Brookdale CEO: We Reinvented Our Business Model, Are Primed for Sustained Pandemic

March 17 was the day everything changed for Brookdale Senior Living (NYSE: BKD).

In the months leading up to that day, President and CEO Cindy Baier had watched the novel coronavirus from afar as outbreaks spiked outside the U.S. She thought it might hit the provider like a severe flu season, causing days-long community lockdowns and isolation measures.

But by mid-March, her thinking had evolved.

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“We saw people starting to become afraid to come to work, [and] the needs of our residents increased at the same time the country shut down and began sheltering in place,” Baier told Senior Housing News. “It was at that point that it became clear to me that this was going to be something very different than anything that we had seen before.”

She recalled being at the office when all these changes in the world crystallized into a realization that Covid-19 would be lasting and serious, leading to the March 17 decision to withdraw the company’s financial guidance for 2020.

Since then, Brookdale has fought hard — and fast — to get ahead of the pandemic. The company reinvented its business model overnight, Baier said. Brookdale has baseline tested all of its residents and associates for Covid-19 with future testing initiatives ongoing at its 737 senior living communities across the country. Less than 1% of the company’s resident base tested positive for Covid-19 as of July 31.

But tackling a global pandemic as the nation’s largest senior living operator is not cheap. Through the second quarter of 2020, Brookdale estimated it had incurred $71 million in Covid-19 expenses, with about 60% going toward procurement of personal protective equipment (PPE) and medical supplies. At the same time, the company has reported $140 million in losses related to the pandemic, and its average occupancy rate hit 76.6% at the end of July.

Baier believes the federal government should provide additional support for private-pay senior living providers, and that the industry would do well to gird itself for more pandemic challenges ahead, as Brookdale is currently doing.

“Whether it ends sooner than we hope is not relevant,” Baier said. “We have to figure out how to be successful in a world that lives with Covid-19.”

‘Reinvented our business model overnight’

When the pandemic hit earlier this year, it changed almost everything about the senior living industry. Communities entered lockdown mode, necessitating sweeping operational changes and new investments in technology, labor, infection control and health care supplies, and even new perspectives on the fundamental value proposition of senior living for consumers. Brookdale was no exception, and the company enacted sweeping changes.

“We literally reinvented our business model overnight,” Baier said. “We are a dynamic, nimble, learning organization filled with servant leaders who have made incredible sacrifices for the benefit of our residents and patients.”

Like many other senior living providers, Brookdale began utilizing to-go and delivered meals along with hallway fitness activities to keep residents nourished and engaged. The company also facilitated new ways to keep residents connected to loved ones, such as through window visits, car parades or communication technology.

Brookdale has also put its infection control measures “on steroids” with help and guidance from state and local governments, Baier said. The company’s strategy includes ample screening for residents and staff, limitations on visitors and limited use of common areas and amenities. And in the first half of the year, Brookdale successfully tested more than 100,000 of its residents and associates for Covid-19 — a herculean but valuable effort, Baier said.

“The testing is helping our extensive efforts to identify individuals who are asymptomatic for Covid-19, and it helps contain it,” Baier said.

On the sales and marketing side, the provider worked to keep residents moving into its communities. That included posting informative and uplifting content to its social media channels to help engage residents and keep families up to speed. The posts ranged from photos of family members wishing a resident happy birthday, to articles about how grandparents and grandkids can stay connected during the pandemic.

The company in March also redesigned its entire sales process and moved to virtual tours to help its salespeople maintain leads even as communities went on lockdown. As of the end of July, 85% of Brookdale’s 737 communities were accepting new resident move-ins. The company’s total number of move-ins also improved each month during the second quarter of 2020, going from about 65% lower on a year-over-year basis in April to about 35% lower in June.

“We’ve had thousands of residents move into our communities during the pandemic, and we had to have a lot of those people move in without physically entering the community at any point in time [beforehand],” Baier said.

And at the same time, Brookdale leveraged its scale and procurement network to find sources of infection control supplies such as masks and gowns, which weren’t always available from its traditional suppliers.

“We had to screen hundreds of vendors to find enough to meet our requirements, and do more direct importing than we historically have,” Baier said.

All the while, Baier has worked from the company’s corporate office in Brentwood. She is there with about 30 other Brookdale employees, all socially distanced from one another.

“Everything is done by Zoom, so we don’t really see each other face to face,” Baier said.

And in the midst of the comprehensive operational changes, Brookdale also has taken several notable steps to improve its financial position, including the announcement this week that it has refinanced substantially all its near-term debt maturities.

Living with Covid-19

In the months ahead, Covid-19 will almost surely remain the biggest hurdle for the senior living industry. At the top of Baier’s current objectives is simply keeping the coronavirus out of the company’s communities while minimizing its spread in the fall and winter months.

Baier believes that Brookdale’s current state of infection control will help mitigate the impact of any upcoming seasonal flu, as Covid-19 shares many of the same vectors for infections. Testing will continue to play a large role in Brookdale’s operations. Baier is also heartened by a plan from the U.S. Dept. of Human Health and Services (HHS) to include private-pay assisted living providers in its allocation of Covid-19 antigen tests, though plans are still in the works for how the company will implement those tests.

“We’re obviously grateful for any support that we get to improve our infection control protocols,” Baier said, referring to the antigen tests. “The low-cost way to determine who’s potentially affected so that they can be isolated really does seem like a great thing.”

Private-pay assisted living providers also were recently allowed to apply for federal financial support, which would be 2% of gross 2019 revenue. While this is a positive development and Brookdale’s application to receive that funding is in process, Baier believes the federal government still has a larger role to play if the senior living industry will be successful in its efforts against Covid-19.

“If you look at what Brookdale has reported publicly, you can see that 2% of revenue just isn’t enough to cover the costs that we have incurred,” Baier said. “Now what we need to do is to get everyone in our industry to help ensure that our elected representatives better understand, so they can provide appropriate funding.”

Challenges aside, Baier thinks that Covid-19 is leading to some longer-term changes that could ultimately strengthen the industry. Prior to the pandemic, she was interested in forging closer partnerships with health systems, and she thinks Covid-19 strengthens the case for doing so.

“We learned a lot as an industry during Covid-19. Being able to see patients in their homes, in our communities, making sure that the patients are getting the right care when they need it, that is so important,” Baier said. “And I’m sure that, as a result of this very fast, very focused learning, we’re going to continue to see better, more productive relationships with the health care systems.”

Baier acknowledged that leading Brookdale through the last six months has taken a personal toll, in part because Covid-19 has been far from the only challenge facing the world and Brookdale.

“Certainly, senior living has been dramatically impacted by the combination of the coronavirus, the economic crisis, as well as all the social unrest that is gripping the country, and then add in hurricanes and wildfires, and you have a lot to be personally affected by,” she said.

However, she also is motivated by the importance of the work that Brookdale does in caring for older adults.

“You definitely feel the weight of the responsibility for the residents, the patients, our associates and our shareholders being heavy, but certainly once Covid hit, that is something where the weight has become exponentially greater just because of how vulnerable our population is,” she said.

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