Brookdale Senior Living Inc. (NYSE: BKD) saw its home health revenue decrease by more than 7% in 2018 compared to the previous year, though it stabilized somewhat during the Brentwood, Tennessee-based company’s most recent quarter.
The year-over-year drop was largely due to Brookdale’s intentional efforts to shift its case mix toward lower-rate managed care ahead of the Patient-Driven Groupings Model (PDGM), CEO Cindy Baier told Home Health Care News.
“It is fair to say that there is a change in the mix of patients, where we’re seeing a lot more Medicare Advantage (MA),” Baier said. “And Medicare Advantage pays less than Medicare, so that’s a factor that comes into play.”
Segment resident fee revenue for Brookdale’s health care services segment — formally known as its ancillary services segment — decreased $5.2 million, or 4.6%, to $108.3 million for Q4 2018 compared to the same period in 2017. For the year, total segment resident fee revenue came in at about $437 million.
Brookdale’s health care services segment includes its home health and hospice business lines. The company additional segments are made up of its independent living and continuing care retirement community (CCRC) offerings, as well as its assisted living and memory care operations. Brookdale — one of the country’s largest owners and operators of private-pay senior living communities — also maintains a management services segment.
Resident fee revenue for Brookdale’s home health business line was about $332.1 million in 2018, down from about $357.4 million last year.
Overall, Brookdale’s total revenue for the full year 2018 was $4.53 billion, a decrease of 4.5% from the prior year. Q4 2018 total revenue was $1.07 billion compared to $1.17 billion for the prior year period.
The company released its fourth quarter and full-year financial results on Wednesday.
PDGM, therapy and Brookdale’s case mix shift
Brookdale kept a relatively steady home health average daily census from 2018 compared to 2017. Its average daily census for 2018 checked in at 15,238, according to the company, a 1% gain over the previous year.
While health care services segment revenue was down, the decrease was partially offset by an increase in hospice volume. Brookdale expects strong organic growth for its hospice line in 2019, complementing those gains by also expanding into new markets.
In addition to a more managed care focus, Brookdale likewise tweaked its case mix in terms of skilled nursing and therapy services to be in-line with the broader industry mix. Among its many changes, PDGM aims to drastically alter how and when therapy services are provided by eliminating the use of therapy volume as a payment rate determinant.
Under PDGM, therapy payments will be more closely tied to clinical characteristics and patients’ needs.
“We’ve seen our nursing-therapy mix shift to be more consistent with the industry, which also has an impact on our rates,” Baier said. “As we look forward to PDGM, we are closer to the industry now in terms of mix. We will need to adjust our business to affect the different lengths of care as well as the difference in payment between post-acute and community-based referrals.”
Brookdale stock was down 14.6% and trading at $6.93 per share toward end-of-day Thursday.
Additional reporting by Tim Regan