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Edited Transcript of BKD.N earnings conference call or presentation 25-Feb-21 2:00pm GMT

·51 min read

Q4 2020 Brookdale Senior Living Inc Earnings Call BRENTWOOD Feb 26, 2021 (Thomson StreetEvents) -- Edited Transcript of Brookdale Senior Living Inc earnings conference call or presentation Thursday, February 25, 2021 at 2:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Kathy Ann MacDonald Brookdale Senior Living Inc. - SVP of IR * Lucinda M. Baier Brookdale Senior Living Inc. - President, CEO & Director * Steven E. Swain Brookdale Senior Living Inc. - Executive VP & CFO ================================================================================ Conference Call Participants ================================================================================ * Albert J. William Rice Crédit Suisse AG, Research Division - Research Analyst * Brian Gil Tanquilut Jefferies LLC, Research Division - Senior Equity/Stock Analyst * Frank George Morgan RBC Capital Markets, Research Division - MD of Healthcare Services Equity Research & Analyst * Joanna Sylvia Gajuk BofA Securities, Research Division - VP * Joshua Richard Raskin Nephron Research LLC - Research Analyst * Steven James Valiquette Barclays Bank PLC, Research Division - Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good morning, ladies and gentlemen. My name is Paul, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Brookdale Senior Living's fourth quarter earnings release call. (Operator Instructions) As a reminder, this conference will be recorded for replay purposes. I would now like to turn the call over to Ms. Kathy MacDonald of Investor Relations. -------------------------------------------------------------------------------- Kathy Ann MacDonald, Brookdale Senior Living Inc. - SVP of IR [2] -------------------------------------------------------------------------------- Thank you, and good morning, everyone. I'd like to welcome you to the fourth quarter 2020 earnings call for Brookdale Senior Living. Joining us today are Cindy Baier, our President and Chief Executive Officer; and Steve Swain, 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. Actual results and performance may differ materially from forward-looking statements. 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 the annual report on Form 10-K and quarterly reports on Form 10-Q. I direct you to the release for the full safe harbor statement. Also, please note that during this call, we will present our 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 brookdale.com/investor and was furnished on an 8-K yesterday. With that, I would like to turn the call over to Cindy. -------------------------------------------------------------------------------- Lucinda M. Baier, Brookdale Senior Living Inc. - President, CEO & Director [3] -------------------------------------------------------------------------------- Thank you, Kathy. Good morning to all of our shareholders, analysts and other participants. I am thrilled with yesterday's announcement that HCA Healthcare will purchase a majority stake of our home health and hospice business, which we call our health care services business, and we will retain a 20% interest. Our top priority is the health and well-being of our residents. Part of this commitment is to offer many services in our communities with a keen focus on resident and patient needs. As we pursued this business opportunity, it was extremely important to find the right strategic partner with the same dedication to care. I believe we found a great partner in HCA Healthcare. HCA Healthcare is a collaborative health care network dedicated to giving people a healthier tomorrow. Based in Nashville, the organization is comprised of more than 2,000 sites of care. Our new partnership is designed to deliver value for our shareholders and ensures continuity of quality care for our residents and patients while improving access to additional health care services. In addition, the agreement transitions our healthcare services associates to a company that is a strong cultural fit with Brookdale. As a leading health care company looking to expand their first-class services, we believe HCA Healthcare has the ability to accelerate the growth of the home health and hospice business, and we will look to share in this growth through our retained minority interest. In addition, we believe that this relationship will create opportunities to improve the health care service offerings within our communities to enhance our residents' experience and health outcomes. The depth and breadth of our 2 companies provides an incredibly strong foundation for growth. I look forward to working with Sam Hazen, CEO of HCA Healthcare, and his team on a smooth transition and developing a strong relationship for the long-term success of the home health and hospice business. Turning to our fourth quarter. On our last quarterly earnings call, I spoke about our optimism regarding the near-term availability of vaccines to accelerate recovery from the COVID-19 pandemic. Getting as many residents and associates fully vaccinated as quickly as possible remains an urgent priority for us, and we are pleased to share that we have made excellent progress. I am grateful for our dedicated teams who work around the clock and through the holidays to do everything possible to successfully launch this endeavor. We have a great start to the year. Every single one of our communities completed their first COVID-19 vaccine clinic. And recently, over 600 of our communities have completed their second vaccine clinic. We accomplished this so quickly by pursuing all sources of vaccines, leveraging our nationwide relationship with CVS Health, and working with federal and state officials as well as local departments of health. I'm also thrilled that approximately 90% of residents received their first shot in our vaccine clinics. Led by our clinical leadership and our emergency response center, I believe our community associates have created an incredibly strong culture of vaccine acceptance. The team's efforts include proactively monitoring current clinical data, strategic planning for the clinics, frequent communication at all levels of the organization as well as significant efforts to provide education, tools and resources for associates, residents and families. Our associates have been compassionate in providing information to residents and their families to make them aware of the science behind the vaccine. Addressing their questions, encouraging them to discuss the vaccine with their physician and providing reassurance about our vaccine clinic plans. Our successful efforts to secure vaccines for our residents and associates and to get them vaccinated is just the latest example of how we are demonstrating strong, passionate, clinical and servant leadership during the pandemic. With an early and strong resident vaccination rate, Brookdale should be able to improve occupancy through messaging our good news to increase move-ins. Throughout the pandemic, we have taken swift and robust actions to strengthen our operations and financial position. Let me highlight a few, starting with quality, care and safety. In January 2020, we began our preparation. We united to help protect our residents, patients and associates as much as possible. Our goal remains to continue improving our infection prevention, infection control and treatment protocols, and we are proud of all that we have accomplished thus far. Brookdale has demonstrated industry leadership. We shared our knowledge of best practices with peers and the public and provided downloadable toolkits to allow others to leverage our ideas and resources so that we could all help protect as many people as possible. Our leadership was acknowledged by Facebook by being recognized as an exemplary leader of social media for COVID-19 response. To prevail over this unique virus, we needed to innovate quickly. Examples include our decision to purchase and deploy pulse oximeters to help with early detection of respiratory distress, providing an antimicrobial barrier lotion for memory care residents and installing air purification technology, to name a few. Now let's turn to testing. We proactively initiated baseline testing at every 1 of our Brookdale communities, providing our residents, families and associates with the most up-to-date information regarding the status of COVID-19 at our communities and giving the best chance of an effective response. To date, we have performed approximately 