What changed in this filing

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Item 1. Business

2022-02-15 compared with 2021-02-25 · 320 added, 352 removed, 286 unchanged (70% of the section changed)

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together with its consolidated subsidiaries.

As of December 31, 2020, we are the largest operator of senior living communities in the United States based on total capacity, with 726 communities in 43 states and the ability to serve approximately 64,000 residents.

We are the nation's premier operator of senior living communities, operating and managing 679 communities in 41 states as of December 31, 2021, with the ability to serve more than 60,000 residents.

We offer our residents access to a broad continuum of services across the most attractive sectors of the senior living industry.

We operate and manage independent living, assisted living, memory care, and continuing care retirement communities ("CCRCs").

We also offer a range of home health, hospice, and outpatient therapy services to more than 17,000 patients as of that date.

Our community and service offerings combine housing with hospitality and healthcare services.

Our senior living communities offer residents a supportive home-like setting, assistance with activities of daily living ("ADLs") such as eating, bathing, dressing, toileting, transferring/walking, and, in certain communities, licensed skilled nursing services.

We also provide home health, hospice, and outpatient therapy services to residents of many of our communities and to seniors living outside of our communities.

Our senior living communities and our comprehensive network help to provide seniors with care and services in an environment that feels like home.

Our expertise in healthcare, hospitality, and real estate provides residents with opportunities to improve wellness, pursue passions, and stay connected with friends and loved ones.

By providing residents with a range of service options as their needs change, we provide greater continuity of care, enabling seniors to age-in-place, which we believe enables them to maintain residency with us for a longer period of time.

The ability of residents to age-in-place is also beneficial to our residents and their families who are concerned with care decisions for their elderly relatives.

The ability of residents to age-in-place is also beneficial to residents' families who are concerned with care decisions for their elderly relatives.

Our goal is to be the first choice in senior living by being the nation's most trusted and effective senior living provider and employer.

We believe there are significant opportunities to create and deliver stockholder value as we execute on our strategy to achieve this goal.

We continue to execute our core operational strategy that we initiated in early 2018, and we believe successful execution on that strategy provides the best opportunity for us to navigate and recover from the pandemic and to create stockholder value.

We have supplemented our operational strategy with initiatives intended to complement and enhance our core operational efforts and to position us for future growth and success as we encounter changes and trends in demographics, customer preferences, technology, and healthcare delivery and outcomes.

Our refined strategy is focused on these priorities:

• Continued Operational Improvement and Efficiency.

We are focused on our core senior living communities and intend to continue to drive operational improvements.

Through our "win locally" initiative, we intend to provide choices for high quality care and personalized service by caring associates while leveraging our industry-leading scale and experience.

Such efforts include optimizing our sales and marketing processes, prioritizing communities with the most opportunities for growth, and ensuring that our communities and their programming are competitive in the market.

We also continue to focus on attracting, engaging, developing, and retaining the best associates by maintaining a compelling value proposition in the areas of leadership, career development, and meaningful work.

We believe engaged associates lead to lower turnover, improved operations, and ultimately an enhanced resident experience that drives accelerated growth.

To sharpen our focus on our core senior living operations, we are (and have been) executing on initiatives to reduce the complexity of our business and to ensure appropriate risk-reward tradeoffs in our highly regulated product lines.

Such initiatives include exiting substantially all our entry fee CCRC business in 2020 (which also significantly reduced the number of skilled nursing facilities we operate) and continuing to optimize our management services business.

• Senior Living Portfolio.

Since initiating our operational turnaround strategy in early 2018, we have continued our portfolio optimization initiative through which we have disposed of owned and leased communities and restructured leases.

Such transactions have included restructuring our leases with our three largest landlords, sales and conveyance of owned communities, and dispositions of substantially all of our remaining ownership interests in unconsolidated ventures, including our entry fee CCRC venture with Healthpeak Properties, Inc.

("Healthpeak").

As we move forward in 2021, we intend to continue to (i) expand our footprint and services in core markets where we have, or can achieve, a clear leadership position, (ii) execute an ongoing capital recycling program through acquiring leased or managed communities and exiting underperforming owned assets or leases when possible, and (iii) pivot back to portfolio growth through targeted development, investment, and acquisition opportunities.

