Brookdale Senior Living Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 8, 2024

There are 9 speakers on the call.

Operator

Hello all, and welcome to the Brookdale Senior Living 1Q 2024 Earnings Call. My name is Harry, and I'll be your operator today. I would now hand the call over to Jessica Hazel, Vice President of Investor Relations to begin. Please go ahead.

Speaker 1

Thank you, and good morning. I'd like to welcome you to the Q1 2024 earnings call for Brickdale Senior Living. Joining us today are Cindy Beyer, our President and Chief Executive Officer and Don Cuso, our Executive Vice President and Chief Financial Officer. All statements today, which are not historical facts, may be deemed to be forward looking statements within the meaning of the federal securities laws. These statements are made as of today's date, and we expressly disclaim any obligation to update these statements in the future.

Speaker 1

Actual results and performance may differ materially from forward looking statements, and certain of the factors that could cause actual results to differ are detailed in the earnings release we issued yesterday as well as in the reports we file with the SEC from time to time, including the risk factors contained in our annual report on Form 10 ks and quarterly reports on Form 10 Q. I direct you to the release of the full Safe Harbor statement. Also, please note that during this call, we will present non GAAP financial measures. For reconciliations of each non GAAP measure from the most comparable GAAP measure, I direct you to the release and supplemental information, which may be found at brickdaleinvestors.com and was furnished on an 8 ks yesterday. Now I will turn the call over to Cindy.

Speaker 2

Thank you, Jessica. Good morning to all of our shareholders, analysts and other call participants. Welcome to our first quarter 2024 earnings call. In the Q1, we made great progress on our key strategic priorities, which are designed to not only pave the way for operational excellence and sustainable long term growth, but also to support the health and well-being of our residents and associates. At Brookdale, our unwavering commitment is and has been the health and well-being of our residents and associates.

Speaker 2

We know that aging presents new challenges for seniors and they along with their families often struggle with their evolving needs. Many times these needs include a significant increase in chronic conditions, increased feelings of loneliness and isolation and support to complete even the most basic activities of daily living. At Brookdale, we take pride in our ability to help seniors manage these challenges of aging through high quality care and personalized services, all in a home like setting, surrounded by a community of friends. But our commitment doesn't stop with our residents. Our business depends on people taking care of people and as such, our greatest asset is our associates.

Speaker 2

Each Brookdale associate has the meaningful privilege to truly enrich our residents' lives with compassion, respect, excellence and integrity. Our mission embodies Brookdale's commitment to a culture of caring and excellence. Through our key strategic priorities and our relentless dedication to the health and well-being of our residents and associates, we are seeing meaningful positive outcomes being realized for our residents and associates in our community operations and throughout our financial results. I'll share with you many of these positive first quarter outcomes, including an accelerating year over year occupancy growth trend, another year of favorable rate growth that is supporting profitable census increases and our continued triple digit same community margin expansion. It remains undeniable that demand from the target senior demographic is here and rising.

Speaker 2

We remain focused on our goal to meet this growing demand and to be the nation's 1st choice in senior living. With the strong start to the new year, including the sustainable growth we continue to deliver, I am filled with tremendous optimism for our ability to capture the incredible opportunity that lies ahead. In the Q1, we maintained an intense focus on our key strategic priorities. Building on our strong momentum from 2023 and with the continued successful execution of these priorities, we are proud to report another quarter of positive operational performance where we once again delivered results within or better than our previously provided guidance ranges. Using our strategic framework as a guide, I'm proud to share with you our recent progress and noteworthy accomplishments.

Speaker 2

Beginning first with our priority to get every available room in service at the best profitable rate. In the Q1, on a same community basis, RevPAR grew 6.3% over the prior year, which supported operating income margin of 27.6%, our highest reported adjusted margin rate since the initial impact of the pandemic. As Dawn will share, this represents an important milestone on our road to pre pandemic margins and beyond. Our effective January 1st rate increase coupled with 150 basis points of year over year same community occupancy growth and continued appropriate expense management contributed to these strong results. We were very pleased that our year over year occupancy increased every month of the Q1, accelerating from our 4th quarter growth level and exceeding our initial expectations.

