Brookdale Senior Living (NYSE: BKD) is positioning itself to capture future senior living demand in part through through the continued rollout of its new HealthPlus program.

The program, which Brentwood, Tennessee-based Brookdale launched in 2020 and also touted earlier this year, is now offered in dozens of communities and counting, according to CEO Cindy Baier. The program was recently shown to have lowered urgent care visits and hospitalizations among residents.

Looking ahead, it will become an increasingly large part of the company’s value proposition with new residents, particularly as the industry continues its long march toward adopting more value-based care cost arrangements, she said.

“It will attract someone who’s really focused on maximizing their healthspan, and I think that we are uniquely positioned to help seniors who are looking for that as they continue their life,” Baier said Tuesday during the company’s second-quarter earnings call with investors and analysts.

Same-store weighted average occupancy in the second quarter of this year was 76.5%, representing a gain over the 74.6 % average occupancy rate Brookdale recorded in the second quarter of 2022.

Thanks to occupancy gains and successful efforts trimming expenses, Brookdale was able to stem its net losses in the second quarter compared with the year prior, going from a net loss of $84.3 million in 2Q22 to a net loss of $4.5 million in 2Q23.

And looking ahead, the company’s management sees a “robust revenue opportunity” in the form of at least $295 million in incremental growth revenue.

“We are incredibly focused on execution of our recovery strategy that prioritizes profitable and sustainable, long term growth through operational excellence of our key strategic priorities,” Baier said during Tuesday’s second quarter earnings call. “I am pleased with our year-to-date performance and we believe we are on the right path to deliver against expectations successfully in the third quarter.”

As of market close on Tuesday, Brookdale’s stock price ended at $4.59, up $0.80 (21.1%) from the previous day’s trading. Brookdale operated 672 communities in 41 states as of June 30.

Demand, higher acuity and HealthPlus

At the end of the second quarter, Brookdale HealthPlus program was in nearly 50 communities.

Management noted on Tuesday’s call that a third-party service confirmed that HealthPlus had reduced hospitalizations and urgent visits compared to similar communities. AtBrookdale HealthPlus communities, urgent care visits were down 78% and hospitalizations were down 36%, according to Brookdale.

She also noted that assisted living and memory care services are “a mere 25%” of the calculated cost of hiring a home health aide.

Those outcomes “demonstrate the value that Brookdale care provides in lowering health care costs for our residents,” Baier said.

“​​Through programs like Brookdale Health Plus, with measurable positive resident health outcomes, we are confident that Brookdale will distinguish itself further as the leader within the senior housing industry,” she said. “At the same time, we have the opportunity to capitalize on the transition to value-based care by sharing in the value created from improved health outcomes.”

The company’s portfolio is in part composed of 53% assisted living and 17% memory care units, which the company’s management noted was higher than the typical industry split of 37% assisted living, 13% memory care.

“Our diverse portfolio of communities with a higher mix of assisted living and memory care set us apart from the

industry, which is skewed towards lower acuity products,” Baier said.

In the third quarter, Baier said Brookdale will continue to capitalize on demand in the near-term, as roughly 2% of all communities are within a 20-minute drive of another competing senior living community.

“The silver lining from the pandemic and the follow-on inflation is that it has become increasingly difficult for developers to achieve financial feasibility for communities that would be able to compete successfully at our price points,” Baier said.

With 34 million people by 2030 expected to be 75 and up, Baier touted strong demand fundamentals that will “drive significant growth” in senior living. The Centers for Disease Control and Prevention (CDC) expects nearly nine million Americans will live with Alzheimer’s disease, and the caregiver ratio would continue to drive a need to be proactive on staffing.

Brookdale’s average length of stay is just under two years, Baier said, with memory care reporting shortest stays, AL in the middle and IL reporting the longest stays.

Despite rising acuity during the pandemic, residents have “returned to pre-pandemic norms in the last couple of years,” a fact that should “bode well for longer length of stay” in the future.

While move-outs were elevated due to rental increases in the quarter, Baier said the time was right to factor in elevated expenses, noting that increased rates “definitely affected our occupancy and sequential growth.”

In an update regarding Brookdale’s decision to opt-out of its lease with LTC Properties (NYSE: LTC), Baier said that Brookdale reached a “mutually beneficial agreement” to retain 10 communities under a new lease agreement with the option to purchase the assets after the new lease term ends. LTC also offered to provide additional capital expenditures (CapEx) investments within the communities.

“We value our relationship with LTC and appreciate the hard work from both teams to achieve this positive outcome,” Baier said.

Current results and future expectations

Brookdale management noted that the company’s latest quarter would help fuel greater long-term results.

reported same-store senior housing revenue per available room (RevPAR) was up 0.1% from the first quarter and up 11.9% from the same period last year. Same-store revenue per occupied room (RevPOR) increased 0.5% from the first quarter and is up 8.9% since the same period last year.

Consolidated senior housing revenue grew 11% in the second quarter compared to the same period last year, driven by the 190-basis point increase in occupancy and 8.8% increase in revenue per occupied room (RevPOR).

Move-in activity has exceeded pandemic averages by 7.5% in the second quarter and that supported the company’s occupancy growth in the period. Second quarter consolidated facility operating expenses were $531 million in the second quarter.

Brookdale reported operating margin within its senior housing portfolio decreased slightly in the second quarter from 25.8% margin in 1Q23 and 25.6% last quarter, a decrease of 0.2%. But margins remain elevated from past quarters, like when the company reported an operating margin of 19.8% in the fourth quarter of last year.

Looking ahead, the company sees a path to significant value creation. Occupancy, if increased to 84.5%, would drive at least $295 million in incremental growth revenue, while achieving a historic-high occupancy of 89% would deliver at least $465 million in incremental revenue, according to the operator’s investor relations presentation.

“We are eager to embrace the opportunities of this new era and senior living,” Baier said. “While there’s often a temptation to seek rapid growth and immediate results, I believe that sustainable success is the outcome of careful planning, solid execution and measured steps.