We will continue to invest in our development capital expenditures program through which we expand, renovate, reposition, and redevelop selected existing senior living communities where economically advantageous, although at a reduced pace during the pandemic.

• Expansion of Healthcare and Service Platform.

Our vision is to enable those we serve to live well by offering our residents the highest-quality healthcare and wellness platform in the senior living industry.

We intend to further integrate our healthcare service model in certain markets in 2021.

We also intend to pursue initiatives designed to accelerate growth in our healthcare services offered to residents within our communities and private duty services business.

Such initiatives may include implementation of improvements to our sales and marketing efforts associated with our healthcare services, pursuit of additional or expanded relationships with managed care providers, and further development of healthcare relationships to capitalize on growth opportunities.

We believe the successful execution of these initiatives and our healthcare strategy will drive incremental revenue by increasing move-ins, improving resident health and wellbeing, and as a result extend residents' average length of stay and increase occupancy.

We also believe that we will improve the results of operations as we further develop as a partner of choice for healthcare service or payor organizations seeking to provide services within our communities and/or improve health outcomes at an overall lower cost of care.

• Driving Innovation and Leveraging Technology.

Brookdale continues to be driven by its mission—to enrich the lives of those we serve with compassion, respect, excellence, and integrity.

During this pandemic recovery phase, we have continued to focus on the health and wellbeing of our residents and associates and "Winning the Recovery, Faster" by providing high quality care and personalized service.

We believe successful execution on this strategy provides the best opportunity to create attractive long-term stockholder value.

During this recovery phase, we are focused on priorities that will position us for growth and take advantage of positive trends in demographics, customer preferences, and lower new supply in the industry.

Our key strategic priorities are as follows.

• Attract, engage, develop, and retain the best associates.

Brookdale’s culture is based on servant leadership.

We believe engaged associates lead to an enhanced resident experience, higher retention, and ultimately improved operations that drives accelerated growth.

Through this strategic priority, we intend to diversify and optimize our recruiting plans and enhance our already compelling value proposition for our associates in the areas of compensation, leadership, career growth, and meaningful work.

• Get every available room in service at the best profitable rate.

We believe that we provide highly valuable services to seniors, and we continue to strive to expand the number of seniors we serve through increasing our occupancy levels, while remaining focused on driving rate and improving margin.

With this strategic priority, we intend to ensure all communities are appropriately priced within their market.

Through our targeted sales and marketing efforts, we plan to drive increased move-ins through enhanced outreach with impactful points of differentiation based on quality, a portfolio of choices, and personalized service delivered by caring and engaged associates.

• Earn resident and family trust and satisfaction by providing valued high quality care and personalized service.

We believe that earning the trust of our residents and their families will allow us to build relationships that create passionate advocates and generate referrals.

We intend to create a consistent high quality experience for residents, including through the implementation and execution of our high quality clinical, operational, and resident engagement programs.

We are a learning organization that uses multiple tools to obtain feedback from residents, their families, and our associates to improve our services to meet the changing needs of residents.

The above three priorities are intended to provide long-term returns to our stockholders by focusing on growing RevPAR, Adjusted EBITDA, and cash flow.

Strategic innovation also continues to be an important factor for our long-term growth.

We are piloting programs in several areas and, in the future, plan to roll out initiatives to further accelerate our growth.

We plan to explore additional products and services that we may offer to our residents or to seniors living outside of our communities and, where opportunities arise, pursue development, investment, and acquisition opportunities.

• Enhance Healthcare and Wellness.

Our vision is to enable those we serve to live well by offering our residents a high-quality healthcare and wellness platform.

We believe Brookdale is uniquely positioned to be a key participant and partner in the value-based healthcare ecosystem.

Our initiatives include piloting redesigned delivery of clinical care within assisted living communities and embedding technology-enabled care management capabilities, in order to better align our communities with payors, providers, and healthcare systems.

We are also piloting the expansion of our private duty services business to serve those living outside of our communities.

We believe the successful execution of these initiatives will improve resident health and wellbeing and drive incremental revenue by increasing move-ins and extending residents' average length of stay resulting in increased occupancy.

• Drive Innovation and Leverage Technology.

We are engaged in a variety of innovation initiatives and over time plan to pilot and test new ideas, technologies, and operating models in order to enhance our residents' engagement and experience, improve outcomes, and increase average length of stay and occupancy.