Speaker 2

There continues to be robust demand for our services and a recognition for the strong value proposition that Brookdale provides, resulting in more seniors choosing to call Brookdale home. In the Q1, our move ins exceeded pre pandemic levels by 7.5%. Though not quite as high as our prior year Q1 move in level, we are still pleased with the strong demand that we are seeing. We're also grateful that Q1 move outs improved relative to both the prior year and pre pandemic levels. By holding steadfast to our commitment to consistent and profitable year over year occupancy increases, while continuing to meet our residents' needs, provide high quality care and personalized service and remain in compliance with applicable regulations, we are building a significant runway for future revenue and operating income growth as we serve more seniors in the quarters decades to come.

Speaker 2

Turning to our next strategic priority to attract, engage, develop and retain the best associates. A simple philosophy resonates within Brookdale. If we take care of our associates, they in turn will take care of our residents. That is why this strategic priority remains critical to our long term success. With this in mind, I am very pleased with our incredible progress to attract, engage, develop and retain the best associates, which has already had a positive impact on our operations performance and financial results, while simultaneously strengthening our teams and creating lasting benefits for the future.

Speaker 2

The pandemic significantly affected the workforce in our industry, leading to a nationwide shortage of healthcare workers. In 2022, we increased our internal workforce by approximately 15% with nearly 5,000 net hires, which supported more shifts being filled by our own Brookdale associates rather than contract labor. Then in 2023, we refined the executive director role, introduced enhanced leadership training and focused on enhancing our associate onboarding experience to support better turnover and retention, particularly within the 1st 90 days. During the Q1, we've been pleased with our continued improvement in key 3 leadership retention, which includes our Executive Director, Health and Wellness Director and Sales Director and in our associate turnover. As part of this, we are incredibly proud that our trailing 12 month Executive Director retention rate through the Q1 has reached nearly 70% retention.

Speaker 2

This is critical as we have found that when an executive director is in place at least 2 years, those communities have higher overall profitability. Given the significant progress we've made over the last 2 years to stabilize our overall workforce, in 2024, we are refreshing our hourly training to be more engaging and personalized for our associates, while ensuring that we continue to provide high quality care and maintain regulatory compliance. It's still early, but we are excited about this opportunity and the impact it will have for our associates' productivity and growth in their career opportunities. 3rd is our strategic priority to earn resident and family trust and satisfaction by providing valued, high quality care and personalized service. At Brookdale, we remain committed to continuous improvement and we believe feedback is a gift.

Speaker 2

Thanks to strong engagement for our residents and their families, including approximately 65,000 internal and third party satisfaction surveys over the past 12 months, we are able to gain meaningful insights. These insights enable us to appropriately address areas of opportunity within our communities and we've been pleased with the progress we've made to continually improve resident satisfaction. Most recently, our internal resident satisfaction ratings increased each month of the Q1. I believe this reflects the positive outcomes of our continued efforts in this critical area and speaks to our dedication to compassionate, high quality care and personalized service. While we believe our customer focus is strong, we feel a deep sense of pride when our industry leadership is recognized externally, whether that's when our individual communities are acknowledged as the best of or when one of our differentiated Brookdale programs receives a notable recognition.

Speaker 2

In just the last few weeks, we've been honored with 3 unique external distinctions. 1st, our ClearBridge Alzheimer's and dementia care training was recently certified by the Alzheimer's Association for its demonstrated commitment to providing evidence based training with a person centered focus. We are proud of our industry leading expertise in the care of those with Alzheimer's and other related dementias. Today Brookdale operates more than 9,000 memory care units that support residents and their families who are impacted by these diseases. The number of seniors who need these services is growing rapidly.

Speaker 2

By 2,030, the CDC expects 8,500,000 Americans will be living with Alzheimer's disease. We are confident in the effectiveness of our Alzheimer's and dementia care program to support those living with these chronic conditions and we are honored to have this certification of our ClearBridge training. 2nd, Brookdale was recognized once again with the most communities on U. S. News and World Report Best of Senior Living Listings.

