PDGM-Coronavirus Combo Straining Brookdale’s Home Health Business

Home health care services make up a relatively small portion of Brookdale Senior Living Inc.’s (NYSE: BKD) overall book of business. Still, it appears to be one of the hardest-hit areas for the Brentwood, Tennessee-based company during the coronavirus outbreak.

As the largest senior living operator in the country, Brookdale has been aggressively preparing for and battling against the virus since early January. To keep the COVID-19 virus out of its 741 owned, leased or managed communities, Brookdale has carried out a multi-layered plan built on health system partnerships, resident education, enhanced cleaning protocols and more.

So far, those efforts have paid off; as of the end of April, less than 1% of the company’s senior living residents had tested positive for COVID-19.

Advertisement

“With communities in 45 states, we are managing through rolling state peaks, which started in the West, quickly expanded to the East Coast, then through Florida and Texas, and are currently growing in the Midwest,” Brookdale President and CEO Cindy Baier said Wednesday morning during the company’s first-quarter earnings call.

Brookdale’s senior living operations haven’t been immune to the coronavirus entirely. Welcome visits have slowed, while move-ins have dropped to “a significantly lower volume,” according to leadership.

Meanwhile, Brookdale’s home health care segment has faced major disruption due to the fact COVID-19 hit during the transition to the Patient-Driven Groupings Model (PDGM). The Medicare payment overhaul was expected to prove challenging for Brookdale’s downward-trending home health business in the early part of 2020, but the coronavirus only added insult to injury.

“As foreshadowed in our previous earnings call, we expected some noise in the first quarter with the implementation of [PDGM] and the announced segment organizational changes,” Baier said. “In January and February, we saw sequential census progress, but in the later part of the quarter, key medical referrals dropped significantly as the coronavirus spread throughout the United States.”

The widespread adoption of stay-at-home orders and the suspension of various medical procedures also contributed to a home health dip in Q1, according to Baier.

Similar to what other home health businesses have experienced, some Brookdale patients also canceled appointments due to COVID-19 exposure concerns.

Overall, Brookdale posted revenues of $1.01 billion for the quarter ended March 2020. That total is slightly down compared to the $1.04 billion in revenues the company reported in the first quarter of 2019.

The company’s home health revenue came in at $65.9 million in Q1, down 21.7% compared to the same quarter a year ago. Brookdale’s Q1 home health average daily census fell to 14,020, an 11.8% drop compared to last year’s first quarter.

While Brookdale’s entire health care services department was down, hospice remained a silver lining.

Brookdale’s hospice operations brought in $23 million in the first quarter of 2020, representing a 6.9% increase from the prior year’s first quarter. The company’s hospice average daily census increased to 1,698 from 1,428 during the same period.

Mitigating costs

Personal protective equipment (PPE) has been a company-wide pain point for Brookdale, similar to other senior care organizations.

In total, Brookdale spent about $10 million on COVID-19 costs during the first quarter, with the largest expense categories being PPE, medical equipment, cleaning materials and disposable dining supplies.

“Due to nationwide demand, when our supplier for masks and gowns materially reduced the levels of product that we could buy, we aggressively sourced product from other suppliers, albeit at a large multiple of a cost that we normally pay,” Baier said on the call.

To mitigate some of COVID-19 costs, Brookdale has initiated several cost-cutting actions, including temporary reductions in marketing spend and the cancellation of events and travel.

As of Wednesday’s call, Brookdale had received $29 million from the federal Public Health and Social Services Emergency Fund, which began offering COVID-19 financial relief to Medicare providers on April 10.

But the company is being cautious with how it uses that emergency funding moving forward, Baier told Home Health Care News during a follow-up call Wednesday afternoon.

“We want to make sure that we’re fully complying with the terms of the program,” she said. “Compliance is a big deal to us, and ensuring that we are using the funds as they were intended is critically important to us.”

Unlike some smaller, standalone home health providers, Brookdale is “uniquely positioned” to have some financial stability amid the COVID-19 crisis, given its liquidity and scale, Baier added.

“I think we have resources that other smaller operators don’t have,” she said. “And that’s a benefit.”

Apart from emergency relief, Brookdale’s home health and hospice operations have both benefited from regulatory measures taken by the U.S. Centers for Medicare & Medicaid Services (CMS) in light of the coronavirus outbreak. Non-physician certification has been especially helpful.

Non-physician certification — something home health providers have sought for years — was one of the provisions included in the $2.2 trillion CARES Act.

“I think that will be helpful in ensuring our patients are able to access the services that they need by having more people who can sign the orders,” Baier said. “I would expect that we would have an easier time getting care started and getting properly reimbursed for the care.”

Editor’s note (May 7, 2020): A previous version of this story said Brookdale had been aggressively preparing for and battling against the coronavirus since early March. The company ramped up its COVID-19 response in January.

Additional reporting by Tim Regan

Companies featured in this article: