Thank you for standing by. This is the conference operator. Welcome to the Extendicare Inc. third quarter analyst conference call. As a reminder, all participants are in a listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Jillian Fountain, Vice President, Investor Relations. Please go ahead.
Thank`s, operator, and good morning, everyone. Welcome to Extendicare's Q3 2021 results conference call. With me today are Extendicare's President and CEO, Michael Guerriere, and Senior Vice President and CFO, David Bacon. Our Q3 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 19th November . 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. Before we review our third quarter results, I will highlight our ongoing efforts to ensure the safety of our residents, clients, and staff as we continue to navigate the COVID-19 pandemic and work to keep the virus out of our homes. In August, we announced that COVID-19 vaccination would become mandatory for all long-term care and retirement home staff across Canada. Those not vaccinated by 12th October were placed on unpaid leave. Currently, all staff working in our long-term care homes and retirement communities are vaccinated. Prior to the implementation of our policy, we had made significant progress on our vaccination campaign, and as a result, we were able to implement our policy with minimal disruption to operations.
The high vaccination rates for both residents and staff, along with our continued commitment to active symptom screening, testing, and infection control, are effectively limiting the impact of the fourth wave in our homes and communities. We have also made significant progress in delivering third doses to our residents to further boost their immunity to the virus. Currently, four of our 69 long-term care homes and retirement communities are recovering from outbreaks. There are currently no active cases of COVID-19 among the residents and staff of those homes. The four long-term care homes in outbreak are in Alberta, where there continue to be heightened numbers of COVID-19 cases in the community. Our ongoing vaccination campaign in ParaMed is going well thanks to the positive response of our team members to the program. Our goal is full vaccination for our home healthcare team.
To achieve this, we support team members by offering educational resources, reimbursement of expenses, and paid time off for vaccine appointments to remove all barriers to vaccination. As well, vaccination is a condition of employment for all new hires across ParaMed. As of 28th October , 92% of ParaMed staff have at least one dose of vaccine, and more are being vaccinated each week. Turning to slide four, I'll begin our third quarter update by highlighting several important new announcements made in the last month by the government of Ontario that are related to long-term care. On 6th October , Ontario announced the first phase of funding for increased staffing levels as part of its CAD 4.6 billion long-term care staffing plan.
Starting in this month, the government is providing additional funding to support an initial increase to three hours of direct care per resident day, with subsequent increases planned each April first until four hours per resident day is reached in 2025. This means that the additional staff we brought on board during the pandemic will be supported by this new funding on a permanent basis, allowing them to deliver the high-quality care our residents need and deserve. These additional team members are already familiar with our homes and processes and have been an integral part of addressing the challenges brought on during the pandemic. On the long-term care redevelopment front, on 20th October , the Ontario government announced a new call for applications for new and upgraded long-term care beds under the Long-Term Care Home Capital Development Funding Policy, 2020 that was announced in 2020.
We currently have three long-term care redevelopment projects under construction and six additional projects with bed license allocations that are at advanced stages of planning and approvals. We intend to resubmit our remaining 13 redevelopment projects into this new call for applications by the end of this year. Then just yesterday, the Ontario government announced its fall economic update and allocated an additional CAD 3.7 billion in funding starting in 2024-25, toward the commitment to build 30,000 net new beds and 28,000 upgraded long-term care beds across the province by 2028. This brings its total investment in new homes to CAD 6.4 billion. On 28th October , the Ontario government introduced Bill 37, the Providing More Care, Protecting Seniors and Building More Beds Act.
In addition to detailing the commitment to increase direct care hours and build new long-term care beds, it outlines measures to improve transparency and accountability in the long-term care sector. The proposed legislation strengthens the Residents' Bill of Rights and introduces new requirements for annual resident, family, and caregiver surveys. It also establishes new compliance and enforcement tools. We believe that the proposed legislation is an important and positive step toward ensuring seniors get the quality of care they need and deserve. Our strategy is aligned with the government's key pillars as we continue to focus on our redevelopment agenda and work to implement the increase in direct hours of care.
We believe the enhanced accountability and transparency included in the proposed legislation puts a clear focus on the quality of care, accountability, and support for caregivers that's required to restore public trust in the sector after the devastation caused by the pandemic. We are committed to doing our part to make this happen. Finally, on 28th October , the Ontario government extended the CAD 3$ per hour pandemic wage premium for frontline PSWs until 31st March of next year. Extending the wage premium recognizes the ongoing contributions by long-term care and home healthcare frontline team members and supports our efforts to increase staffing capacity, particularly in our home healthcare segment. Now let's turn to the financial highlights on slide five.