Speaker 2

This year, more Brookdale communities were recognized as a Best of winner than ever in our history and we are proud to lead the industry in community recognition for the 3rd year in a row. I believe this is a testament to the trust our residents and their families place in us, the quality of the care we are providing and the unique Brookdale programs that we believe support improved resident outcomes. 3rd, as yet another recognition of our differentiated programs, argentum awarded Brookdale as a 2024 Best of the Best winner for our innovative Brookdale Health Plus program, noting that innovative programs like this show unparalleled passion and commitment to providing an optimal environment for the residents and families we serve. As I've shared before, Brookdale Health Plus delivers measurable positive outcomes and we believe that over the long term through programs like Health Plus, we will further improve the quality of life for our residents, increase the satisfaction of our customers and their loved ones, while also reducing costs to residents, their families and the overall healthcare system and delivering value to our shareholders. We are very proud of this argentum best of the best award as we strive to continue to differentiate ourselves through clinical excellence and an emphasis on value based care.

Speaker 2

In summary, we entered 2024 with a clear vision, an intense focus and a dedication to continued positive results. Already this year, we have delivered meaningful positive outcomes across our key strategic priorities. With the Q1 annualized, we have recovered 97% of our 2019 adjusted EBITDA. At the same time, we are keenly focused on the incredible opportunity ahead of us from recovering our pre pandemic occupancy and margins. Our consistent forward progress each quarter reinforces my confidence that the plans we are executing combined with industry supply and demand dynamics and Brookdale's key differentiators will drive significant growth for decades to come.

Speaker 2

We are excited to continue our positive momentum in the second quarter and throughout 2024. I'll now turn the call over to Dawn.

Speaker 3

Thank you, Cindy. Good morning, and thank you for being here today. Cindy shared highlights of our positive first quarter operational and financial progress. I'll provide additional color on our Q1 results, and then I'll speak to our Q2 guidance. Beginning with 1st quarter revenue.

Speaker 3

Residency revenue grew 4.3% over the prior year first quarter. At the top end of our previously provided Q1 guidance range, consolidated RevPAR grew 6.7% over the prior year Q1, which was attributable to 160 basis point increase in weighted average occupancy and a 4.4 percent RevPOR growth. Marking our 10th consecutive quarter of year over year occupancy growth, the first quarter's 160 basis point increase reflects a positive acceleration of our recent occupancy growth trends. We are also pleased to report that the sequential occupancy change from the Q4 of 2023 to the Q1 of 2024 was meaningfully better than normal pre pandemic seasonality for this period. Specific to Q1 RevPOR, as a reminder, while higher than historic norms, we implemented a lower average January 1st rate increase than in the prior year.

Speaker 3

We remain focused on ensuring appropriate pricing to match the services we deliver in our communities, while remaining affordable to our residents and appropriately addressing our costs. As reflected in our results, this year's January 1 increase effectively supported continued RevPOR growth, improved year over year financial move outs and strong flow through as evidenced by our margin growth. Specific to our same community portfolio, 1st quarter RevPAR increased 6.3% over the prior year, driven by 150 basis points of occupancy growth and a 4.3% increase in RevPOR. We are pleased with our continued top line progress, including 1st quarter occupancy that was better than normal seasonality, strong demand and year over year improvement in controllable attrition. Moving to 1st quarter expenses.

Speaker 3

Consolidated facility operating expense was $543,000,000 while same community facility operating expense, as shown on Page 8 of our financial supplement, was $528,000,000 Same community labor expense as a percent of revenue improved 150 basis points compared to the prior year Q1. This was a result of favorable flow through of top line growth given the fixed cost nature of our business, reductions in contract labor and overtime and the favorable impact of improved leadership retention and hourly associate turnover. We are very pleased to realize these favorable outcomes from our strategic priorities, particularly considering the year over year incremental expense increase from LEAP Day. Same community other facility operating expense as a percent of revenue was flat to the prior year. Driving the dollar expense increase over the prior year Q1 were a number of marginal factors, including the higher cost of property and casualty coverage, including higher premiums and higher retained risk technology enhancements, including upgraded Wi Fi within our independent living portfolio and an outsourcing of our data centers, as well as broad inflationary pressure and the impact of an extra day.

Speaker 3

Importantly, the data center outsourcing is neutral from a cash flow perspective. Our continued favorable same community revenue to expense spread drove 140 basis points of year over year adjusted operating margin expansion to 27.6 percent of revenue. As Cindy shared, this represents our highest reported adjusted margin rate since the initial impact of the pandemic, Reflecting our 10th consecutive quarter of meaningful year over year same community growth, 1st quarter adjusted operating income increased by 12% over the prior year Q1. Continued progress on the top line and ongoing appropriate expense management have supported these results as well as supporting our achievement of a meaningful milestone in our pandemic recovery. On a per available unit basis, our annualized Q1 same community operating income surpassed our 2019 same community operating income per available unit.

