for any further remarks.
Barry Port -- Chief Executive Officer And Director
Thanks, Sri, and thank you all for joining us today. [Operator Closing Remarks]
Duration: 40 minutes
Call participants:
Chad A. Keetch -- Chief Investment Officer, Executive Vice President And Secretary
Barry Port -- Chief Executive Officer And Director
Suzanne D. Snapper -- Chief Financial Officer, Executive Vice President
Frank Morgan -- RBC Capital Markets -- Analyst