With the marked decrease in COVID-19 cases during the quarter, our pandemic-related spending decreased by approximately CAD 10 million from Q2 levels to CAD 32.4 million and was largely offset by provincial funding, which included CAD 5.1 million related to costs incurred in Q1. As a result, costs exceeded COVID-related government funding by only CAD 700 thousand this quarter, an improvement of CAD 8.8 million over Q2. While COVID-19 costs are declining, we will continue to incur elevated costs as we remain committed to our ongoing efforts to protect residents, clients, and staff until the threat of the pandemic has passed. We anticipate further recovery of unfunded pandemic costs retroactive to prior periods. However, the amounts and timing of any recoveries are uncertain and may not cover all of the costs incurred.
Occupancy levels at our long-term care homes and retirement communities continue to recover from the lower levels we experienced at the height of the pandemic, with average occupancy in long-term care up 360 basis points from Q2. Our home healthcare average daily volumes were marginally higher than Q2, despite the seasonal softness we experienced in the summer months. Lower back-office costs and the additional operating day in the quarter contributed to the sequential improvement in NOI margins of 180 basis points from Q2 after adjusting for wage subsidy payments and net COVID costs. Our SGP customer base continued to grow in Q3, up 5.9% from Q2 and up 11.4% year-over-year.
NOI in our other operations segment was down this quarter compared to Q2 and prior year as a result of investments in growth initiatives to capitalize on future opportunities in this segment. Moving on to slide 6. We continue to work with the provinces to address the pressing need to replace aging infrastructure with new modern homes to meet the current and future demand for senior services. In total, we have 22 long-term care redevelopment projects in Ontario that we are actively advancing with the goal of building more than 4,200 new long-term care beds, 3,285 of which would replace aging Class C beds across the province. Last week, we commenced construction of a new long-term care home in Stittsville, near Ottawa.
This new 256-bed home will replace a 240-bed Class C home nearby, with completion expected in the first quarter of 2024. This project joins two other homes already under construction in Kingston and Sudbury. Together, these three projects will replace 684 Class B beds with 704 new beds, requiring a net investment of approximately CAD 179 million. We have a further six projects in advanced stages of approvals in Ontario, with a goal of commencing construction on all six before the end of 2023. These projects represent an estimated CAD 285 million in additional net investment. We are currently working to resubmit our remaining thirteen projects by the end of the year in response to the newly announced call for applications by the Ontario government.
We continue to work with our industry partners and the government to address those projects that are facing economic barriers that affect their feasibility under the current capital funding program, including diseconomies of small scale in rural areas and very high land acquisition costs in the GTA. Moving to slide seven and our long-term care operations. Lower rates of COVID-19 in the community and easing of pandemic-related restrictions resulted in a decline in costs and an increase in admissions during the quarter. COVID-19 related costs were CAD 23.2 million in the quarter, down 29% from Q2. As I mentioned earlier, CAD 5.1 million of funding received this quarter related to pandemic costs incurred in Q1. As a result, COVID funding received by the long-term care segment in Q3 was in excess of COVID costs by CAD 800,000.
Average occupancy across our long-term care homes increased to 89% in Q3, up 360 basis points from Q2. In October, the Ontario government extended basic occupancy protection until 31st January next year. We will not return to full occupancy in homes with ward-style three and four bed rooms, which takes 185 beds out of circulation in Ontario until such time as the homes are redeveloped. It is not yet clear what impact the removal of these beds will have on funding after 31st January . The initial phase of the Ontario government's long-term care staffing plan comes into effect this month, which provides us with the funding to make permanent the additional staff we added throughout the pandemic.
The increased funding will be provided through the nursing and program flow-through envelopes and takes us to three hours of care per resident day with subsequent increments in April of each year. On October fourteenth, the Saskatchewan Health Authority and Extendicare announced our intention to transition the delivery of long-term care services operated at our five long-term care homes in Saskatchewan to the SHA. We are working collaboratively with them during the transition to keep the focus on the needs of residents, families, and staff. Although terms of the transfer are under negotiation, our exit from the five long-term care homes in that province is not anticipated to have a material impact on our financial results. David will address this in more detail in his comments.