Speaker 3

Given the significant runway still available for occupancy growth, we believe this not only reflects a remarkable accomplishment, but also positions us well over the near and long term as occupancy continues to grow. I am very proud of our continued progress as we diligently work to return to pre pandemic segment operating margins, while continuing to ensure that we meet our residents' needs, provide high quality care and services and remain in compliance with applicable regulations. 1st quarter general and regulations. 1st quarter general and administrative expense was relatively flat to the prior year Q1, excluding prior year restructuring costs. Cash operating lease payments were $65,000,000 These financial results culminated in 1st quarter adjusted EBITDA of $98,000,000 which exceeded the top end of our guidance range approximately $3,000,000 This outperformance was due to favorability in labor expense driven predominantly by wage rate.

Speaker 3

Compared to the prior year Q1, adjusted EBITDA increased $9,000,000 or 10%. As we shared previously, when comparing Q1 adjusted EBITDA to the Q1 of 2023, there are several factors that presented a meaningful headwind to year over year growth results. First, the prior year Q1 included approximately $2,300,000 in government grant revenue. 2nd, as a result of the May 2023 change in lease classification, we had approximately $7,400,000 of lease payments that impacted adjusted EBITDA this year, but did not affect last year and did not impact cash rent payments. 3rd, our current year Q1 adjusted EBITDA results include approximately $2,000,000 of incremental expense from the January winter storms.

Speaker 3

And lastly, the current year Q1 included an extra day for leap year, which resulted in approximately $3,000,000 of incremental expense with only a minor impact to revenue. Considering the magnitude of these factors combined, we are very pleased with our year over year adjusted EBITDA growth results. Adjusted free cash flow was negative $26,000,000 for the quarter. As expected, our Q1 change in working capital was negative $22,000,000 and represented the largest impact when comparing Q1 adjusted free cash flow to the prior year Q1. As normal core seasonality, annual incentive compensation payments occurred during the Q1 and are reflected in our change in working capital results.

Speaker 3

Additionally, unique to this quarter was the impact of cash, long term incentive payments related to awards that were granted in lieu of equity in 2021 following satisfaction of certain performance conditions. Given Brookdale's strong 2023 performance and the timing of the unique approximately $4,000,000 long term incentive grant, the cash impact of our current period incentive compensation payments was larger than in recent prior years. 1st quarter non development capital expenditures were $51,000,000 We continue to anticipate approximately $180,000,000 of net non development capital expenditures in 2024. 1st quarter interest expense net was relatively flat to the Q4 of 2023. As of March 31, total liquidity was $355,000,000 compared to $341,000,000 at the end of the 2023 Q4.

Speaker 3

We are pleased with this liquidity position and that we have no mortgage debt maturities without extension options until September 2025. Turning to the Q2. In yesterday's press release, we guided to 2nd quarter RevPAR growth of 6.25% to 6.75% over the prior year and adjusted EBITDA in the range of $93,000,000 to $98,000,000 Contributing to our RevPAR expectations, we anticipate our 2nd quarter weighted average occupancy to increase sequentially from the Q1, representing favorable performance when compared to normal pre pandemic seasonality for this period. This favorable expectation reflects our strong Q1 move ins and the anticipation for continued positive recovery from the impact of the pandemic. Regarding RevPOR, we expect a step down sequentially from 1st quarter RevPOR to 2nd quarter RevPOR.

Speaker 3

A sequential step down between these two quarters is normal course and has varied historically in amount based upon a number of factors, including product mix and care rates, as newer residents generally move in with lower acuity and therefore have a lower care rate than existing residents. We are pleased that our top line expectations will support another quarter of meaningful year over year revenue growth, particularly considering we received more than $4,000,000 in state grant revenue in the Q2 of 2023. We expect to exit the Q2 with a capacity of 50,950 units or 1,000 fewer units than at the same time last year as a result of owned and leased dispositions over the 12 month period. We believe that with our continued expected occupancy recovery as we build upon our strong occupancy start to this year, our year over year RevPAR growth rate will further improve throughout the year. When considering our 2nd quarter adjusted EBITDA guidance, we believe that beyond our expected favorable occupancy growth compared to the Q1 and continued appropriate expense management, the cadence of our results will be largely in line as it relates to the seasonal sequential performance as shown on the last page of our investor presentation.