320,000 tests, which is a monumental undertaking, and we believe is significantly higher than others in the industry. The final area to highlight is our leadership's 2020 focus on helping seniors live their best lives. The well-being of our residents requires a balance between both their physical and emotional health. We provided many new experiences for residents and their families. We also developed welcome plans to ensure move-in processes were made easier while adhering to federal, state and our own safety guidelines. Even with the pandemic, during 2020, we welcomed over 15,000 new residents. I am extremely grateful for the dedication of my team and their accomplishments. Moreover, I am especially proud to share what external experts are saying about Brookdale. J.D. Power and Associates recently announced that Brookdale ranked highest in customer satisfaction for assisted living memory care communities. And most importantly for us, our 2020 resident and family survey received nearly 10,000 responses. Through this direct feedback, we learned our customers were overwhelmingly satisfied with how we have communicated during the pandemic and that a significant majority of respondents agreed with their specific community response. We are a business of people taking care of people, so we will continue to ask for feedback from our residents and families. Turning to vaccines. We were and continue to be a leader in advocating for senior housing residents and staff to be part of the first priority for the COVID-19 vaccination. During 2020, we began the efforts with advocacy to ensure that assisted living residents were prioritized to receive the vaccine at the federal level. Ahead of vaccine approval, we started educating our residents, associates and families of the importance and benefits of receiving a vaccine. We worked with CVS Health to get our vaccine clinic scheduled as quickly as possible. We did the heavy lifting to ensure that the administrative effort necessary to complete the clinics was accelerated. As 2020 drew to a close, it became clear that the federal prioritization wasn't enough to get our clinic scheduled, and we began aggressive advocacy efforts at the state level. This intense focus on the health and safety of our residents and associates has positioned us well for 2021. There was so much excitement and anticipation throughout our company with the reality of our first vaccine clinics on December 18. Since then, with our unwavering commitment to be the best, we have hosted vaccine clinics at a rapid pace. Our team stepped in and helped protect our residents as quickly as possible so that we can emerge from this phase of the COVID-19 pandemic and focus on winning. As I mentioned, we have a strong relationship with CVS Health, which is our annual flu shot clinics partner. We nimbly navigated the many, many logistical steps necessary to host vaccination clinics and to take advantage of every possibility to accelerate our clinics. For example, our residents cheered when we were successful in organizing a vaccination clinic in less than 24 hours. I am so proud that we uploaded our resident and associate rosters within 4 hours of being notified of a vacancy in a schedule. Our months of planning allowed one of our communities to qualify to take that newly opened clinic slot. We were prepared to do whatever it took to have our residents prioritized. We received external feedback that we were prepared, hit the ground running and worked well with the vaccine team. As the largest senior living company in the U.S., we have the ability to have a significant positive impact on helping a very large population of seniors. Over 85,000 COVID-19 vaccine shot has been administered at our communities. While the vaccine is a very important step forward, we are reinforcing the absolute need to continue to be diligent, use PPE appropriately and practice socially distanced interactions. We continue to invest in and implement innovation and technology in our communities to enhance our already strong infection control protocols. Recently, we added electrostatic sprayers for more efficient disinfection in every community. We are piloting additional technology, including ionization air purification. As I mentioned earlier, our top priorities continue to be the safety and well-being of our residents, patients and associates. During the pandemic, our efforts have been woven throughout every fiber of our work. These efforts have become as natural to us as our cornerstones of passion, courage, partnership and trust. With the support of the corporate teams, the local leaders provide the critical foundation for their community's success. This is why I am pleased that executive directors and health and wellness directors' retention continues to be over 70%. Considering the length and depth of this pandemic and the massive physical, intellectual and emotional demand it has placed on our leaders, this retention is truly extraordinary. I will always be grateful for the incredible efforts our leaders displayed to help protect the precious seniors who we serve and to help protect each other. We are grateful for each of our Brookdale everyday heroes. And the special acts of kindness they provide our residents countless times a day, especially during the holidays. To provide extra assistance to our employees during these difficult times, we bolstered our associate compassion programs. Every executive leadership team member and numerous other associates donated to the program, resulting in approximately $1.8 million from paid time off donations in 2020, along with Board members' contributions. This is very important because we build our business, one relationship at a time. And the only way to do that is to have great people. I am personally very grateful that my contribution over the past year helps support a large number of our associates with COVID-19 wage losses. As we look to the bright future ahead of us, we need to ensure our associates have the right skills to help Brookdale win. That is why I'm pleased that in 2020, we continue to focus on our associates' development. We enhanced training, created development programs and recently, Training Magazine recognized us in the 2021 Training Top 100. Before I turn the call over to Steve, let me share a few financial highlights for the fourth quarter. Most states had a resurgence in COVID-19 cases, especially after the November and December holidays. We persevered with our strong infection control protocols and use of testing. While the resurgence affected senior living occupancy, we continue to make progress. Sequentially, we reduced the rate of the occupancy decline and over 3,600 new residents moved in during the quarter for over 15,000 during 2020, an extraordinary achievement during the pandemic. That is worth repeating. During the third and most severe peak of COVID-19 cases throughout the United States and around the holidays, over 3,600 new residents and their families put their trust in Brookdale and moved into our senior living communities. For our Health Care Services business in the fourth quarter, our revenue trend turned positive with 2% growth on a sequential basis, excluding federal grants. Helping to ensure the safety of our residents, patients and associates was and is our top priority. Accordingly, when an associate had a COVID-19 exposure, they couldn't deliver services to our patients. This impacted revenue. Let me turn now to liquidity. Our company's financial position strengthened even further in the fourth quarter with $575 million of available liquidity at year-end. The most significant financial benefit in the fourth quarter was the recognition of $78 million of government grants, with the vast majority from Phase 2 of the provider release fund. The phase or assisted living communities started to receive grants. Should more government funding become available, we will continue to apply for additional grants. This support is critically important to our industry. We have taken a leadership role in federal and state level advocacy since the very beginning. We educated numerous government officials about the critical role that private pay senior living industry plays in the health care continuum. We are grateful that once they understood, we receive support to offset a portion of the expenses that we incurred to help protect our residents against COVID-19. I am pleased that the new administration called for the protection of vulnerable populations in congregate setting. We anticipate that HHS will make additional