Despite an overall solid fourth-quarter performance that sent the company’s stock soaring on Wednesday, Brookdale Senior Living Inc. (NYSE: BKD) is still watching its home health segment lag behind.
Brentwood, Tennessee-based Brookdale is one of the country’s largest owners and operators of private-pay senior living communities. The company operates 763 owned, leased and managed senior living communities in 45 states.
The company’s health care services segment includes its home health and hospice business lines.
Last November, Brookdale President and CEO Lucinda Baier was frank when she called the company’s home health third-quarter revenue performance “disappointing” after it stood at $80.6 million. During Q4 2019, Brookdale’s home health business brought in $77.4 million in resident fee revenue, a 4.4% decrease compared to $81 million in Q4 2018.
The biggest silver lining for Brookdale’s health care services segment was an increase in volume for hospice services, which led to $26.1 million in Q4 revenue, compared to $21.3 million during the same period a year ago.
“While health care services didn’t meet our expectations, what stands out is the hospice business,” Steven Swain, executive vice president and CFO, said during Brookdale’s Q4 earnings call on Wednesday. “Although less than a quarter of the segment’s revenue, hospice growth was so significant that it drove the segments positive overall revenue growth.”
Despite hospice being the main source of revenue growth for the company’s health care services segment, Brookdale views home health as a critical component of its overall portfolio strategy.
“We think our competitive differentiator is the ability to provide those services in a seamlessly coordinated way within our communities and, where we have geographic concentration, to offer the services outside of the walls of our communities,” Anna-Gene O’Neal, president of Brookdale’s health care services division, told Home Health Care News in an email.
Overall, the company brought in $986.64 million in Q4 2019, compared to $1.07 billion in Q4 2018. On the year, Brookdale’s total revenue checked in at $4.06 billion, compared to $4.53 billion in 2018.
Total resident fee revenue for home health in 2019 was $327.49 million, compared to $332.06 million in 2018.
Aside from recapping the company’s financial results, Brookdale hinted at a reorganization of its home health segment during Wednesday’s call. So far, that reorganization has included recent additions to the company’s leadership team.
“For home health, our new leaders evaluated the best go-forward business model and executed a plan to reorganize the operations,” Swain said.
Brookdale’s most recent leadership change was the appointment of Cindy Kent to serve as executive vice president and president of senior living in December.
“We have an enhanced leadership team that has brought leaders with greater clinical, financial and operational expertise in the health care arena,” O’Neal said. “We are evaluating our cost structure and labor utilization. As such, we will be adjusting our operations accordingly to match these goals.”
While O’Neal did not specify what those adjustments entail for Brookdale, some home health providers have begun tweaking their operations by changing their service mix and utilization patterns.
Specifically, many providers have opted to cut back on therapy utilization due to changes associated with the Patient-Driven Groupings Model (PDGM).
Brookdale leadership recognizes PDGM as a headwind and said it expects the overhaul will mean revenue growth that’s back-half weighted in 2020.
“There will be some noise in the first quarter with the implementation of a new reimbursement model with 30-day episodes and the recently announced organizational changes,” Swain said. “As such, we expect segment [net operating income] to decline sequentially from the fourth quarter.”
PDGM is expected to negatively impact working capital for Brookdale.