Speaker 3

In closing, we are pleased to have delivered another quarter of strong year over year growth. We are confident that our disciplined approach to achieving positive outcomes and sustainable growth, while maintaining a commitment to quality and excellence will yield favorable results in 2024 and for decades to come. I'll now turn the call back over

Speaker 2

to Cindy. I'd like to close by saying thank you. Thank you to our residents and their families for entrusting us with their care and allowing us the privilege to serve them. To our 36,000 associates for their dedication and commitment to enriching the lives of those we serve, to our shareholders for their continued support in advancing our mission. And lastly, a special thank you to Guy Sansone and Mark Bromley for their years of service to Brookdale's Board of Directors as they notified us that they will not be standing for reelection and will be retiring from our Board at our 2024 Annual Meeting.

Speaker 2

Guy and Mark have played an important role at Brookdale and we are grateful for their contributions. Operator, please open the line for questions.

Operator

Thank you. And our first question today is from the line of Ben Hendricks of RBC. Please go ahead. Your line is open.

Speaker 4

Great. Thank you very much and congratulations on the quarter. Just wanted to get some more details on the factors that give you confidence in outperforming the seasonal occupancy trends for the remainder of the year. Is that largely driven by the staff retention efforts and advances you've made there or are there other market dynamics? And then just related to that, clearly strong performance and controllable move outs this quarter.

Speaker 4

Is the overall move out rate kind of where it needs to be at this point or how much room to run do we have there? Thank you.

Speaker 5

Hi, Ben, and thanks so much for the question. This is Cindy. I'll start with the response to the controllable move out rates and then Dawn can jump in. I'm really proud of the progress that we made this quarter and quite honestly since our recovery began in March 2021, we would still like to see improvement in both controllable and non controllable move outs relative to pre pandemic. I think it makes sense to say that we are making progress and we're focused on improving resident satisfaction and that is one of the ways that we think that our results will improve.

Speaker 5

It's also important to note that this year's rate increase was more aggressive than historical norms, but less aggressive than last year. And I think that played a critical role in helping us with control from move outs. Now Don, if you want to address the rest of the question.

Speaker 3

Yes. Good morning, Ben. How are you today?

Speaker 5

Great. Thank you.

Speaker 3

Thinking about our over performance in the Q4 to Q1 where we had the 50 basis point decline in our occupancy. As Cindy mentioned in her prepared remarks, our move ins were 7.5% better than our pre pandemic move ins. So we were very happy with that, with the strong move ins. On a move out perspective, I think we saw less on the financial move outs compared to the prior year. And so we continue to see that supply and demand coupled with the fact that the rate was that rate increase was lower than the prior year.

Speaker 3

Additionally, Cindy talked about in her prepared remarks, our retention and turnover progress and we think that that is playing into that favorability and we would expect to continue that to continue throughout the year.

Speaker 4

Thank you very much.

Speaker 3

Thanks, Beth. Thank you.

Operator

Our next question today is from the line of Joanna Gajuk of Bank of America. Please go ahead. Your line is open.

Speaker 6

Thank you. Thank you. Good morning. Thanks for taking the questions. So I guess, staying on occupancy for a second.

Speaker 6

So you mentioned you expect this positive, I guess, experience from Q1 to continue in Q2. And you talk about you expect to devote sequentially because when I look at the historical data, 2018, 2019 actually occupancy was down quarter over quarter, I guess, because of the new supply pressure there. But last year, right, Q2 versus Q1 was up 20 basis points. So is that is this what you're referring to? Kind of is that the magnitude we should be thinking about in terms of the growth Q2 versus Q1 occupancy?

Speaker 7

I think Joanna, how you have

Speaker 3

to think about it is, we it would generally be similar in trend as prior year, maybe not similar in percent. If you think about what has happened Q2 into Q1 of 2022 into 2023, we're relatively flat coming because we were recovering from the pandemic. We're seeing that favorability, so not coming down from Q4 into Q1 of this year. We're making that turn, if you will, sooner. So that's evidenced by the April occupancy that we just published last night, where our average occupancy was consistent with March.