COVID-19 funding available. In addition to the fourth quarter grants, we saw the first full quarterly net benefit from the Ventas negotiated transaction through permanent cash rent expense reduction, which will be $500 million of savings over 5.5 years. As we start the recovery phase, we are focused on winning in the near term and ensuring that we have a strong foundation for long-term success. We are continuing to improve our winning formula to increase occupancy by differentiating Brookdale's best-in-class services that consumers value most. Here's our strategy to get back on track as we put the pandemic behind us. First, we are focusing on health plus care. We will extend our successful and game-changing vaccine strategy. Our accelerated schedule of COVID-19 vaccine clinics offers another level of protection for our residents, should health increase social interaction for residents and enables us to welcome thousands of new residents every quarter. We know that many health care professionals believe that the vaccine is critical for making referrals. We have enhanced our outreach program to speak with health care providers about our vaccine progress to gain more referrals. This health plus care action plan makes our communities more attractive for prospects to move in. Second, we are sharpening our business edge through sales transformation to become more nimble. By retooling our sales function, our associates have the right skills, processes and tools to respond to local market conditions. We are enabling them to make the best decision at a local market level to accelerate move-ins while growing REVPAR. We are strengthening our local referral and aggregator relations to rapidly and intentionally connect with prospects and their families, digitally and in person. We are sharpening our analytical focus to identify opportunities and to evaluate success. These plans will provide a wider and deeper reach in the local communities to drive higher occupancy. Third, we are better capitalizing on our leadership position for residents and prospects with higher acuity needs. We will leverage our clinical and programming expertise to expand our services to deliver better health outcomes and higher social engagement for more residents. These 3 pillars of growth are built on a strong foundation of servant leadership, meaningful strategies to attract, develop, engage and retain the best people and financial scale. Combined, this sets us up to thrive. I'll now turn the call over to Steve. -------------------------------------------------------------------------------- Steven E. Swain, Brookdale Senior Living Inc. - Executive VP & CFO [4] -------------------------------------------------------------------------------- Thanks. To build on Cindy's comments regarding our liquidity position. In 2020, there were 3 significant areas where we strengthened our financial position. Debt refinancing, real estate transactions and our successful efforts in advocating for government relief. And the newly announced agreement with HCA Healthcare, when completed, will further strengthen our liquidity position. I'll speak more about this exciting news a little later. Let me start with the 2020 financing transaction highlights. In March, we refinanced the majority of 2020 maturities. And by September, we had refinanced the remaining 2020 and substantially, all of the 2021 maturities. It's worth noting that new 10-year mortgage debt is nonrecourse and at considerably better interest rates. In December, we executed a new revolving credit agreement. At year-end, this revolver funded $40 million of letters of credit and added $22 million of remaining capacity. As of today, no 2021 maturities remain. The second area in which we improved our financial position came from the successful results of negotiating with our REIT and other partners. In January 2020, we exited substantially all of our unconsolidated ventures with Healthpeak and received a $100 million management termination fee. By mid-2020, we completed the most significant lease restructuring in our company's history. The transaction with Ventas permanently cut our cash rent expense by $500 million. We will see this benefit throughout the next 5 years. With LTC, we negotiated lease flexibility, including multiple renewal options. In the fourth quarter, we continued to reduce our managed portfolio. We recognized approximately $5 million of management fee termination revenue associated with the transition of properties, which we expect to be complete in the first quarter of 2021. Overall, we will realize over $1 billion of future lease savings, primarily related to these transactions. Third, the receipt of government grants for senior living operators is, thanks, in part to Brookdale and others in our industry, advocating at both the federal and state levels. Brookdale's finance team invested significant time to track the details and submit all the necessary government filings. For 2020, we received and recognized approximately $120 million of COVID related government grants and other relief that do not need to be repaid. We are grateful for government grants to our vital industry, which helped pay for the PPE we needed and the many other steps that we took to try to keep team members and residents safe, and we anticipate HHS will make additional funding available. Turning to operations. I'll start with senior housing and will focus my senior housing commentary on same community results. In the fourth quarter, we started publicly sharing occupancy each month to provide timely visibility as the pandemic progresses. In the fourth quarter 2020, senior housing revenue was 11% lower compared to the fourth quarter 2019 and 3% lower on a sequential basis, driven by occupancy. We estimate the impact of COVID was nearly $94 million of lost revenue for the quarter for the same community portfolio. Detailing the revenue components. Our sequential occupancy decline moderated in the fourth quarter. This is a remarkable achievement considering the height of the nationwide resurgence in COVID cases and is a tribute to our amazing community teams who remained diligent and focused on what they could control while continuing to safely welcome new residents. In the fourth quarter, move-ins stabilized compared to the prior year on a percentage basis and were expressly better than the third quarter on a year-over-year comparison. In December, we had more move-ins than November. This positive trend has continued into the New Year, with January bringing in more move-ins than December. On average, move-in volume at communities with no or few restrictions fared 39% better. Rate or RevPOR for the fourth quarter was 3.9% higher on a year-over-year basis and held steady on a sequential basis. With 2,500 senior housing operators, the fragmented market remains very dynamic. Better market rates in the fourth quarter offset strategic and select local market responses. As COVID cases resurged across many states, our COVID-related expenses increased, resulting in $26 million of same community expense in the fourth quarter. Excluding COVID expenses, the sequential OpEx increase was mainly labor related. Due to the difficult operating environment, we used more contract labor and overtime. The fourth quarter same community operating margin of 27.8% improved sequentially, thanks to the benefit of government brands, yet remained below the prior year quarter due to occupancy pressure. Moving to the Health Care Services segment. While revenue was lower compared to the fourth quarter 2019, on a sequential basis, revenue grew 2%. With our stringent protocols in place to try to keep patients safe, some associates were required to self-quarantine, which, while clearly the right thing to do, we believe, had translated into lost opportunity for higher growth in the quarter. Sequentially, hospice revenue delivered 11% growth and full year revenue was within 1% of 2019. In addition to the good news on the Health Care Services revenue growth, the team employed strong cost controls and delivered 2% lower expense on a sequential basis and 8% on a full year basis. We continue to see the benefits of structural changes made in early 2020, along with our efforts to scale operations throughout the year to better match expenses to revenue. Turning to G&A. Early in 2020 with the unconsolidated venture community sales to Healthpeak, we took actions to scale our workforce and align infrastructure to go forward business needs. In 2020, we delivered annualized G&A savings of nearly $15 million, prior to normal cost inflation. For cash operating lease payments, this is the first quarter you can clearly see the full quarterly benefit of the Ventas transaction and all the other actions taken during the year. Cash operating lease payments for the fourth quarter were more than 30% lower compared to the prior year quarter. The fourth quarter government relief helped to mitigate a portion of our full year COVID costs. The fourth quarter adjusted EBITDA of $99 million was nearly the same as the prior year quarter. Adjusted free cash flow was nearly $20 million better in the fourth quarter compared to the prior year period. The key drivers were nondevelopment CapEx, which was $21 million lower than the prior year quarter. In 2020, we delayed or canceled many elective projects, so that only essential workers were present in the community as part of our efforts to help protect residents and associates. And the smaller year-over-year working capital benefit was offset by $10 million of lower interest expense, reflecting lower interest rates, along with lower financing lease costs related to the Healthpeak transaction completed in January 2020. Turning to liquidity. As of December 31, total liquidity was $575 million, a nearly $85 million improvement from September 30. The benefit was primarily from government funding and a new credit line revolver. Now let me share what we're seeing for the first quarter of 2021 and some high-level full year reminders. As mentioned earlier, our sequential occupancy decline moderated in the fourth quarter. With the nationwide COVID case resurgence in the public in late 2020, we continue to feel the impact, though there are some encouraging signs. In January, senior housing month-over-month occupancy softened. However, we saw sequential move-ins improve at month end. As the quarter progresses, we expect the occupancy decline can moderate, helped by the positive impact of our accelerated COVID vaccine clinics. As a reminder, occupancy historically turns positive late in the second quarter. And we typically see positive sequential growth in the third quarter. Given what we know now, we would expect this pattern to recur in 2021. In January, our annual price increase took effect, and we expect it will generally help mitigate labor rate increases. As mentioned earlier, we will continue to respond appropriately to competition in local markets. We anticipate HHS will make additional funding available to help mitigate the second half 2020 COVID impact. We will provide updates as they become available from the government. Continued funding is important to offset the COVID-related costs that we expect to continue incurring in 2021. For G&A, as the country's recovery progresses throughout the year, we expect more travel and annual compensation-related increases for our associates. With the majority of our REIT restructuring and debt refinancing completed, the fourth quarter 2020 results will be a good quarterly run rate for 2021 for cash operating lease payments and interest expense. We expect nondevelopment CapEx to be approximately $140 million in 2021 with some higher investments offset by increased lessor reimbursements. Lastly, 2 working capital reminders that are subject to change based on the timing of the HCA Healthcare transaction closing. Under the accelerated and advanced payment program, in 2020, we received the benefit of accelerated Medicare payments. Currently, half the repayment or approximately $45 million is due in 2021 and the balance in 2022. In 2021, we expect this to be repaid across the second, third and fourth quarters. Under the Cares Act, we elected to defer payment of the employer portion of the social security payroll tax in 2020. Currently, half of the deferred amount or approximately $36 million is due in the fourth quarter of 2021 and the balance at the end of 2022. For Health Care Services, we will continue reporting these results as a segment until the transaction closes, which we expect to occur late in the second quarter or early in the third quarter 2021, subject to regulatory approvals. The implied transaction value is $500 million. Upon close, we will retain a 20% equity interest in the venture with the implied valuation of $100 million. Accelerated and advanced payment program and payroll tax deferral program balances related to the Health Care Services segment, and not yet repaid will be deducted. Today, these amounts are approximately $85 million, and transaction-related adjustments and expenses will be applied. As a result, we expect our net upfront cash proceeds will be approximately $300 million. We plan to update you on the use of proceeds as we make progress on winning the recovery. As Cindy mentioned, we are excited about the future venture with HCA, with $575 million of liquidity at the end of December, plus the future HCA transaction proceeds, we will continue to focus on strengthening our liquidity position and plan to remain judicious with investments. I will now turn the call back over to Cindy. -------------------------------------------------------------------------------- Lucinda M. Baier, Brookdale Senior Living Inc. - President, CEO & Director [5] -------------------------------------------------------------------------------- 2020 was an unprecedented year with a once-in-a-century pandemic. I am incredibly proud of the outstanding efforts from all of our associates and the resilience shown by our beloved residents. We've listened to the feedback we have received from health experts, from industry peers, and from our residents and their families and implemented protocols that made us better and help keep our residents and associates health and well-being our priority. In closing, let me reiterate our optimism about this agreement to sell the majority of our home health and hospice business to HCA Healthcare and our belief in the long-term opportunity for Brookdale. With large demographic growth in the next few years, we believe our investment thesis is stronger than ever. This concludes our prepared remarks. Operator, please open the line for questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question is from Josh Raskin with Nephron. -------------------------------------------------------------------------------- Joshua Richard Raskin, Nephron Research LLC - Research Analyst [2] -------------------------------------------------------------------------------- So if I think about the $120 million of Cares Act funding, but except the amounts that don't have to be paid back. That really is -- I mean that pales in comparison to, I think you talked about $280 million of lost revenue and $125 million or so of additional COVID costs. And so if you think about, okay, take out the 2 COVID impacts revenue and cost, take out the government funding. EBITDA would have been something crazy, $300 million higher, right? And so what I'm really trying to figure out is we reported EBITDA number of $389 million this year. How do we think about that as a run rate for the company? I know it's difficult to give guidance, but just trying to figure out what you think of your sort of baseline when and if things get back to normal, even sort of a new normal? -------------------------------------------------------------------------------- Lucinda M. Baier, Brookdale Senior Living Inc. - President, CEO & Director [3] -------------------------------------------------------------------------------- Josh, that's a great question. And let me just provide some context about the Cares funding, and then Steve will jump in and answer your question. I think it's really important to note that our Cares funding relates solely to our Q1 and Q2 expenses and revenue loss, and we are hopeful that the HHS will open the provider funds to allow us to get reimbursement or partial reimbursement for the very significant expenses that we incurred in Q3 and Q4 to help protect our residents as well as the revenue loss. Now Steve, can you take a minute and answer the rest of the question? -------------------------------------------------------------------------------- Steven E. Swain, Brookdale Senior Living Inc. - Executive VP & CFO [4] -------------------------------------------------------------------------------- Sure, Josh. You're right. Until we really see virus-related metrics moderate to a level that really allows for reliable forecasting. Instead of guidance, we'll continue to disclose occupancy each month, and we'll discuss business trends on a quarterly basis. For the business trends in the first quarter, you need to know rate occupancy and COVID expense. So first is rate. In January, the annual price increase took effect. And the sequential change in RevPOR from fourth quarter to first quarter will be about the same as we saw last year. Second is occupancy. So as the first quarter progresses, we expect occupancy, that decline that we saw in January to moderate, certainly was -- it's going to be helped by the positive impact of the accelerated vaccine clinics. And as I already mentioned, sequentially, move-ins improved from November to December and again, from December to January. Today, we have 97% of our communities open. And of course, we'll continue sharing occupancy each month. And the third piece is COVID expense. Our top priority is the health and wellbeing of our residents, patients and associates. We saw COVID cases peak in January, and they are dropping quickly, which will help our COVID expenses in the first quarter. So we expect first quarter COVID expenses to decline slightly from Q4. And with the vaccine, we expect a sizable reduction in Q2 and further reductions in the second half. -------------------------------------------------------------------------------- Joshua Richard Raskin, Nephron Research LLC - Research Analyst [5] -------------------------------------------------------------------------------- So I guess my question is really more just taking the totality, right? And I think Cindy's comments about the Cares Act funding, the $120 million, really only representative of the impact in the first half of the year plus expenses and revenues loss. So theoretically, you'll get sort of even more money back. And what I'm really, again, trying to say is if you think about $281 million of lost revenue and $126 million of additional cost, so sort of $400 million-plus of EBITDA impact. How do we think about that going forward? I mean it would be -- it really sort of extraordinary, beyond impressive to think about the revenue base that you guys are running now. Producing an EBITDA level that's something close to $750 million or $800 million, right? So as margins get north. So what are the moving pieces, right, like I guess, I'm just trying to figure out are you -- should we be expecting a lower occupancy rate than you've seen historically when all is set and done? Do you think there was a rate impact here? I would assume the COVID costs kind of go away over time. -------------------------------------------------------------------------------- Lucinda M. Baier, Brookdale Senior Living Inc. - President, CEO & Director [6] -------------------------------------------------------------------------------- Yes. Let me provide a few high-level comments and then Steve can jump in. So clearly, occupancy was a significant issue in 2020, and it will take a while to rebuild the census. So we believe that the vaccine will help us accelerate the recovery because we know that health care professionals that are a significant referral source are looking to see the vaccine to be more comfortable in referring. We know that prospects and influencers are really looking at those vaccine numbers. So the question really becomes is how quickly can we rebuild our occupancy. So we're focused on the vaccination clinics to accelerate that. We're focused on sales transformation to make sure that we capture more than our fair share of move-ins. And we're focused on higher acuity, which will help us on the rate perspective. We certainly lead in our clinical programs and our programming. And so those things will help us accelerate out of this and win the recovery. We will need to see what the macro virus conditions are and sort of how comfortable people are with returning. But we are certainly focused on rebuilding our occupancy as quickly as we possibly can. -------------------------------------------------------------------------------- Joshua Richard Raskin, Nephron Research LLC - Research Analyst [7] -------------------------------------------------------------------------------- Okay. Then if I could just sneak in 1 last one. Just on vaccination rates. Do you have a sense of how your vaccination rates compared to other senior housing operators? Is that something your sales team can work with? -------------------------------------------------------------------------------- Lucinda M. Baier, Brookdale Senior Living Inc. - President, CEO & Director [8] -------------------------------------------------------------------------------- I think we're doing an amazing job. So the points of pride for me are that in the first months of vaccine availability, we execute our vaccine clinics 2.5x faster than the entire industry. So we have more residents vaccinated than anyone else. Clearly, as I announced in the call today, 100% of our communities have had their first vaccine clinic and 600-plus communities have had their second vaccine clinic. So again, we're well ahead of the industry with regard to our vaccination rates. We've had a wonderful culture of vaccine acceptance. Approximately 90% of our residents are vaccinated by the first shot, at least, and quickly getting those second shots in their arms. And we've seen approximately 50% of our associates being vaccinated, which is well above the numbers that you've seen in the press. So we believe that we are a leader in this area, and we continue to press hard on this important initiative. -------------------------------------------------------------------------------- Operator [9] -------------------------------------------------------------------------------- Our next question is from the line of Steven Valiquette with Barclays. -------------------------------------------------------------------------------- Steven James Valiquette, Barclays Bank PLC, Research Division - Research Analyst [10] -------------------------------------------------------------------------------- Just around the sale of the Health Care Services business. And I guess I'm curious to maybe drill down a little bit deeper on the normalized profitability. If we look back before 2020 in COVID impact, this segment saw NOI margins decreased around the mid-teens, about 5 years ago to around 5% in 2019. 2020, obviously, is somewhat of a throwaway year for analytical purposes. But if you think about Brookdale still having 20% ownership going forward, are you able to provide a little more color or thoughts on what you think will be the normalized margins in these operations once they're in the hands of HCA? And also since you're going to be reporting this segment for a few more quarters before the transaction closes. Just curious if there's any sense for 2021, with the segment results maybe look similar to 2019, just as sort of some goalpost to think about normalized profitability before HCA enhances the operations in future years? -------------------------------------------------------------------------------- Lucinda M. Baier, Brookdale Senior Living Inc. - President, CEO & Director [11] -------------------------------------------------------------------------------- Sure. Steve, I'll take the first part of the question and leave the second question to Steve. So first, when we complete the transaction, our expectation is that our minority interest in Health Care Services will be reported as an equity investment. And so it will come through equity accounting as opposed to us reporting the revenue expense. So you won't directly see the margins on our P&L. What we are most excited about is HCA has 32 million patient encounters. And a lot of those patients absolutely need home health and hospice services. So we believe that the growth trajectory of BHS after the sale is going to be incredibly steep, and we are so excited about that, which is why we are retaining the interest. Now we have always thought that BHS will return to more traditional operating margins. As you know, our 2019 margins were impacted by the revenue cycle issues that we have as well as 2020 being affected by COVID-19. So we always expected that the business would get back to normal profitability. And the quality improvements that we saw in 2020 are a key part of that recovery. Steve, if you could just spend a minute and just give a little bit more color on sort of how you're thinking about 2020, that would be great. -------------------------------------------------------------------------------- Steven E. Swain, Brookdale Senior Living Inc. - Executive VP & CFO [12] -------------------------------------------------------------------------------- Sure. Thanks for the question. The -- it seemed like it has improved. If you look at the NOI on the absolute numbers throughout 2020, it has been on a steady improvement, first quarter through fourth quarter. And we expect about that same improvements, on average throughout 2021. The volume, if you will, was partially impacted by occupancy, and as occupancy in senior housing stabilizes and grows, we expect a tailwind there. And as I already mentioned, some of the COVID peak impacts around the country also impacted HCS in the fourth quarter. -------------------------------------------------------------------------------- Steven James Valiquette, Barclays Bank PLC, Research Division - Research Analyst [13] -------------------------------------------------------------------------------- Okay. So if we strip out the stimulus payments and look at the kind of organic sequential improvement quarterly, I think that's a good trajectory performance in '21. -------------------------------------------------------------------------------- Steven E. Swain, Brookdale Senior Living Inc. - Executive VP & CFO [14] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Operator [15] -------------------------------------------------------------------------------- Our next question is from the line of Frank Morgan with RBC Capital Markets. -------------------------------------------------------------------------------- Frank George Morgan, RBC Capital Markets, Research Division - MD of Healthcare Services Equity Research & Analyst [16] -------------------------------------------------------------------------------- Congratulations on that transaction. Just 1 detail. Just curious, the 20% interest, was that your idea? Was that your request or that's a request of HCA? -------------------------------------------------------------------------------- Lucinda M. Baier, Brookdale Senior Living Inc. - President, CEO & Director [17] -------------------------------------------------------------------------------- It was a joint decision. I think it is truly a win-win transaction. This transaction is great for our shareholders. It's wonderful for our residents and our patients, and it's really good for our associates. What we believe both HCA Healthcare and us is this is a great alignment of interest. HCA needs to continue to ensure that the penetration rates in our communities are strong and that Brookdale has the services offered to residents. And what we want from Brookdale is we want to really enhance the availability of services to our residents. And so we're really incredibly excited about having better access to HCA Healthcare as a result of this transaction. -------------------------------------------------------------------------------- Frank George Morgan, RBC Capital Markets, Research Division - MD of Healthcare Services Equity Research & Analyst [18] -------------------------------------------------------------------------------- Got you. And then on the vaccination front, I'm just curious. I appreciate the color there. Did you notice any difference as those facilities, I think you said you had 600 of them have now had 2 vaccine, but if that was rolling out, could you see any discernable difference in move-in activity as -- within weeks after those second vaccines were implemented across the facilities? That would be my next question. -------------------------------------------------------------------------------- Lucinda M. Baier, Brookdale Senior Living Inc. - President, CEO & Director [19] -------------------------------------------------------------------------------- I think the important thing to note is that we have seen move-ins improve between December and January. And we're also seeing move-ins improve between January and February, at least the early part of the month. Certainly, we'll wait to see how the one closes out. But we don't know exactly whether that was caused by the vaccination clinics or not. But we do know that we had a number of residents who moved in to be part of the opportunity to get the vaccine in our communities. Now the one reason that I'm a little hesitant about going too far into February. As you know, our portfolio has a heavy concentration in Texas. And at Brookdale, we needed to manage through successfully, not just 1 100-year pandemic. But we needed to manage through 2 100-year issues with the extreme weather in Texas. So my expectation is that we probably will have a little disruption on move-ins in Texas during the month of February because, quite honestly, no one could get out with the ice on the road. -------------------------------------------------------------------------------- Frank George Morgan, RBC Capital Markets, Research Division - MD of Healthcare Services Equity Research & Analyst [20] -------------------------------------------------------------------------------- That's a good point. I hadn't thought about that. Then separately, you mentioned a number -- I think you said in this discussion around vaccines in state and local guidelines, 39% better. I wonder -- could you go back and explain what that was, again, that was better? -------------------------------------------------------------------------------- Steven E. Swain, Brookdale Senior Living Inc. - Executive VP & CFO [21] -------------------------------------------------------------------------------- So I mentioned, Frank, communities that were open had a 39% improved or better move-in rate compared to communities that were restricted from move-ins. The point was that now we're up to 97% open communities. So many more communities will have that benefit of being open to new move-ins. -------------------------------------------------------------------------------- Lucinda M. Baier, Brookdale Senior Living Inc. - President, CEO & Director [22] -------------------------------------------------------------------------------- Yes. One point before we wrap up, Frank, it's also important to note that because of the vaccines, controllable move-outs have been better in January. I think the residents are very excited to have the opportunity to get vaccinated in our clinics. And it gives us a lot of hope about the ability to have more engaging environments within our communities when we have fully vaccinated residents. -------------------------------------------------------------------------------- Frank George Morgan, RBC Capital Markets, Research Division - MD of Healthcare Services Equity Research & Analyst [23] -------------------------------------------------------------------------------- Got you. One final one and then I'll hop. In your slide deck, you always give updates on the growth in supply. And I know there's a lot of other stuff going on with COVID and ice storms in Texas. But when you look at supply growth today, I mean, the new starts continue to really slow down. I was just curious, are you seeing that in your markets? Or are there any markets where you continue to see new starts going on and kind of what is your kind of view from out in the field in terms of where new supply growth is? -------------------------------------------------------------------------------- Lucinda M. Baier, Brookdale Senior Living Inc. - President, CEO & Director [24] -------------------------------------------------------------------------------- Frank, given the size and scope of our portfolio, we always have communities that have new starts around them. But if you look at Page 6 of our investor deck, what you'll see is that the starts in the fourth quarter were 85% lower than the second quarter of 2015 peak. And that is something that's incredibly encouraging to us. And if you look at the fourth quarter open, they were 46% lower than the Q2 '17 peak as well. So both starts and opens are getting better. We were very hopeful about the oversupply in the industry starting to taper off. And we did continue to see that. So now we're just looking to winning to the recovery as we beat the battles on COVID-19. -------------------------------------------------------------------------------- Operator [25] -------------------------------------------------------------------------------- Our next question is from the line of Joanna Gajuk with Bank of America. -------------------------------------------------------------------------------- Joanna Sylvia Gajuk, BofA Securities, Research Division - VP [26] -------------------------------------------------------------------------------- So I guess, just a follow-up on the discussion around RevPOR. So obviously, 3.9%, a very good number. And I guess Steve mentioned that you expect, obviously, the typical price decrease taking effect this quarter. So kind of how do you think this is going to progress for the year in terms of the average pricing? And can you talk about the trends between different products, AL versus IL, how things are tracking there? -------------------------------------------------------------------------------- Lucinda M. Baier, Brookdale Senior Living Inc. - President, CEO & Director [27] -------------------------------------------------------------------------------- Steve, I'll leave that one for you. -------------------------------------------------------------------------------- Steven E. Swain, Brookdale Senior Living Inc. - Executive VP & CFO [28] -------------------------------------------------------------------------------- You bet. So Joanna, we're aggressively focused on profitable revenue growth. We've charged the sales team, as Cindy mentioned, with getting every single unit in service at the highest achievable price. We know that profitable revenue growth depends both on rate, which we've done a good job protecting and occupancy, both combined. The field is seeing some pressure in some markets. Each community does have the flexibility to respond to local market conditions, but within guard rails, of course. And given the industry's kind of high attrition rate, we think this is the right focus because if you focus just on rates, just to drive incremental volume, you're not going to maximize RevPAR. If you take a quick step back, when you look at our results, same-store portfolios, especially U.S. same-store portfolios. If you look at total revenue, not just occupancy, Brookdale does appear to compare favorably. Of course, the field is giving some flexibility on pricing by product. We are seeing a bit more furnace in pricing in some of our needs-driven products versus IL, which is a little bit more discretionary in the short term. And so as you look forward, we're certainly focused on occupancy, as already mentioned, that it starts increasing occupancy in late in the second quarter, and we generally see third quarter occupancy growth, and that's what we expect in 2021. -------------------------------------------------------------------------------- Joanna Sylvia Gajuk, BofA Securities, Research Division - VP [29] -------------------------------------------------------------------------------- All right. So then -- so what were the price increases you were able to achieve in January that you said across the portfolio? -------------------------------------------------------------------------------- Steven E. Swain, Brookdale Senior Living Inc. - Executive VP & CFO [30] -------------------------------------------------------------------------------- On the average, it's going to be about the same as last year. Its weighted average, what you will see, is about 3%. -------------------------------------------------------------------------------- Joanna Sylvia Gajuk, BofA Securities, Research Division - VP [31] -------------------------------------------------------------------------------- Great. That's helpful. And then on this comment around, obviously, focusing on the need -- services that are need based. So can you talk about kind of acuity levels in your portfolio? Are you seeing, because of, obviously, the high death rate among seniors, are you seeing an average lower acuity because of that or actually, higher acuity because the lower acuity residents would maybe postpone the movement? So kind of can you kind of picture here in terms of how the acuity across the portfolio compares to before the pandemic. And kind of how do you expect this trend going forward? -------------------------------------------------------------------------------- Lucinda M. Baier, Brookdale Senior Living Inc. - President, CEO & Director [32] -------------------------------------------------------------------------------- Sure, Joanna. If you think about sort of our portfolio in the aggregate, our portfolio is 17% memory care compared to 13% memory care in the industry. So acuity and memory care is the highest in our portfolio. The residents have dementia, and that is very much a needs-driven purchase decision. And so certainly, the acuity is highest in that particular portion of our portfolio. If you look at assisted living. Assisted living is 53% of our portfolio compared to the industry at 36%. Again, this is a needs-driven purchase. And so assisted living move-ins has been important during the pandemic. The most discretionary choice is really independent living, which is the lowest acuity resident. So on the move-in side, more move-ins from memory care than AL than assisted living, but that is offset in part by the different lengths of stay. So if you think about the longest length of stay is independent living, then assisted living with the shortest length of stay being memory care, you've got 2 things moving in opposite directions that affect acuity. -------------------------------------------------------------------------------- Steven E. Swain, Brookdale Senior Living Inc. - Executive VP & CFO [33] -------------------------------------------------------------------------------- And one thing to note, too, Joanna, is we have not only rent, but care revenue as well. And higher acuity residents do provide us with higher care revenues. So the RevPOR on those residents tends to be higher. -------------------------------------------------------------------------------- Joanna Sylvia Gajuk, BofA Securities, Research Division - VP [34] -------------------------------------------------------------------------------- Okay. So just to sort of wrap it up, is the memory care, I guess, occupancy kind of holding on better or worse? Because I'm trying to get a sense of an average, how this acuity kind of looks like now versus before the pandemic. -------------------------------------------------------------------------------- Lucinda M. Baier, Brookdale Senior Living Inc. - President, CEO & Director [35] -------------------------------------------------------------------------------- So Joanna, if you look at Page 11 of our supplement that are same community results, they're broken down by product type. And you can see the occupancy rates there. In the fourth quarter, independent living occupancy was 76.8%, assisted living and memory care was 72%. And so you can see the answer to that there. Now roughly on a year-over-year basis, the occupancy has declined about the same amount. And so that will give you your answer. -------------------------------------------------------------------------------- Kathy Ann MacDonald, Brookdale Senior Living Inc. - SVP of IR [36] -------------------------------------------------------------------------------- Joanna, I want to make sure that we have time for other analysts. -------------------------------------------------------------------------------- Lucinda M. Baier, Brookdale Senior Living Inc. - President, CEO & Director [37] -------------------------------------------------------------------------------- Our next question is from the line of Brian Tanquilut with Jefferies. -------------------------------------------------------------------------------- Brian Gil Tanquilut, Jefferies LLC, Research Division - Senior Equity/Stock Analyst [38] -------------------------------------------------------------------------------- Cindy, I guess my first question, just on the sale of BHS to HCA. Where do you see potential cross-sell or strategic opportunities there? And how would you operationalize something like that later? You gained more than just the cash portion of the deal for that. -------------------------------------------------------------------------------- Lucinda M. Baier, Brookdale Senior Living Inc. - President, CEO & Director [39] -------------------------------------------------------------------------------- Yes, that's a very, very insightful question, Brian. So the way that I think about it is the health and well-being of our residents is the most important thing. And if you think about what happened during COVID-19, residents really wanted to access more health care within our communities. And so we saw a significant increase in telehealth, which was incredibly important. So what we will do is we will sit down and work closely with HCA Healthcare to see where the opportunities that we can improve the offerings for our residents and then we will make that part of our playbook. I'm certain, given what really strong operators, HCA Healthcare is, is they will have a plan in terms of how to grow BHS aggressively, and that will be from incorporating BHS into their continuum of care. So that will give their patients better options and will really help by, in my view, growing both BHS as well as our senior living community occupancy. -------------------------------------------------------------------------------- Brian Gil Tanquilut, Jefferies LLC, Research Division - Senior Equity/Stock Analyst [40] -------------------------------------------------------------------------------- Got you. And then, Steve, I got a few questions on numbers really quickly. G&A related to BHS, how much of that will stay on your P&L, #1. And then just a clarification. You said in your prepared remarks, you're expecting a rate to offset the increase in wages, so should we think of that as one for one? And then last one, grant money expectations for 2021. -------------------------------------------------------------------------------- Steven E. Swain, Brookdale Senior Living Inc. - Executive VP & CFO [41] -------------------------------------------------------------------------------- Sure. On -- I believe on Page 7 or so of the supplement, you'll see a G&A allocation to HCS. And that was about $5 million for the fourth quarter. If you annualize that, that's $20 million. We will have more information during our first quarter call, but that's kind of in the ballpark you should think about for G&A allocation that will go away. Secondly is the expenses. I would treat them as slightly separate. Just do the rate increase, certainly, for the revenue side or the expense side. Just as we are growing occupancy, we feel that much of our occupancy, now we're at a rate -- at a position where a lot of it is fixed. There's not a lot of variable expense that will grow with increased occupancy throughout the second half of 2021. So you can separate those out a little bit from the 2 data points. And then the government relief. I think Cindy mentioned that we certainly hope that in government grants, we remain optimistic that the government will ultimately provide funding for us as well as others fighting this COVID beyond the first half of 2020. And any positive impact there would certainly help revenue in 2021. -------------------------------------------------------------------------------- Brian Gil Tanquilut, Jefferies LLC, Research Division - Senior Equity/Stock Analyst [42] -------------------------------------------------------------------------------- Got it. And then Cindy, last question for you. So with occupancy pickup getting delayed a little bit, right? I mean I'm sure you start -- you had a higher starting point or expectation for 2021, but obviously not the case. Do you think that given the way your occupancy ramps raised on a sequential basis, that as we exit 2021, that the starting point for '22 has also reset down a little bit as a result? -------------------------------------------------------------------------------- Lucinda M. Baier, Brookdale Senior Living Inc. - President, CEO & Director [43] -------------------------------------------------------------------------------- I think it is going to take a little time to rebuild the occupancy that we lost during COVID-19. Our focus, obviously, is on winning the recovery and recovering as much of that occupancy during 2021 as we can. But I think it's reasonable to think that there will be some bleed over into 2022. -------------------------------------------------------------------------------- Operator [44] -------------------------------------------------------------------------------- Your next question is from A.J. with Credit Suisse. -------------------------------------------------------------------------------- Albert J. William Rice, Crédit Suisse AG, Research Division - Research Analyst [45] -------------------------------------------------------------------------------- I just wanted to ask, if I could, a couple of quick questions on the Brookdale Health Care Services business. I see that about 50% of the business is serving your residents and about 50% is external. Is that external business across the board, the home health hospice and therapies, something you actively market to the community? Or is it somehow tied to the current residents and their families as they maybe come in or out of the facility? -------------------------------------------------------------------------------- Lucinda M. Baier, Brookdale Senior Living Inc. - President, CEO & Director [46] -------------------------------------------------------------------------------- A.J., it's a good question. We have very high quality in both our home health and our hospice business, outpatient services as well. And so we do market directly to patients who are not connected with our senior living operations in any way, and we're grateful for that business and have intent to grow it. -------------------------------------------------------------------------------- Albert J. William Rice, Crédit Suisse AG, Research Division - Research Analyst [47] -------------------------------------------------------------------------------- Okay. And then when I look at some of the disclosures, it looks like about 65% of your units are served by the home health and about 25% by hospice and 20% by therapy. Is that -- I understand the concept of doing more in the existing markets where your units are being served, but do you see opportunity to expand that reach so that particularly, in hospice and outpatient therapy, more of your units will be served under this new agreement? -------------------------------------------------------------------------------- Lucinda M. Baier, Brookdale Senior Living Inc. - President, CEO & Director [48] -------------------------------------------------------------------------------- A.J., I don't want to go too far into that, talking about the future, but what I can tell you is talk about the past. So we have a track record of successfully opening new agencies, and that is something that has allowed us to grow our business organically. With our strong installed residents base, it was easy for us to get new agencies up the ramp relatively quickly. I see no reason to think that with HCA Healthcare's volume, that there's not a big opportunity there. Now the question is, what will HCA want to do with that? And that's a question for them. -------------------------------------------------------------------------------- Albert J. William Rice, Crédit Suisse AG, Research Division - Research Analyst [49] -------------------------------------------------------------------------------- Sure. And then just to make sure I understand the comment about the G&A. Is there any kind of a service agreement that you're going to have for some period of time where there's some aspects of this business that you will continue to run through your G&A? Or does it all pretty much just go to HCA? And is there any provision around the 20% stake down the road? Or do you assume you'll retain that indefinitely? Or is there any put or call provision or anything like that? -------------------------------------------------------------------------------- Lucinda M. Baier, Brookdale Senior Living Inc. - President, CEO & Director [50] -------------------------------------------------------------------------------- Yes. We will provide transition services for a period of time after the transaction closes. That's customary in any transaction like this. And so we will happily provide those services. And the agreement does contain put call provision several years down the road. -------------------------------------------------------------------------------- Kathy Ann MacDonald, Brookdale Senior Living Inc. - SVP of IR [51] -------------------------------------------------------------------------------- Paul, this is Kathy. Since we've run over our time, I think we'll stop there with the questions. And then I'd like to turn it over to Cindy to wrap up. -------------------------------------------------------------------------------- Lucinda M. Baier, Brookdale Senior Living Inc. - President, CEO & Director [52] -------------------------------------------------------------------------------- Thank you, Kathy. Thank you, Paul. I want to thank everyone for your interest in Brookdale and for joining us this morning. We look forward to talking with you again soon. -------------------------------------------------------------------------------- Operator [53] -------------------------------------------------------------------------------- Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Have a great day, and thanks again.