Brookdale mulls restructuring options amid Medicare reductions
Brookdale Senior Living, one of the country’s most diverse long-term care companies, is considering several financial options to refit its operations in an era of Medicare reductions, executives announced today at the Stephens Fall Investment Conference in New York.
Some of the options being discussed include splitting the company into two parts and/or encouraging a REIT to buy them, said Brookdale’s co-president and CFO Mark Ohlendorf in a webcast presentation. “Most of the sensible world is converting to a REIT right now,” he said.
During 2006 and early 2007, the company experienced astounding growth and a net operating income (NOI) of nearly 12 percent, Ohlendorf said. But the economic downturn that began in 2007 combined with the Medicare cuts in 2011 and 2012 have reduced the company’s NOI to about 3 percent, he explained.
“Fifteen percent of our revenue is Medicare, so it has impacted our overall numbers and has clearly impacted our growth,” Ohlendorf said. “If you use the Medicare rates today, last year’s $2.10 is a $1.85.”
Reductions in home-care rates in 2011 and 2012 are further complicating the financial picture, although “it’s hard to imagine home-care rates being reduced by another six or seven percent again this year,” Ohlendorf said.
Meanwhile, Brookdale also is engaged in a search process for a new CEO to replace current CEO Bill Sheriff, who announced in July that he plans to retire at the end of the year.
Brookdale operates 67,000 LTC units across the country, 22,000 of which they own. The company provides the gamut of LTC services, including skilled nursing facilities, assisted living, CCRCs, home health care and outpatient physical therapy. Brookdale also is the country’s largest operator of Alzheimer’s centers.
The Brookdale conference webcast is archived on the Stephens website.
Pamela Tabar was editor-in-chief of I Advance Senior Care from 2013-2018. She has worked as a writer and editor for healthcare business media since 1998, including as News Editor of Healthcare Informatics. She has a master’s degree in journalism from Kent State University and a master’s degree in English from the University of York, England.
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