Speaker 3

And then you can see our ending occupancy was up 10 basis points over March. So we would expect to make that turn sooner. We're making that turn sooner and we would expect that you'll see that in our Q2 occupancy.

Speaker 6

Right. That makes sense. And to that end, when it comes to the occupancy, continue to surprise to the upside rate like improvement is happening at a faster rate in the 6th quarters. So I guess as it relates to the prior question, but can you give us your views of like the main drivers? I understand you obviously have been working hard on this, not just this last quarter, but for the last couple of years.

Speaker 6

But any specific examples you can point to in terms of what's happening? Obviously, the new supply not being there is helping, but any other industry level driver versus the company specific. And to that end, in your slides, right, you have this mention of targeting coming back to 2019. And I guess you added thinking about kind of returning to not really the 2019 level, right, because that was again impacted by the robust new construction happening across the industry, but really to the prior peak. So I guess it was 2014 or 2015.

Speaker 6

So any updated views in terms of how long it's going to take you to either get to the 84, call it, or higher occupancy?

Speaker 5

Add. First, our goal really is to get back to our 2019 profitability. And as I mentioned, we were incredibly proud of the fact that this quarter, if you annualize our Q1 results, we're back to 97% of pre pandemic. And if you look at our same community adjusted operating income on a per unit basis and you annualize the first quarter results were actually better than 2019. And so unlike many in the industry, we really focused on recovering the cash flow of our business.

Speaker 5

And so we focused very hard on what was the rate that we were charging for the services and what were the costs that went into making a resident experience differentiated from our competition. And I think that has boded well. What I can tell you that as a team, there really are those three priorities that are really going to drive our recovery, right? We have to make sure that everyone in the company is focused on getting every unit available in service at the best profitable rate as quickly as we can. That's going to be easier in some markets than others, but everybody is focused on that.

Speaker 5

And last year, we enhanced the Executive Director job description to make sure that they were focused on driving sales in addition to providing good quality care to our existing residents and focused on their satisfaction. The second thing that we've made just great progress on is retaining our associates. Now we know that when an Executive Director has been in place at least 2 years, that community has better profitability. And we also know that we've got stability in our leadership team that translates into stability of the community hourly associates. And the stability is important because our team builds relationships with the residents.

Speaker 5

In addition, when they have been in position a long time, they're more effective at serving the residents. And so that translates into higher resident satisfaction, which is our 3rd priority of providing residents, burning residents and family trust by providing valued high quality services. The reason that is important is when you have residents who are happy with the care that you're providing, they want their friends to live with them and they have a longer length of stay. So that helps you build occupancy in the communities. So what I can say is we've had a playbook that is working quite effectively.

Speaker 5

I think that we are going to continue to sort of drill down on the training that we did last year on the Brookdale Way. We're pleased with our progress, but we have a long way to go in terms of getting back to pre pandemic demonstrated that we can execute our plan successfully. And at the same time, there's still a lot of opportunity in front of us backed by strong supply and demand fundamentals. And you'll continue to see us roll out Brookdale Health Plus because we're just so far ahead of the industry in terms of our ability to participate in value based care and to really provide a differentiated experience on the clinical side for our residents.

Speaker 7

And Joanna, this is John. What

Speaker 3

I would point back to as well just adding on to what Cindy said is Slide 2425 in our investor presentation where we've laid out our pre pandemic operating margins. We're nearing, as Cindy had said in her prepared remarks, we are over our 2019 on a per unit basis operating margin, but you can see how close we are to those pre pandemic operating margins. And then just the runway that we have from an occupancy standpoint and how excited we are about that.

Speaker 6

Yes, exactly. That's what I was referring to. Thank you. And since Cindy, you mentioned Help Plus program, and it was on my list too, in terms of the roll up. So I don't remember, have you guys talked about like how many communities, I guess, currently have it in place?

Speaker 6

And I guess what are the plans terms of the rollout? Like how aggressive you are in terms of sort of planting those seeds across the portfolio? Thank you.

