Home health continues to be a trouble spot for Brookdale Senior Living (NYSE: BKD), the nation’s largest owner and operator of private-pay senior living communities.
Brentwood, Tennessee-based Brookdale posted its financial results for the second quarter of 2018 this week, highlighted by a companywide net loss of $165.5 million compared to a net loss of $46.3 million for the same period a year prior. Revenue for Brookdale’s ancillary services segment—which includes the company’s home health, hospice and outpatient therapy lines—decreased slightly by about $337,000 on a year-over-year basis.
The drop was primarily due to a decline in home health revenue, Brookdale leadership said during a call with investors Tuesday.
In total, ancillary services revenue for Brookdale—which is in the midst of an operational turnaround—was about $109.9 million during 2018’s Q2.
“The home health business continues to have lower business,” Teresa Sparks, Brookdale’s interim CFO, said during the call. “However, we are seeing progress, especially beyond our community walls.”
As a company, Brookdale operates a total of 988 independent living communities, assisted living communities, memory care communities and continuing care retirement communities in 46 states. That network serves about 95,000 residents combined, according to the company.
Brookdale’s home health business serves about 15,000 patients daily across more than 40 locations in 27 states.
While home health was down, Brookdale’s hospice revenue was up, increasing by about 27% to $19.7 million on a year-over-year basis. The success of Brookdale’s hospice services helped offset the lackluster home health results, according to company executives.
Brookdale also highlighted the down-and-up nature of home health and hospice in Q1 of 2018.
Total revenue for Brookdale in the second quarter of 2018 was $1.16 billion compared to $1.19 billion in the prior year’s second quarter.
Home health outlook
Brookdale’s Medicare reimbursement rates are lower than they were a year ago, Sparks said during the call.
Residents at Brookdale communities often utilize its home health services, making them a unique base of patients who reside in environments that inherently provide personal care and oversight, unlike traditional patients residing at home. Access to that population means Brookdale has had a lower ratio of nursing to therapy services.
Announced in July, the proposed Patient-Driven Groupings Model (PDGM) from the Centers for Medicare & Medicaid Services (CMS) for 2020 seeks to remove current incentives for providers to over-provide therapy services. In particular, PDGM would eliminate using the number of therapy visits provided as a payment determinant.
Therapy changes will likely impact Brookdale’s reimbursement rates, Sparks said.
“There are opportunities that we see to reduce cost as we transition to a new model, increasing our efficiency to things like central intake and consolidating some agencies to reduce costs,” she said.
For calendar year 2019, CMS is proposing to increase home health Medicare payments by about 2.1%, or about $400 million.
“I think that we will start looking at our ancillary services model—our [skilled nursing facility] model, and our home health business—really as a single entity going to market,” Sparks said. “We are really focused on providing value-based solutions and this is what we are focused on for the future.”
Written by Robert Holly