With our technology platform, we also expect to identify solutions to reduce complexity, increase productivity, lower costs, and increase our ability to collaborate with third parties.

• Grow and Improve Our Senior Living Portfolio.

As we emerge from the pandemic, we intend to (i) expand our footprint and services in core markets where we have, or can achieve, a clear leadership position, (ii) execute an ongoing capital recycling program through acquiring leased communities and exiting non-strategic or underperforming owned assets or leases when possible, and (iii) pivot back to portfolio growth through targeted development, investment, and acquisition opportunities.

We will also continue to invest in our development capital expenditures program through which we expand, renovate, reposition, and redevelop selected existing senior living communities where economically advantageous.

We believe that our successful execution on these strategic priorities and our longer-term growth plans will allow us to achieve our goal to be the first choice in senior living by being the nation’s most trusted and effective senior living provider and employer.

Recent Developments

COVID-19 Pandemic

The COVID-19 pandemic has adversely impacted, and likely will continue to adversely impact the senior living industry and our business.

Due to the average age and prevalence of chronic medical conditions among our residents and patients, they generally are at disproportionately higher risk of hospitalization and adverse outcomes if they contract COVID-19.

We continue to serve and care for seniors at our communities and their homes through the pandemic.

A significant portion of our corporate support associates have worked from home since March 2020.

The health and wellbeing of our residents, patients, and associates is and has been our highest priority.

We initiated our COVID-19 preparation efforts in January 2020.

Our response efforts center on infection prevention and control protocols, including following requirements and guidance of federal, state, and local governments and agencies, including the U.S.

COVID-19 Pandemic Update

The COVID-19 pandemic significantly disrupted the senior living industry and our business beginning in March 2020.

We expect the impact of this disruption to continue into 2023.

T he health and wellbeing of our residents and associates has been and continues to be our highest priority.

Due to the average age and prevalence of chronic medical conditions among our residents, they generally are at disproportionately higher risk of becoming severely ill from COVID-19.

By staying up to date with COVID-19 vaccines, our residents can generally mitigate their risk of becoming severely ill from COVID-19 infection.

Since COVID-19 vaccines received emergency use authorization, we have worked diligently to ensure our residents have access to vaccines, including completing at least three initial vaccine clinics and at least one booster vaccine clinic for all of our communities.

As of January 31, 2022 , our resident vaccine acceptance rate was above 95%.

Community Response.

Our COVID-19 response efforts center on infection prevention and control protocols, including following requirements and guidance of federal, state, and local governments and agencies, including the U.S.

Centers for Disease Control and Prevention ("CDC") and U.S.

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We have enhanced and reinforced training our associates in such protocols and continue to actively monitor government requirements and guidance and adapt our policies, procedures, and response efforts when applicable.

Upon confirmation of positive COVID-19 exposure at a community, we take actions intended to minimize further exposure, including associates' adhering to personal protection protocols, isolating residents or finding placement in an alternate care setting to best address their care needs, and in some cases, restricting new resident admissions, as directed by local health authorities.

Seeking to prevent the introduction of COVID-19 into our communities, and to help control further exposure to infections within communities, in March 2020 we began restricting visitors at all our communities to essential healthcare personnel and certain compassionate care situations, screening associates and permitted visitors, suspending group outings, modifying communal dining and programming to comply with social distancing guidelines and, in most cases, implementing in-room only dining and activities programming, requesting that residents refrain from leaving the community unless medically necessary, and requiring new residents and residents returning from a hospital or nursing home to isolate in their apartment for fourteen days.

These restrictions were in place across our portfolio for the three months ended June 30, 2020.

We have adopted a framework for determining when to ease restrictions at each of our communities based on several criteria, including regulatory requirements and guidance, completion of baseline testing at the community, and the presence of current confirmed positive COVID-19 cases.

Under this framework, we began easing restrictions on a community-by-community basis in July 2020 where regulatory requirements and guidance allowed, which easing may have included permitting outdoor, and in some cases, indoor visits with families, reduced capacity or socially distanced communal dining, limited communal activities programming, and in-person prospective resident visits.