Speaker 5

Sure. Today Brookdale Health Plus is in close to 50 communities and our goal is to have it in 130 communities by year end. One of the things that we think about with regard to the rollout is we're scaling a clinical program that involves changing every single aspect of community operations. So we want to move quickly, but we also want to move carefully to make sure that we're able to appropriately source RN care managers who can help us with that, that we're able to train our people so that the Health Plus communities operate effectively. And we're excited about the fact that by year end we'll be at 130 communities.

Speaker 5

And again, I couldn't be more excited about fact that our industry trade association, Argentum, recognized Brookdale Health Plus as one of the best of the best programs. And that just is a testament to how far we are ahead of the industry in this area.

Speaker 6

Thank you so much. Thanks for taking the question. Thanks,

Operator

Joanna. And our next question today is from the line of Josh Raskin of Nephron Research. Please go ahead. Your line is open.

Speaker 8

Hi, thanks. Maybe just taking a step back, if you could speak about your development plans, I guess both sort of short or intermediate term and then the long term. And I'm specifically interested in how you're thinking about changing populations and state demographics and things like that. I'm curious also as we've seen a big ramp in home based healthcare services, are you seeing any impact from that on demand We

Speaker 3

currently don't have a lot of development

Speaker 5

plans at Brookdale. We currently don't have a lot of development plans at Brookdale. We're very focused on winning the recovery with our existing portfolio. As we think about what the right answer is, we are very focused on serving residents in their homes, which are our communities. And we think that Brookdale Health Plus and adding healthcare into our communities is the right answer.

Speaker 5

One of the things that you may or may not know is that we have physicians and nurse practitioners who are around in many of our communities. And so our residents are able to get health care services right at home. We're continuing to look to see what additional health care services could be provided by 3rd parties in our communities. I think you probably know that historically we've had home health and hospice within our communities. We are continuously focusing on the quality of the programs within our communities, whether that is quality dining and nutrition, whether that is our resident and social engagement, whether that's the home life setting without the burdens of homeownership, but most particularly health and wellness.

Speaker 5

And what you'll see over the longer term though is we will look to increase the density in the markets where we think there's growth and where we've got a strong presence.

Speaker 8

Yes, I'm sorry. I've spoken word development. I meant more about go ahead, sorry.

Speaker 3

I was going to say the last part

Speaker 5

on the home base. We have not seen an impact of home based services at this point in time. And the age of our residents over the last few years hasn't really changed in terms of the age that they're moving in at. In fact, what we've actually seen is a lower acuity resident is moving into Brookdale and that is even compared to pre pandemic.

Speaker 8

Got you. Got you. I was going to say I sort of misspoke, I shouldn't use the word development. I meant more around sort of like your development CapEx at the local level, like sort of developing more memory care. Is that more targeted?

Speaker 8

Or is there sort of a general thought on that? I know those numbers have been relatively low in recent years.

Speaker 5

We aren't currently doing much in terms of deals on capital in terms of changing the configuration of the community from assisted living to memory care. We're very pleased with the mix that we have. We're much higher assisted living and memory cares in the industry and lower in terms of SNF, that's 0.2% of our portfolio. So we're pretty pleased with the position of our portfolio and really looking forward to improving the execution and capturing the opportunities in front of us.

Speaker 8

Got you. And then you sort of touched on this Cindy, but I understand Brookdale Health Plus isn't an explicit upcharge to residents. It's more kind of built into the rents. But is there a thought of getting back into health services and actually charging for specific services? I know you sold the home base to you sold the JV to HCA, but just curious if there's an appetite to sort of get back into other value added services?

Speaker 5

It's a good question, Josh, and I'm very proud of the transaction that we had with HCA. I think we got a very good exit from that service line. I think we're more interested in this point of making sure that our residents have access to the services within our communities and less with the adding a new business line. If you look at just the investor presentation and the opportunity that's in front of us, there is so much opportunity from getting back to our pre pandemic and our historical high occupancy and margins, that's where we're focused. And I think that's the right answer for us today.

Speaker 8

Okay. Thanks.

Speaker 6

Thanks, Josh.

Operator

Thank you. With no further questions in the queue at this time, this will conclude the Brookdale Senior Living 1Q 2024 Earnings Call. Thank you to everyone who has joined us today. You may now disconnect your lines.

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