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Brookdale Senior Living CEO: We’ll Continue ‘Leaning In’ to Health Care Programs

Brookdale Senior Living (NYSE: BKD) is planning for occupancy and margin growth in the year ahead as the company further “leans in” to providing health care services in its communities.

The Brentwood, Tennessee-based company during an earnings call with analysts and investors Tuesday reported “strong” occupancy gains and a more than 10% increase to resident revenue comparing the third quarter 2022 and 2023. The operator also managed to trim employee turnover and increase retention in the quarter.

With a positive quarter now in the rear-view mirror, the company’s leaders see many positive signs that momentum will carry over into 2024 as they chase a pre-pandemic high occupancy rate.

“We plan to deliver another year of solid occupancy growth,” Brookdale Senior Living President and CEO Cindy Baier said during the call Tuesday. “The supply and demand dynamics, coupled with our unique differentiators, support a long term expectation that we will return to our historical high occupancy once again.”

Brookdale Senior Living is the nation’s largest senior living operator with 672 communities across the U.S.

Brookdale’s share price rose 7.04% to land at $4.41 by the time financial markets closed Tuesday.

Continued momentum in Q3

The company in the third quarter of 2023 reported occupancy growth of 120 basis points compared with the same period in 2022, with 3Q23 weighted average census registering at 77.6%.

The senior living operator kept labor expenses to a 1% increase during the third quarter of this year as other operating expenses grew by 6%, according to Dawn Kussow, Brookdale executive vice president and chief financial officer.

But they were offset by an 11% increase in revenue for the year as revenue per occupied room (RevPOR) ticked up to just under $5,919.

“Our teams have remained very disciplined in matching the competition where necessary to drive occupancy, but also making sure that we’re getting the strongest rate for our units,” Baier said.

Contract labor usage was down by more than one-third, and the next goal for reducing labor costs will be cutting back on overtime, Kussow said.

That coincided with a 200 basis point improvement for retention in leadership roles, specifically executive director, health and wellness director and sales director throughout the quarter. For full time hourly associates, turnover has improved by 10 percentage points compared to the Q322, according to Brookdale management.

Baier said the retention and turnover changes were due to various initiatives and programs that have been implemented across the organization, including training for community and field leaders to “support a growth mindset” to foster growth and enhance operations. The training has been well-received by newer employees and associates, Baier noted.

The operator also inked a renewed lease agreement with LTC Properties to manage 17 communities in the third quarter of 2023. Brookdale had previously managed 35 communities in the portfolio for LTC, and initially had declined to renew the lease earlier this year.

“This new expanded lease is a win-win for Brookdale and LTC and under the new lease terms these communities would provide positive lease coverage,” Baier said.

Brookdale management noted that they expect LTC to transfer management of the other 18 communities to other operators in the fourth quarter.

While Brookdale posted a net loss for the quarter of $48.8 million, the company noted that was driven primarily by a $64.2 million decrease in operating income and an increase in debt service expenses. Brookdale in the third quarter of 2022 accepted a $61.1 million grant from the U.S. Dept. of Health and Human Services (HHS), and recognized $2.6 million in government grants in the third quarter of 2023.

On Nov. 1, Brookdale also sold a continuing care retirement community (CCRC) in its portfolio for proceeds of $12.7 million at closing after transaction costs.

‘Lean in to health care programs’ in 2024

With a strong quarter behind them, Brookdale management is looking ahead to 2024 with optimism on their minds.

The company’s overall strategy has rested on increasing resident rates, solving staffing challenges and growing quality of services “by providing valued high-quality care and personalized service.”

Looking ahead to 2024, Brookdale has more progress planned in these and other core initiatives, Baier said.

The company’s resident pricing plans “will incorporate the normal cost of operations, expectations of more muted labor inflation and ongoing elevated interest expense from the higher for longer rate environment,” she said.

Also in the cards for 2024 is more plans to grow health care services, including through Brookdale’s HealthPlus program, which has reduced hospitalizations and urgent visits compared to similar communities, Baier has previously noted.

“We will continue to lean into health care programs like Brookdale HealthPlus as one of many ways to best serve our residents and further establish our position as the nation’s first choice in senior living through high quality, individualized care,” she added.

With the rate of new construction down 78% versus the industry’s previous peak during the fourth quarter of 2017 and new starts down 52% versus the fourth quarter of 2019, Brookdale management expects occupancy gains to continue in the new year. That should help boost margins beyond where they are today, provided the company can continue to keep a handle on expenses elsewhere.

And with an expectation of one million new customers in the senior living market annually until 2030, Brookdale’s top leader is optimistic the occupancy gains will continue in the new year and beyond.

“We can once again report margin expansion in 2024 as we improve leverage of fixed costs, and naturally become more productive while meeting our residents’ needs providing high quality care and services,” Baier said. “Looking ahead, it remains undeniable that demand from the target senior demographic is here and rising.”

The post Brookdale Senior Living CEO: We’ll Continue ‘Leaning In’ to Health Care Programs appeared first on Senior Housing News.

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