Although we are hopeful that administration of the vaccine to our residents and associates will enable us to further ease restrictions at our communities, those restrictions may continue for some time, and we may revert to more restrictive measures if the pandemic worsens, as necessary to comply with regulatory requirements, or at the direction of state or local health authorities.

In April 2020, we proactively commenced a resident and associate testing program for our communities.

We undertook the program to identify positive, including asymptomatic, individuals, to better understand how our infection protocols are working, to help minimize the exposure to residents and associates of someone known to be COVID-19 positive, and in some cases to comply with state and local testing requirements.

In July 2020, we completed baseline testing at all of our communities,

and we have continued testing residents and associates at many of our communities.

We also continue to utilize rapid point of care antigen test kits supplied by the U.S.

Department of Health and Human Services ("HHS") at those of our communities with Clinical Laboratory Improvement Amendments ("CLIA") waivers.

Our testing program has accumulated approximately 320,000 test results.

Approximately 1.2% of our residents were known to have current COVID-19 positive test results on February 22, 2021.

Further testing, whether undertaken proactively, as a result of regulatory requirements, or at the direction of state or local health authorities, may result in significant additional expense, additional temporary restrictions on move-ins at affected communities, continued need for isolating positive residents, increased use of personal protective equipment ("PPE") by our associates, and increased employee-related costs.

In December 2020, two COVID-19 vaccines received emergency use authorization from the U.S.

Food and Drug Administration.

We elected to work with CVS Health Corporation, with whom we have a longstanding relationship to provide flu shot clinics in our communities, to administer vaccinations on site to our eligible residents and associates through the Pharmacy Partnership for Long-Term Care Program offered through the CDC.

Our work to prepare for and host vaccine clinics includes extensive planning, gathering insurance information, obtaining consents, scheduling appointments, holding educational sessions with residents, families, and associates and detailed coordination of traffic flow and observation areas.

We hosted our first clinics on December 18, 2020 and by January 22, 2021 had hosted over 500 community vaccine clinics.

As of February 22, 2021, first dose vaccine clinics had been completed for residents and associates at 100% of our communities and approximately 85% of our communities have had second dose vaccine clinics.

The pandemic, including the related restrictions at our communities, have significantly disrupted demand for senior living communities and the sales process, which typically includes in-person prospective resident visits within communities.

We believe potential residents and their families are more cautious regarding moving into senior living communities while the pandemic continues, and such caution may persist for some time.

In response to these developments, we have redesigned our sales process to include virtual tours, video engagement, and outdoor prospective resident meetings, enhanced and adapted our marketing programs to address the social distancing environment, and sought to strengthen our relationships with referral sources.

During the third quarter of 2020, we returned to using in-person prospective resident visits for a majority of our communities.

However, several large markets continue with virtual-only prospective resident visits as of December 31, 2020.

We have placed restrictions on move-ins at our communities when circumstances warrant, including at the direction of state or local health authorities.

Although these restrictions began to ease considerably in August 2020, restrictions on move-ins escalated throughout the fourth quarter of 2020 due to the resurgence of the virus.

At the end of the second, third, and fourth quarters of 2020, 86%, 98%, and 89% of our communities, respectively, were accepting new move-ins.

As of February 22, 2021, 97% of our communities were accepting new move-ins.

We cannot predict with reasonable certainty whether or when demand for senior living communities will return to pre-COVID-19 levels or the extent to which the pandemic’s effect on demand may adversely affect the amount of resident fees we are able to collect from our residents.

The pandemic, including the related restrictions at our communities, began to adversely impact our occupancy and resident fee revenue significantly during March 2020, as new resident leads, visits (including virtual visits), and move-in activity declined significantly compared to typical levels.

The year-over-year decrease in monthly move-ins of our same community portfolio has moderated from 64.2% in April 2020 to 26.5% in December 2020.

Our consolidated senior housing portfolio's weighted average occupancy has declined in each month of the pandemic, from 82.7% in March 2020 to 71.5% in December 2020, and was 70.0% in January 2021.

We estimate that the pandemic, including the related restrictions at our communities, resulted in $281.1 million of lost resident fee revenue for the year ended December 31, 2020, including $228.5 million of lost resident fee revenue in our consolidated senior housing portfolio.

Further deterioration of our resident fee revenue will result from lower move-in activity and the resident attrition inherent in our business, which may increase due to the impacts of COVID-19.

