Brookdale takes legal action against former workers, competitor

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Cindy Baier
Cindy Baier

Brookdale Senior Living is taking legal action against several former workers and their current employer over possible illegal actions that are affecting the company's bottom line, Chief Financial Officer Cindy Baier said Tuesday during the company's third-quarter earnings call.

Earlier this year, she said, more than 20 employees delivering ancillary services on behalf of Brookdale's Nurse on Call Home Health Care, which the senior living operator acquired in 2014 as part of its merger with Emeritus, left the company to join a new, competing company in what Baier described as an “egregious corporate raid.”

“We believe certain of these former associates, on behalf of their new employer, are or have been directly soliciting our patient referral sources, in violation of non-solicitation agreements, and are engaging in other behaviors that violate Florida state law to our financial determent,” she said.

Brookdale has obtained a temporary injunction against one former employee, Baier said, adding: “We're aggressively pursuing all available legal remedies in connection with the situation while we've replaced staff and recovered our lost business.”

Actions associated with the former workers, Baier said, have contributed to declining revenues that have affected the company's operating margin. Brookdale's ancillary services segment, which includes home health, hospice and outpatient therapy, generated $14.6 million in operating income during the third quarter, a 16.1% year-over-year decrease. Revenue for the segment decreased $0.4 million, or 0.4%, to $117.3 million for the third quarter of 2016 compared with the third quarter of 2015.

The revenue decrease was partly offset by higher home health census, Brookdale said, but operating expenses also increased due to the higher census and increased expenses for salaries and wages. Also, Baier said, Brookdale is downsizing its outpatient therapy business as reimbursement declines.

“We're moving toward outpatient therapy only in markets in which we don't have home health and where there is a large population of independent living residents,” she said. “As we transition from using outpatient therapy home health, there is usually a period of time requires capture the business into home health services.”

Brookdale's hospice business is “doing very well,” Baier said. “Going forward, we're focusing on improving our overall ancillary services business by rationalizing our outpatient therapy business, improving our preferred provider relationship with our community, recovering the lost Florida business and growing the hospice business.”

Overall in the third quarter, Brookdale's revenues of $1.25 billion missed analysts' projections by $10 million, and earnings per share, at 28 cents, missed analysts' projections by 17 cents. Read more here.

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