Brookdale Senior Living Inc. BKD recently announced that its third-quarter 2024 weighted average occupancy grew 130 basis points (bps) from the year-ago level to 78.9%. The weighted average occupancy for the first and second quarters increased 160 bps year over year each.

While its August 2024 weighted average occupancy grew 130 bps year over year to a new high (78.9%) for the company since it started on the recovery path in March 2021, the same for September grew 30 bps sequentially and 100 bps from a year ago to 79.2%.

Greater than pre-pandemic average move-in volumes and lower move-outs are expected to have aided the metric. This positive trend is expected to persist, driven by the projected growth in the senior population.

What Does This Mean for BKD?

The company has witnessed 35 straight months of year-over-year increases in weighted average occupancy, which is contributing to higher resident fee revenues.

In the second quarter of 2024, resident fee revenues increased 4.2% year over year to $739.7 million, while RevPAR (revenue per available unit) and Adjusted EBITDA grew 6.4% and 20.2% year over year, respectively. However, increased expenses and declining interest income affected its second-quarter profits and offset the positives from higher occupancy. Its adjusted free cash flow was at a negative $5.5 million in that quarter.

Per BKD’s guidance, third-quarter 2024 RevPAR is expected to grow 6.25-6.75% from a year ago, and adjusted EBITDA is projected to be in the $90-$95 million range. The increases in RevPAR and occupancy will likely contribute positively to its results. Nevertheless, rising operating costs due to inflationary challenges in the senior living industry and higher estimated insurance expenses are likely to keep BKD’s margins under pressure.

Countering Rising Costs

A similar trend of increasing expense levels is observed within the healthcare sector due to multiple factors including staffing challenges (which are easing now), inflationary pressures on supplies, higher benefits, administrative expenses, and costs related to growth in occupancy level. To tackle this, they are increasingly adopting AI, automation, and analytics to enhance patient care, streamline workflows, cut costs, and optimize margins.

BKD, along with other healthcare companies, including Community Health Systems, Inc. CYH, HCA Healthcare, Inc. HCA and Tenet Healthcare Corporation THC, are partnering with tech firms to adopt new technologies to support clinical decision-making, automate administrative processes and enhance patient engagement.