Our home health average daily census also began to decrease in March 2020 due to lower occupancy in our communities and fewer elective medical procedures and hospital discharges, resulting in a 14.6% year-over-year decline in home health average daily census for the year ended December 31, 2020.

We expect home health average daily census to continue to gradually recover sequentially with increased elective medical procedures and hospital discharges and senior housing occupancy.

We estimate that the pandemic, including the related restrictions at our communities, resulted in $52.6 million of lost resident fee revenue for the Health Care Services segment for the year ended December 31, 2020 .

Facility operating expense for the year ended December 31, 2020 includes $125.5 million of incremental direct costs to prepare for and respond to the pandemic, including costs for:

acquisition of additional PPE, medical equipment, and cleaning and disposable food service supplies;

Upon confirmation of positive COVID-19 exposure at a community, we take actions intended to minimize further exposure, including enhanced personal protection protocols, temporarily isolating residents or finding placement in an alternate care setting to best address their care needs, and in some cases, restricting new resident admissions as directed by authorities having jurisdiction.

We may also restrict visitors at our communities, screen associates and permitted visitors, suspend group outings or programming, and modify communal dining as necessary to comply with regulatory requirements or at the direction of authorities having jurisdiction.

At the onset of the pandemic, substantial restrictions at our communities were in place across our portfolio.

We began easing restrictions on a community-by-community basis in July 2020 where regulatory requirements and guidance allowed.

As of December 31, 2020, 89% of our communities were open for new resident move-ins.

During 2021, various communities experienced restrictions on new resident move-ins, with a peak of such restrictions occurring in September 2021.

As of January 31, 2022 , substantially all of our communities were open for new resident move-ins.

We may revert to more restrictive measures at our communities, including restrictions on visitors and move-ins, if the pandemic worsens, as a result of infections at a community, as necessary to comply with regulatory requirements, or at the direction of authorities having jurisdiction.

Vaccine Update .

In December 2020, the U.S.

Food and Drug Administration ("FDA") authorized COVID-19 vaccines for emergency use, and we initiated our first vaccine clinic a week after such authorization.

By April 9, 2021, we facilitated at least three rounds of COVID-19 vaccine clinics at all of our communities through the Pharmacy Partnership for Long-Term Care Program offered through the CDC.

As of January 31, 2022 , our resident vaccine acceptance rate was above 95%.

By November 2021, the CDC recommended that all adults receive a vaccine booster dose.

We have completed at least one booster vaccine clinic for all of our communities.

In the second half of 2021, we adopted a policy requiring our associates to be vaccinated against COVID-19, subject to certain exceptions necessary to comply with applicable federal, state, and local laws.

Rebuilding Occupancy .

We continue to execute on key initiatives to rebuild occupancy lost due to the pandemic.

From March 2020 through February 2021, we lost 1,330 basis points of weighted average consolidated senior housing occupancy.

In 2021, we achieved ten consecutive months of weighted average consolidated senior housing occupancy growth on a sequential b asis.

During the latter half of 2021, we believe the nationwide spread of the COVID-19 Delta variant caused some moderation in our sequential monthly occupancy growth rate as some potential residents and their families were more cautious, or temporarily delayed their decision regarding moving into senior living communities in certain areas as the Delta variant spread.

According to data from the National Investment Center for the Seniors Housing & Care Industry ("NIC"), senior housing occupancy increased 220 basis points from the first quarter to the fourth quarter of 2021 for stabilized portfolios.

Our weighted average consolidated senior housing occupancy increased 390 basis points during such period.

The table below sets forth our consolidated occupancy trend during the pandemic.

Weighted average 83.2 % 78.7 % 75.3 % 72.7 % 69.6 % 70.5 % 72.5 % 73.5 %

Quarter end 82.2 % 77.8 % 75.0 % 71.5 % 70.6 % 72.6 % 74.2 % 74.5 %

Weighted average 70.0 % 69.4 % 69.4 % 69.9 % 70.5 % 71.2 % 72.0 % 72.5 % 73.0 % 73.3 % 73.5 % 73.6 % 73.4 %

Month end 70.4 % 70.1 % 70.6 % 71.1 % 71.6 % 72.6 % 73.3 % 73.7 % 74.2 % 74.5 % 74.3 % 74.5 % 74.2 %

We began to experience our typical seasonality pattern in January 2022.