Turning to Slide eight, our ParaMed volumes increased slightly last quarter as traditionally slower summer months were offset by a resumption in volume growth in September. In comparison to the prior year quarter, our average daily volumes were up 11.4%. Adjusted NOI margins were 9.7%, up from 7.9% in Q2 when COVID-related costs and revenues are excluded. David will also provide more detail on these margin improvements. Our volume growth continues to be constrained by the staffing challenges facing the industry. Nursing shortages are increasingly becoming a challenge across the entire healthcare sector as demographic trends and the stresses of the pandemic cause nurses to leave the profession at a time when demand for their services is on the rise. We are focusing our attention on recruiting and retention programs for nurses to counter these market dynamics.
We are encouraged by the progress of our PSW college partnerships and in-house HSW training programs. In the first nine months of this year, more than 470 new caregivers graduated from these programs and joined our frontline ParaMed team. We remain on track to achieve our target of 600 graduates in 2021. In addition, more than 460 PSW students are getting experience in our long-term care homes. They are currently enrolled in various federal and provincial programs aimed at expanding the workforce in the long-term care sector, and we intend to offer these students employment upon graduation. We continue to encourage our employees who have been on pandemic-related leave to return to work. The extension of the CAD 3$ per hour pandemic wage premium for PSWs in Ontario may encourage more employees to return to active duty, particularly in home health care.
Lastly, I want to mention the recent home health care rate increases. Subsequent to the end of the third quarter, we received notice that home health care rates in Ontario and Alberta have increased retroactive to 1st April 2021. Ontario rates have increased by approximately 1.9%, and Alberta rates increased by 1%. These rate changes and the retroactive amounts will be included in our Q4 2021 results. I'll now turn it over to David Bacon, our Chief Financial Officer, to provide further insight into our consolidated and segmented financial results for the third quarter. David.
Thanks, Michael. I'll start by providing an overview of our consolidated results for the quarter, followed by some financial highlights of our individual business segments and our liquidity position. Turning to slide 10 and our consolidated results. As in prior quarters, we have included a detailed schedule of the impact of COVID-19 on our revenues, operating expenses, NOI, and adjusted EBITDA on slide 19 in the presentation. We continue to receive funding support under various provincial programs, and as Michael has said, we received CAD 5.1 million this quarter from the Ontario government to cover a portion of the unfunded COVID costs in LTC incurred in Q1. As a result, the net impact of our unfunded COVID costs on our consolidated adjusted EBITDA was CAD 700 thousand for the quarter, and the after-tax impact on our AFFO was approximately CAD 500 thousand.
We expect continued volatility in our results at least through the first quarter of 2022 until the effects of the pandemic are behind us. Year to date Q3 2021, we have incurred cumulative unfunded COVID costs of CAD 31.3 million at the consolidated adjusted EBITDA level when you exclude the CAD 18.8 million received in Q1 of this year that related to costs incurred in 2020. We do have some visibility into the level of COVID prevention and containment funding for the fourth quarter and Q1 2022 in both Alberta and Ontario. However, the quantum and timing of our actual costs and any further recovery of unfunded COVID costs incurred to date are uncertain, and the amount of any additional COVID funding may not cover all of the costs we've incurred to date.
Our consolidated revenue in the third quarter increased by 4.5% or CAD 13.3 million to CAD 310.1 million from the third quarter of 2020. This increase was driven primarily by an 11.4% increase in home health care volumes, increased COVID-related funding of CAD 3 million, long-term care funding enhancements, and lower group purchasing volumes related to slowing demand for pandemic supplies. Due to ParaMed's receipt of CAD 50.8 million in the Canada Emergency Wage Subsidy in Q3 of last year, our quarterly consolidated net operating income was down CAD 44.4 million to CAD 31.6 million and represented 10.2% of revenue compared to 25.6% in Q3, 2020.
Excluding the wage subsidy, consolidated NOI grew by CAD 6.4 million to CAD 31.6 million, with an NOI margin of 10.2% up from 8.5% in Q3 2020. Improvements in home health care operations and a reduction in net COVID-19 costs were partly offset by increased costs of resident care, lower preferred accommodation revenue in our long-term care operations, and a decline in NOI of our other operations. Our consolidated adjusted EBITDA decreased CAD 44.5 million from Q3 2020 to CAD 19.3 million due to the factors impacting NOI noted above. Administrative costs were flat year-over-year, with the impact of higher IT costs and insurance claims offset by lower COVID-19 administrative costs. Turning now to our individual business segments on slide 11.
