Brookdale Senior Living (NYSE: BKD) has launched an engagement-focused program to complement its growing HealthPlus service line – just one of the ways the company is seeking to maximize profitability in the months and years ahead, according to CEO Cindy Baier.
The Brentwood, Tennessee-based company detailed its new program, Engagement Plus, which is designed to “help our residents build meaningful friendships faster” and provide a “lifestyle that reflects their unique interests,” Baier said during the company’s fourth-quarter 2024 earnings call Wednesday.
As it is expanding its new engagement program, Brookdale also is narrowing its focus on maximizing profitability in 2025. The operator has steadily grown its occupancy in recent years, with expectations to continue gaining ground amidst an industrywide supply-demand imbalance.
The company’s 4Q24 average occupancy rate of 79.4% lagged behind its pre-pandemic average occupancy rate of 84.5%. But Baier noted that in 2024, Brookdale exceeded its operating income per unit by about 8% and its revenue per available room (RevPAR) by about 18% compared to 2019.
While Brookdale’s leaders believe the operator has an opportunity to push its occupancy rate higher in the future, Baier said the company has “taken one of two paths” – the path of focusing on generating healthier revenue instead of gaining occupancy at all costs.
“We could have pursued occupancy regardless of whether that occupancy would have driven improved cash flow, or we could have pursued cash-flow growth,” Baier said. “We chose the path to pursue cash-flow growth, and looking back, I’m really confident that that was the right path.”
Brookdale is the nation’s largest senior living operator with 647 communities in 41 states. In the fourth quarter of 2024, the company reported a net loss of $83.9 million, an improvement over its net loss of $91.2 million a year prior.
Brookdale continues rollout of ‘Plus’ services
Brookdale has steadily expanded its HealthPlus program since its launch five years ago. Now, the company has added EngagementPlus to that rollout, with plans to grow it in a similar way.
According to Brookdale’s website, the EngagementPlus model centers engagement associates, who “encourage and empower residents to lead a class, tutor an associate or attend a learning event with outside experts from the community.”
Baier noted the company is expanding the program to multiple communities and said she will provide more information on it later this year.
Brookdale is also continuing to expand its HealthPlus program, as it has in previous quarters. At its core, the program coordinates health care and other services for residents in an effort to keep them well for longer. In 2024, the operator expanded the program to 80 more communities, with plans to add 60 more communities to the program later this year. All told, the company expects to have deployed the program in 190 communities by the end of 2025.
As Brookdale has noted before, residents living in communities that participate in HealthPlus have 80% fewer visits to urgent care clinics and 66% fewer hospitalizations than similar older adults living at home.
“In memory care as an example, that provides a better value to a lower-acuity resident, and so that is skewed toward bringing residents who have a lower need into our communities,” Baier said during the call Wednesday. “The trade-off there is lower needs and lower care initially, but it should mean longer length of stay.”
The average age of Brookdale residents now skews about six months younger than roughly five years ago – a fact that Baier said she is particularly excited about.
“If you think about having younger residents move in with us, we would think that will mean that they will stay with us longer, which should be very positive as we go into the future,” she said.
Both EngagementPlus and HealthPlus are wrapped up in Brookdale’s quest to generate higher revenue and margins in the months and years ahead. Should the company return to its pre-pandemic occupancy rate of 84.5%, it would gain “at least $190M of incremental revenue,” with an “opportunity for growth as RevPOR potential surpasses inflation in future years,” according to its fourth-quarter earnings presentation.
Via Feb. 19 Brookdale earnings presentationNow that Brookdale has “more than recovered” its pre-pandemic profitability per unit, Baier said it has “much more opportunity for growth” ahead.
“We have communities that have rooms that aren’t currently serving residents. As those units become occupied, it’s going to drive higher RevPAR and a higher profitability,” she said.
She added: “What we are going to look at every single day is, how do we profitably grow our business? How do we differentiate Brookdale to provide a better experience to our residents and our associates?”
In recent weeks, the Trump administration has enabled Elon Musk and “DOGE” to halt spending for multiple longstanding government programs, like USAID, and in the process raising legal concerns and adding to senior living uncertainty. The billionaire and his team were granted access to U.S. Medicare and Medicaid data earlier this month. Additionally, Republicans have recently proposed cutting Medicaid and adding new requirements for recipients.
But Baier said that Brookdale has little exposure to fluctuations in Medicare and Medicaid programs given 94% of its revenue comes from private resident rates. She also cited data that 18% of assisted living residents rely on Medicaid for daily services, higher than Brookdale’s exposure to the program.
“If you run a Medicaid community, usually you’re running a very high occupancy community – often 95 to 100% occupancy – but it’s at a much lower margin,” she said. “Because of our focus on profitability, we absolutely chose to walk away from some Medicaid business because the reimbursement rate did not keep pace with the cost of providing services.”
Brookdale lays to rest ‘single-largest capital issue’ in 10 years
In addition to launching and expanding its programs, Brookdale spent last year retooling its leases with landlords and increasing its number of owned senior living communities.
Last year, the company’s achievements included extending its master lease with landlord Omega Healthcare Investors (NYSE: OHI) while securing $80 million in landlord-funded CapEx, inking a $610 million deal to acquire 41 communities from Welltower (NYSE: WELL) and Diversified Healthcare Trust (NYSE: DHC), and an agreement with Ventas (NYSE: VTR) to continue managing 65 high-performing communities from a 120-community portfolio.
“These 2024 portfolio management transactions are expected to drive meaningful improvements in cash flow and liquidity, increase the proportion of our own real estate portfolio to over 75% of consolidated units by year-end and support meaningful value creation for our shareholders,” Baier said.
The company also in the last year has addressed more than $1 billion in loans, in the process eliminating its 2025 debt maturities and reducing its 2026 debt maturities to $44 million. The company also has refinanced more than $300 million of 2027 debt maturities at a lower interest rate than before. That is “particularly meaningful” given that the senior living industry currently holds $10 billion in debt maturities due in 2025, according to NIC data Baier cited.
“Thanks to the strong relationships we have cultivated with Fannie Mae and Freddie Mac and multiple lending partners, we remain confident in our ability to successfully address these loans well before their maturity dates,” she said.
