Home Health Takes Back Seat to Brookdale’s Core Portfolio, Hospice

Brookdale Senior Living’s (NYSE: BKD) home health business may be taking a back seat to the senior housing owner and operator’s core portfolio and hospice line — at least for now.

Locked in on an ongoing turnaround effort and coming off a strong Q1 2019 performance rooted in an improved sales cycle and growth, Brookdale remains first-and-foremost focused on boosting its occupancy rates, according to CEO Cindy Baier.

Prioritizing occupancy and its core portfolio makes financial sense for Brookdale, she said, as every five points of occupancy growth is roughly equivalent to a $100 million opportunity for adjusted EBITDA and adjusted free cash flow.

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“We have always believed that the greatest creator of shareholder value at Brookdale is the operational turnaround of our business,” Baier said Tuesday, speaking at the RBC Capital Markets Global Healthcare Conference in New York City. “I want my core portfolio to perform as well as it can possibly perform.”

Similar to the rest of the senior housing industry, Brookdale has been impacted by excess housing supply for the past several years, triggered by increased construction during the industry’s last major real-estate boom.

As of March 2019, Brookdale had operations across more than 844 retirement communities in 45 states, serving about 80,000 residents overall. While substantial, the portfolio is about 25% smaller than it was five years ago.

Brookdale’s calling card is its stock of independent living, assisted living, memory care and continuing care retirement community (CCRC) offerings. The Brentwood, Tennessee-based company also delivers home health and hospice care through its health care services segment, however.

In Q1 2019, Brookdale’s health care services segment brought in about $111.5 million in total revenue, a more than 4% increase over the $110.5 million from the segmented in Q1 2018.

Gains were primarily due to Brookdale’s growing hospice business, which the company plans on building out further due to its low capital requirement and attractive margins.

“You’ve seen us increase the number of hospice agencies that we are owning, and that’s something that’s really been really good [for us],” Baier said. “And we have a resident base that needs this service.”

Meanwhile, Brookdale’s home health operations saw a slight decrease in Q1 2019 revenue compared to the same period a year ago, dropping by about 1.5% year-over-year to $84.2 million. Last year, Brookdale saw its home health revenue decrease by more than 7% compared to 2017.

“I think [home health] can grow significantly,” Baier said. “What we see is the ability to expand into significantly more markets … but there’s still much more work to do.”

If Brookdale continues to grow its home health and hospice businesses, the company may eventually look to spin off or sell its health care services segment, Stephens analyst Dana Hambly previously told Home Health Care News.

In addition to home health and hospice, Brookdale will also seek to add other services that seniors need into its fold moving forward, Baier noted.

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