Our long-term care operations saw revenue grow by CAD 4.7 million or 2.6%- CAD 189.5 million in Q3, largely driven by increased COVID funding of CAD 2.9 million, as well as other funding enhancements and the timing of flow-through funding. This was partially offset by lower preferred accommodation revenue that is not covered by the basic occupant accommodation funding protection in Ontario. NOI increased by CAD 3.4 million or 26.5% from the same period last year to CAD 16.4 million and represented 9.4% of revenue, largely due to a reduction in unfunded COVID costs of CAD 7.4 million on a year-over-year basis. This was partially offset by higher labor and operating costs and lower preferred accommodation revenue.
The successful impact of the vaccines and easing of restrictions as community case counts declined, particularly in Ontario, have continued to permit increased admissions. In this quarter, our occupancy increased 360 basis points from Q2 2021 to 89%. While we are encouraged by the improvements in occupancy levels, we anticipate that a small number of our Ontario long-term homes may not return to levels above 97% before the occupancy protection expires at the end of January 2022. Our occupancy at the end of Q3 of our Ontario long-term care homes, adjusted to exclude the ward-style beds we have taken out of service, was 94.6%, and we await more specific details regarding the ongoing funding related to the ward-style three and four bedrooms after the current basic occupancy protection expires.
As mentioned, the ongoing volatility over the next couple of quarters as it pertains to the level of COVID-19 costs incurred and related funding recoveries is largely driven by our Ontario LTC operations. However, the initial phase of the Ontario long-term care staffing plan that commences this month will help to alleviate some COVID cost pressures by funding the staff we added during the pandemic through enhancements to the nursing and program envelopes, where any funding not spent on resident care is returned to the government. We estimate the LTC staffing plan will provide incremental flow-through funding towards direct care hours of between CAD 40 million-CAD 45 million in 2022. As Michael discussed, we are transitioning the operations and potentially the ownership of our five long-term care homes in Saskatchewan to the Saskatchewan Health Authority in 2022.
The transfer is not anticipated to have a material adverse impact on the business, results of operations, or financial condition of the company. The Saskatchewan long-term care homes contributed CAD 42.6 million in revenue and had an NOI loss of CAD 1.3 million, an estimated negative impact on AFFO of CAD 1.5 million for the nine months ended 30th September 2021. From a balance sheet perspective, the net book value of the assets related to our Saskatchewan long-term care homes is CAD 5.4 million, and we currently have CAD 3.2 million in outstanding mortgage financing remaining on these homes that matures in January 2022.
Turning next to our home healthcare segment, revenue grew CAD 8.8 million, or 9.4%, to CAD 102 million in Q3, driven by an 11.4% increase in average daily volume year-over-year. Excluding the wage subsidy received in Q3, ParaMed's NOI grew by CAD 4 million- CAD 8.7 million, with an NOI margin of 8.5%, up from 5.1% in Q3 of 2020. This improvement reflects growth in volumes, lower workers' compensation costs, and improved back-office efficiencies, partially offset by an increase in the unfunded net COVID costs of ParaMed. On a sequential basis, excluding the impact of the wage subsidy and the impacts of net COVID costs, the NOI margin in Q3 was 9.7%, up from 7.9% in Q2 and up from 7.3% in Q1.
Our average daily volumes were up 0.3% in Q2, impacted by the traditional lower volumes in the summer months. Back-office efficiencies continue to drive NOI margin improvements. Our NOI this quarter also benefited from a non-recurring workers' compensation rebate and the impact of an additional operating day as compared to Q2 of 2021. Excluding these two factors, the Q3 margin would have been approximately 9.1%. As Michael mentioned earlier, the Ontario and Alberta governments implemented rate increases retroactive to 1st April 2021, which will be recorded in Q4 of 2021. We estimate that the annualized impact on revenue from these rate increases to be in the range of CAD 6 million-CAD 7 million. Turning now to our retirement operations on slide 13.
