Brookdale Senior Living Inc. (NYSE: BKD) was focused on rebuilding its home health census during Q2 of this year. In Q3, its home health census began increasing again, but it remains down overall on a year-over-year basis.
The Brentwood, Tennessee-based company’s home health average daily census took a hit earlier in the year due to lower occupancy in its senior living communities and fewer elective medical procedures being performed because of the COVID-19 virus. That contributed to a 14.4% year-over-year decline in its daily census for Q3.
The Patient-Driven Grouping Model (PDGM) has also continued to contribute to a decrease in home health revenue in 2020. Still, Brookdale executives are bullish on the segment moving forward.
“Our home health revenues stabilized mid-year and sequentially improved slightly in the third quarter,” Cindy Baier, Brookdale’s president and CEO, said on the company’s Q3 earnings call Thursday. “Our quality has improved to an industry-leading overall star average at 4.7 out of 5, which we expect will drive future growth.”
Brookdale is a leading operator of senior living communities in the U.S. The company operates and manages independent living, assisted living, memory care and continuing care retirement communities (CCRCs), totaling 726 communities spanning 44 states. It also offers a range of home health, hospice and outpatient therapy services to over 17,000 patients.
The biggest impact to Brookdale’s home health business was linked to operations outside of its own facilities.
“While lower occupancy in our communities affected the health care services census, home health inside our communities continues to perform at a strong rate,” Baier said. “Outside of the COVID-19 hotspot of Florida, our non-Brookdale community home health business referral growth and new case starts increased faster than prior to COVID-19 and improved relative to last year. This is an early indicator of the home health business recovery.”
Falling short on projections
Overall, Brookdale’s total revenue checked in at $706 million in Q3 2020, down 13.3% compared to $815 million in Q3 2019. The company estimates that $71 million was lost in revenue in Q3 due to COVID-19.
Its home health census went from an average daily census of 15,357 in Q3 2019 to 13,146 in Q3 2020.
Ultimately, the Q3 results fell short of projections.
“Brookdale posted Q3 results short of our estimates and consensus, primarily reflecting continued pandemic-driven occupancy pressure,” RBC Capital Markets wrote in a note Thursday following the earnings call. “That said, the company appears to be on incrementally better footing, as evidenced by increasing move-ins and less severe occupancy degradation over the course of the quarter.”
Brookdale has been receiving point-of-care COVID-19 tests from the U.S. Department of Health and Human Services (HHS). It saw about a 1% positivity rate among its residents as of Oct. 31.
“Year to date, Brookdale has incurred roughly $95 million of direct COVID costs but has recognized only $37 million of Provider Relief support, thanks in large part to Medicare exposure in the home health and hospices businesses,” RBC’s note read.
Brookdale was happy to learn that assisted living facilities will be benefactors of the third round of funding from the Provider Relief Fund as well.
On its end, investment banking company Jefferies believes that Brookdale’s home health segment could be of significant value to them.
“Brookdale has significant assets, [including] owned real estate, home health and hospice business,” Jefferies wrote in a note of its own. “Those are able to be monetized and could unlock shareholder value.”
Total home health revenue from Q3 2020 was just over $61 million, down 23.6% compared to Q3 2019.
Brookdale’s full-year revenue for home health last year was over $327 million. Since January of this year, its revenue totals have yet to reach $185 million.
Resident analysis
Brookdale’s internal surveys suggest that seniors still feel comfortable in senior living settings. Home health companies that have senior living segments have noticed the same.
“The good news is that we’re seeing the majority of residents, and prospects still think that senior living is a safe solution,” Baier said.
It would be an even safer solution, of course, with a widely distributed vaccine. And Brookdale is already looking forward to distributing it when it’s available as a way to ensure the health of its residents.
It’s likely that senior living operators will be some of the first to receive vaccines from distributors based on the populations they look after.
“With regard to a vaccine, I think that what everyone is trying to figure out, or at least the vast majority of people are trying to figure out is how to reduce risk,” Baier said. “And so while we haven’t conducted consumer research on the vaccine, it is something that we’re watching the research that’s available to us.”
For home health providers, it’s worth keeping an eye on how senior living deals with the prospects of a vaccine. After all, they could be up next.
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