Implementing protocols to protect residents and associates during the pandemic, and an agreement to sell a majority stake in its home health and hospice business, sets Brookdale Senior Living up for long-term growth and success, President and CEO Lucinda “Cindy” Baier said Thursday during a fourth-quarter and 2020 full-year earnings call.
“We listened to feedback we received from health experts, industry peers and from our residents and their families, and implemented protocols that made us better and helped keep our residents’ and associates’ health and well-being our priority,” Baier said. “Our optimism about this agreement to sell the majority of our home health and hospice business to HCA Healthcare, and our belief in a long-term opportunity for Brookdale, with large demographic growth in the next few years — we believe our investment thesis is stronger than ever.”
COVID-19
Brookdale has completed approximately 320,000 COVID-19 tests to date. As of Feb. 22, 1.2% of residents in the company’s communities are COVID-19-positive.
All Brookdale communities have completed first-dose vaccine clinics, with 90% of residents and 50% of associates receiving their first shots. More than 600 communities have completed second clinics.
Baier said that Brookdale leveraged its size and strength to advocate for vaccine priority and funding and that the company shared best practices with others to try to save lives.
“As the largest senior living company in the United States, we have the ability to have a significant positive impact on helping a very large population of seniors,” Baier said, adding that more than 85,000 vaccines have been administered in Brookdale communities. “As an industry leader, we used our strong voice to advocate for senior living funding and then once again for top vaccine priority later in the year.”
At the end of the fourth quarter, 89% of its communities were accepting new move-ins, compared with 98% at the end of the third quarter. As of Feb. 22, 97% of communities were accepting new move-ins. The year-over-year decrease in monthly move-ins of the company’s same community portfolio was 64.2% in April and 26.5% in December.
Consolidated senior housing occupancy was 71.5% as of Dec. 31, compared with 75% in September, dropping to 70.4% in January.
Despite the challenges posed by the pandemic, Baier said Brookdale welcomed more than 3,600 new residents in the fourth quarter and more than 15,000 new residents in all of 2020.
Brookdale also is continuing to invest in and implement innovation and technology, she said, having recently added electrostatic sprayers for more efficient disinfection in every community. The provider also is piloting ionization air purification systems.
Steve Swain, executive vice president and chief financial officer, said that as COVID cases surged, COVID-related expenses increased to $26 million in same-community expenses in the fourth quarter. Those expenses mainly were related to labor due to the difficult operating environment, wherein Brookdale needed to use more contract labor and overtime.
The company estimates $281 million in lost resident fee revenue in 2020 and $126 million in COVID-19 costs — $30.5 million in the fourth quarter — due to personal protective equipment and medical supplies (41%), labor (34%) and cleaning (25%). Swain said COVID-19 cases peaked and then dropped quickly in January, helping to reduce COVID-related expenses in the first quarter. He said he expects a sizable reduction in pandemic-related costs in the second quarter.
Brookdale recognized $78 million in the fourth quarter in government grants, the majority of which came from Phase 2 distributions from the Provider Relief Fund. The provider realized $120 million total in COVID-related relief in all of 2020, which helped pay for PPE and other COVID-related expenses.
“As we start the recovery phase, we are focused on winning in the near term and ensuring a strong foundation for long-term success,” Baier said. “We are continuing to improve our winning formula to increase occupancy by differentiating Brookdale’s best-in-class services that consumers value most.”
That strategy includes focusing on health and care by accelerating vaccine clinics and increasing social interactions of residents; retooling sales functions to try to better respond to local market conditions; and trying to capitalize on the company’s leadership position for residents and prospective residents who have greater healthcare needs.
HCA transaction
After the end of the fourth quarter, the company entered into an agreement with HCA Healthcare, selling 80% of its equity in its healthcare services segment. Baier called the HCA transaction a “win-win” and a “great alignment of interests.”
The new partnership with HCA, she said, was designed to “deliver value to our shareholders and ensure continuity of quality care for residents and patients, while improving access to additional healthcare services.”
“We believe HCA has the ability to accelerate the growth of the home health and hospice business. We will look to share in this growth,” Baier said. “This relationship will create opportunities to improve healthcare service offerings within our communities to enhance our residents’ experience and health outcomes. The depth and breadth of our two companies provides an incredibly strong foundation for growth.”