Increased occupancy levels and care services came with higher labor and promotional costs, leading to a slight year-over-year decline in financial performance. Q3 revenue was up slightly by CAD 100,000, driven by improvements in our leased-up properties, while NOI declined CAD 200,000- CAD 3 million, representing 24.8% of revenue. Throughout the pandemic, our stabilized average occupancy has remained above 90%, and was 90.2% for the nine months ended 30th September . During Q2, it averaged 89.8%, down 210 basis points from Q3 of 2020, but ended Q3 at 90.3%, up 80 basis points from the as at 30th June 2021 occupancy.
In terms of the retirement portfolio overall, average occupancy grew 130 basis points from Q3 2020 and sequentially from Q2 of this year, driven by lease-up improvements, offset by a modest decline in our stabilized communities. The easing of restrictions has allowed occupancy in our leased-up communities to end the quarter at 79.7%, up 670 basis points from Q2 of 2021, and we anticipate continued improvements as long as community infection rates remain low with respect to COVID. Turning now to our other business segment on slide 14.
Our Assist Contract Services and SGP Group Purchasing Services revenue declined 4.3%, largely due to lower group purchasing volumes associated with a decline in the demand and price for pandemic supplies. We increased our spending on business development and other growth initiatives this quarter, which has led to a year-over-year decline in NOI and NOI margins in our third quarter. Year to date, our NOI margin in our other operations segment is 56.6%, which was in line with our segment's historical margins prior to COVID. The underlying demand for our services remains strong, and SGP now supports over 88,000 third-party residents, an increase of 11.4% from Q3 2020 and up 5.9% from our second quarter. Finally, turning to our overall financial position.
At the end of Q3, our consolidated cash on hand remained strong at CAD 132 million, with CAD 73 million in undrawn credit facilities and approximately CAD 96 million in undrawn construction financing facilities for our Sudbury and Kingston long-term care projects. We are currently in the process of negotiating construction financing for our new long-term care redevelopment project in Stittsville and expect this to be completed in Q4 on similar terms as the Sudbury and Kingston financing. With that, I'll pass the call back to Michael for his closing remarks.
Thank you, David. I thank our team members for their efforts and their dedication to help keep the virus out of our homes. The high vaccination rate we achieved even before the announcement of our mandatory policy is a testament to the outstanding commitment of our care team members to our residents, clients, and their families. Our primary focus continues to be on meeting the needs of our residents, clients, and team members. We are extremely encouraged by our progress to date and the success of the booster vaccine campaign to provide a further level of protection in our homes. Enhanced staffing levels, regular testing, and ongoing prevention measures will remain in place until the pandemic is firmly behind us. Extendicare has been delivering services across the seniors' care continuum for more than 50 years, and we are building for the next 50.
Demand for high-quality seniors' care continues to increase as the aging demographic strains our health system. We are committed to addressing the pressing need to replace aging infrastructure and expand long-term care capacity through our redevelopment program. We are also continuing to invest in our people to provide seniors with the high-quality care they need and deserve. Thank you for your continued interest and support. With that, we'd be happy to take any questions you might have. Operator?
Thank you. We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. The first question comes from Jonathan Kelcher with TD Securities. Please go ahead.
Thanks. Good afternoon. First question, just on the occupancy on long-term care in Ontario, you're pretty close to 97%. I guess it's a couple of homes that may prevent you from getting there in January. Can you give us a little bit of color on why that would be?
I think it's, Jonathan, a matter just of time. Some of the homes were more affected than others by the pandemic, and it's taking them longer to recover. The vast majority of our homes are already back at more traditional occupancy levels. We're just thinking it's a matter of time. We may, you know, we may be in a situation of full occupancy by the end of January, but there's just a few homes that are a little bit slower. There's no reason for us to believe that they won't get to full occupancy in due time.
Okay. You're excluding the 185 beds in that 97%, I'm guessing?
Yes. I mean, we don't intend ever to have more than two residents per room. As it happens, the homes that are already under construction have a significant number of those three and four bedrooms. We prioritize those for replacement. That'll be a time-limited issue. We haven't heard yet from the government on their plan to handle that from a funding perspective, so we're just not sure how it'll be handled.
Okay. The funding for the nursing that's coming in, I guess, started in October. Like, how should we expect that to play out for your margins in long-term care? Do you think they get back close to 2019 levels in 2022, or were there other costs in there that might not cover?
John, I think there's a few things on that. I think when you think of the margins, I think two things. We do you know, there's a lot of moving parts currently at the moment, as you can appreciate. As we're working through rolling out and reacting to the new four hours of care program and that getting phased in, you know, there has been quite a bit of disruption in the labor side, which has led to some of the increased costs we've seen with staffing and agency use and overtime. But we hope that does regulate and get back to more normal levels. And then also obviously on a higher level with the additional nursing flow-through funding.
We have seen some escalation in some of our other operating costs, things like insurance and utilities that are harder to control. In part, we need to rely on sort of inflationary rate increases to help us mitigate that going forward. It is, you know, we have seen some increase obviously in those costs. Overall hard to predict exactly sort of what it shakes out to, but we do think we're gonna trend back towards those levels. There are some headwinds on some cost items that aren't necessarily part of the four hours of care. The other thing I think that'll be important for us all to understand as well, obviously with the four hours of care funding coming in, that is all flow through.
From a margin percentage point of view, we are gonna see a change in our margin percentage profile as that phases in over the next four years. You know, that should not have an impact on sort of NOI dollars per bed and sort of absolute dollars. That's not a sort of insignificant impact from a margin percentage point of view. I think there's a lot of moving parts, but you know, there's elements I think like on the labor side, we feel will stabilize with the flow through. There's some cost input elements that have had some inflation pressures in the last few quarters.
Okay, fair enough. Last question, just I guess more high level and staffing's been an issue in the ParaMed business for a long time. Do you think the increase to four hours of care in long-term care and the demands of that sector will, like, how does that impact ParaMed, or does it impact ParaMed in terms of getting staff?
Well, good question, Jonathan. I think there's a balancing act between the increased need for caregivers, the changes in compensation that are happening in the sector, and the increase in supply of new workers through the various government programs that have been announced. We've seen some pretty large increases in enrollments in programs for PSWs and nurses happening across the country. We've also seen the introduction of funding and programs for on-the-job training, which is underpinning some of our efforts to grow our own workers. The answer to your question is in the balance between the increased needs and the increased supply of workers.
The other thing that's a dynamic here that is very hard to get any kind of real current data on is the fact that we have depended on immigration to bring significant numbers of care workers into Canada in the past. Of course, that was shut off for 18 months or so. There's a variety of initiatives now to increase that and to help people with credentials from outside Canada to qualify in Canada. I would say that there's a pretty big demand for workers underway, but there's also some pretty significant efforts to increase supply. Right now, I would say that my confidence on this is a bit different for PSWs versus nurses.
On the PSW front, which is probably 80% of our workforce, from a caregiver perspective, I'm very confident on that front. I think the programs that we're running, combined with the programs that are happening with various colleges, will more than offset the increase in demand for those workers. We're also seeing the continuation of the CAD 3 premium pay, at least in Ontario until March. I'm very confident on the PSW front, you know, in both home care and long-term care. On the nursing front, it's I think gonna be a greater challenge because it takes longer to train nurses than PSWs.
While there's a vigorous response to the nursing shortage, it will take some years for that to have an effect. That's where immigration is the big variable that will probably mean the difference between, you know, a mild shortage and a more severe kind of shortage. Hard to predict how that's going to play out. That is, you know, that is a relatively small proportion of our staff that's impacted there.
Okay. That's a helpful answer. I'll turn it back. Thanks.
The next question comes from Scott Fromson with CIBC. Please go ahead.
Thank you, and good morning, gentlemen.
Hi, Scott.
Hi. Question on the impact and timing of the recent Supreme Court pay equity decision. What do you think that's gonna do to labor costs?
Scott, it's hard to predict. This is a complex issue that really goes back over a decade. It's something we're working with other long-term care operators, unions, and the government to try to work our way through. You know, I will say there's a couple of things when looking at this issue. One is that it's industry-wide. It affects the whole long-term care industry, and in fact, probably has knock on effects in other sectors of the health system as well. Second is the fact that pay equity adjustments historically have been funded by government. This really is a sector-wide issue to sort out, and I think it's gonna take some time for us to resolve it.
It sounds like it will be addressed, but there could be a lag as with other reimbursements. Is that fair?
It's hard to predict. I mean, I would expect that we would have, you know, a solution would be comprehensive. It'll be an industry-wide solution and any adjustments to funding would be timely. I don't see this as something akin to COVID, where with COVID, we incur the costs and then we file a claim. I think in this case, it'll be more like the flow-through funding that we've had for pandemic premiums, where the timing of the reimbursement and the timing of the cost is actually quite closely matched.
Gotcha. Thanks. Just for modeling purposes, when do you expect to remove the beds in Saskatchewan, the 649 beds?
Yeah, Scott, I think it's hard to say exactly on the timing of that. It is gonna happen in 2022. We are trying to focus on having that done sometime before the end of Q3, but it is difficult to predict the exact timing at the moment. We'll give more updates as time goes on in future calls and hopefully be able to get some more specific timing around that, Scott, as the negotiations advance.
Okay, great. Thanks, Michael and David. I'll turn it over.
Thanks.
The next question comes from Yash Pal with Laurentian Bank. Please go ahead.
Good afternoon.
Hi, Yash.
Hi, Firstly, on the occupancy protection. The government has not told you yet about the ward beds, but you are saying that they will be removed. Is that correct from the calculation?
Yeah. I think there's two pieces of the picture, Yash, here. I'll be clear that there's nothing explicit and sort of in, you know, official. But we do anticipate for purposes of the actual occupancy calculation in terms of achieving the 97%, that we do believe the government intends to remove the three- and four-bed wards out of that calculation. That does go hand in hand with our, as we've stated, intent not to fill those beds again. That's what we believe will happen on that, but it isn't official. What the other piece of the equation is just what funding, though, will continue related to those beds.
We're still waiting for clarity after January in terms of the dollars still attaching to those beds, but the test will, we believe, remove those beds from the calculation.
Going to the retirement home sector, the 500 basis points sequential decline in your margin, how much of that was because of labor inflation?
It's a component. I don't have that broken out, but there's a component of that in there. Again, I think part of that decline is in our lease-up properties, as you can appreciate, as the lease-up occupancy does improve the cost side of the equation in terms of adding staff in to support more residents moving in isn't necessarily linear. You can have
Some step ups and unevenness in sort of the cost side and staffing component as you're leasing up. There is some inflation in labor costs for sure, as we're seeing across LTC as well. Some of it does relate to just sort of the unevenness when you're in lease up and that a lot of our occupancy growth is coming from the lease up properties.
Okay. Then moving to the home care sector. The recent wage increase or rate increase. When was the last time the government did similar increase in the past? How much was it?
It's been quite some time. I'm looking around the room. It's been a few years, I would say five or six years since there's been a true rate increase. There's been a number of elements, as you can, if you recall, where rates have increased to absorb incremental costs. There was the Bill 148 wage increases that came through a couple of years ago. In terms of a across the board rate increase, this is the first time in a number of years that we've had one.
Why is the industry not pushing for, like, LTC style, regular rate review? Like how your LTC payment rate gets reviewed every year.
Yash, you may wanna just take a look at the release from the Home Care Ontario Association yesterday in response to the fall economic statement in Ontario. It does just that.
Okay. I will do that. Moving to the Saskatchewan issue, what was the contribution of those five homes in like a more normalized year, say, 2019?
Yeah, I think in our MD&A, Yash, you'll see that sort of more normalized level was about CAD 1 million. Like, if you go back to 2020 and beyond, you're talking we're looking at about CAD 1 million a year of NOI in 2020. Back to 2019, you know, we don't have that number handy, but it's a bit higher than that. I still think ultimately you're talking about, you know, CAD 1 million dollars or less on AFFO, which would be about CAD 0.01 of AFFO.
Okay. What will be the rough market value of those properties? I know you have quoted what you carry them on the balance sheet, but what would be their market value?
I think, Yash, I'd say that you know, we don't disclose that. I mean, we're into a negotiation now with SHA. There's differing ways to value those properties given you know, the age of the properties and the underlying land. I'd say that you know, the value is in excess of our book value, but there is you know, negotiation and the discussion here that's gonna go on with the province over the next few months to settle that.
Okay. Just one last question, if I may. Given, you know, the wage inflation we are seeing and, you know, the Saskatchewan properties going away, has the board considered the current distribution level recently? Any color would be great.
Yeah, I mean, we always look at our distribution level, Yash. I think, you know, something we're always cognizant of. We're comfortable with the current level. I think, you know, the SHA going away, as you can see, didn't really contribute much from a cash flow perspective, AFFO perspective. I think that moving away doesn't have much impact on our thinking around distribution levels. You know, we're comfortable. I think we're in a good liquidity position. I think the way that, you know, we're focused on the redevelopment program and the capital for that.
Just by design, the way the program works with the grants coming in at the end of construction, if we can cycle through to the next projects, I think overall we're comfortable with the current level we're at.
Okay. That's it for me. Thank you.
The next question comes from Tal Woolley with National Bank Financial. Please go ahead.
Hi. Good afternoon, everyone.
Hi, Tal.
Hey, Tal.
I just wanted to go back to your comments on nursing. You know, you'd made reference to the challenges that you're having finding adequate nursing staff for home healthcare in this environment. Should we be similarly concerned about it in long-term care? Can you just remind us what the complement of nursing is as a percentage of the staff in long-term care versus home healthcare?
Yeah, they're pretty similar, Tal. I don't know those numbers off the top of my head. You know, it's just definitely a majority of our staff are PSWs with support from nurses in both of our segments. You know, I think we're going to face more challenges on the nursing side, as I said earlier. I think that may require some policy changes and some shifts in the types of duties of different individuals. We've responded by adding a lot more in-house training capabilities.
I've been talking about that now for a couple of years, but part of the reason for that is to insulate ourselves from some of those shortages and to allow our PSWs to pick up more of the slack. You know, I think this is a sector-wide issue that will have sector-wide solutions. You know, our efforts to create a pipeline of new PSWs has been really what underpinned our 11%+ year-over-year increases in our home care operations. You know, we're committed to continuing that in the long term.
Are there any differences in the vacancies and the turnover rate between the two businesses for nursing specifically? Like, is it significantly less than long-term care or significantly more in home health care?
No, I'd say they're quite similar. The thing about it is that these labor markets are very regional in their nature. In some parts of the country, it's quite easy to be fully staffed. In other parts, we can have significant challenges recruiting people. As you can imagine, you know, large municipalities, it's easier to find people than it is in some of the smaller towns or rural areas. It is quite regional in its behavior.
Can you talk a bit to just, you know, now that the pandemic has, I dare to say it, become a bit more manageable for everyone. What's your sort of sense and what are you doing to sort of get a good gauge on employee satisfaction right now and employee wellbeing? What are you sort of hearing right now? Do you have any concerns coming out of those findings?
I've spent a fair bit of time the last couple of months visiting our homes, visiting our home care offices. I think the staff are feeling very supported and very positive about the future. I mean, the pandemic was very difficult for everybody. You know, I think we're all still contending with the trauma of the pandemic. The fact is that the response, particularly in the province of Ontario to that very negative event, has been very positive by way of support. Everything from salaries to new facilities to adding staff so that workloads are more manageable. I think the sector's feeling more supported right now than it has in 20 years. I think people are optimistic about the future.
I can only, you know, just point to our groundbreaking in Stittsville in the last week in October. We had a lot of our staff there. They were very excited to see us break ground on a new home. Very excited about what that means for the future. We had some of our residents there as well. They were very excited about it. I, you know, my view is that the mood is improving pretty dramatically.
Okay. On the retirement side, you had mentioned, you know, some incremental promotional costs in, you know, had crept into the P&L this quarter. Were these like, was it just a case of like, sort of restarting the marketing engine a bit from where you had been in the past, and so you had a little bit of extra costs getting going? Or were you making like direct promotions to drive occupancy? Was it, you know, you're offering, rebates or incentives to do, to drive occupancy?
Yeah. I think it's more the getting going again, I'd say, versus anything new or different. So, you know, there is some incentives to drive people coming in, but it's more of a restarting. I think we're very comfortable with sort of the level there and, you know, we're protecting the kind of revenue per door averages. But yeah, there is some incentive activity and mostly to kickstart some of the get us back on the and keep going on the trajectory. As I said earlier, we still have homes in lease-up, and that's where a lot of our activity's getting driven from.
I think you said there was 185 beds that are at that, you know, you sort of don't intend to put back into service with the, in the three and four bed wards. If there's no agreement sort of reached with the government, do you have an idea, like, what the impact of that, of just losing funding on those 185 beds would be?
Yeah, I don't. There's not an exact impact. I think there's going to be some funding towards them. I don't know whether it's gonna be, you know, what it's gonna look like between flow through versus OA funding. But I mean, again, it's 185 beds out of 5,100 in Ontario and 8,000 in all of long-term care. It's really not a material impact from our point of view.
Okay. That's perfect. Thanks very much, gentlemen.
This concludes the question and answer session. I would like to turn the conference back over to Jillian Fountain for any closing remarks.
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