We cannot predict with reasonable certainty when our occupancy will return to pre-COVID-19 pandemic levels.

Revenue and Expense Impacts.

In the aggregate, for the years ended December 31, 2021 and 2020, and compared to our pre-pandemic expectations for 2020, we estimate the pandemic has resulted in $660.1 million of lost resident fee revenue, including $556.5 million in our consolidated senior housing portfolio.

Estimated lost resident fee revenue for 2021 includes $328.0 million in our consolidated senior housing portfolio and $51.0 million in our former Health Care Services segment.

In the aggregate, for the years ended December 31, 2021 and 2020, we have incurred $173.2 million of facility operating expense for incremental direct costs to respond to the pandemic, including $47.7 million for the year ended December 31, 2021.

The direct costs include those for:

acquisition of additional personal protective equipment ("PPE"), medical equipment, and cleaning and disposable food service supplies;

enhanced cleaning and environmental sanitation;

increased employee-related costs, including labor, workers compensation, and health plan expense;

increased expense for general liability claims;

and COVID-19 testing of residents and associates where not otherwise covered by government payor or third-party insurance sources.

We are not able to reasonably predict the total amount of costs we will incur related to the pandemic, and such costs may continue to be substantial.

We also recorded non-cash impairment charges in our operating results of $105.6 million for the year ended December 31, 2020 for our operating lease right-of-use assets and property, plant and equipment and leasehold intangibles, primarily due to the COVID-19 pandemic and lower than expected operating performance at communities with impaired assets.

We have taken, and continue to take, actions to enhance and preserve our liquidity in response to the pandemic.

During the year ended December 31, 2020, we completed our financing plans in the regular course of business, including refinancing substantially all of our 2020 and 2021 maturities.

In addition, on August 31, 2020, we terminated our $250 million revolving credit facility and obtained $266.9 million of non-recourse mortgage financing on 16 communities, most of which had secured the credit facility prior to its termination.

During the year ended December 31, 2020, we accepted $109.8 million of cash for grants under the Public Health and Social Services Emergency Fund ("Provider Relief Fund") and $87.5 million of accelerated/advanced Medicare payments, and we deferred $72.7 million of the employer portion of social security payroll taxes.

These programs were created or expanded under the Coronavirus Aid, Relief, and Economic Security Act of 2020 ("CARES Act"), as described below.

We also delayed or canceled a number of elective capital expenditure projects, resulting in an approximate $67 million reduction to our pre-pandemic full-year 2020 capital expenditure plans, and suspended repurchases under our existing share repurchase program.

On July 26, 2020, we restructured our 120 community triple-net master lease with Ventas, Inc.

("Ventas") in a multipart transaction.

The components included, among other things, reducing our initial annual minimum rent to $100 million, representing a reduction of approximately $86 million over the twelve months ending June 30, 2021, and removal of the prior requirements that we satisfy financial covenants and maintain a security deposit with Ventas.

We paid a $119.2 million one-time cash lease payment to Ventas in connection with our lease restructuring transaction effective July 26, 2020.

As of December 31, 2020, our total liquidity was $575.5 million, consisting of $380.4 million of unrestricted cash and cash equivalents, $172.9 million of marketable securities, and $22.2 million of availability on our secured credit facility.

We continue to seek opportunities to enhance and preserve our liquidity, including through maintaining expense discipline, continuing to evaluate our financing structure and the state of debt markets, seeking further government-sponsored financial relief related to the COVID-19 pandemic, and completing the pending sale of 80% of the equity in our Health Care Services segment.

There is no assurance that debt financing will continue to be available on terms consistent with our expectations or at all, that our efforts will be successful in seeking further government-sponsored financial relief or regarding the amount of, or conditions required to qualify for, any such relief, or that the closing of the pending transaction will be completed in accordance with our expectations, or at all, or generate cash proceeds to us in the amount we anticipate.

The CARES Act, signed into law on March 27, 2020, and Paycheck Protection Program and Health Care Enhancement Act, signed into law on April 24, 2020, provide liquidity and financial relief to certain businesses, among other things.

The impacts to us of certain provisions of the CARES Act are summarized below.

• During the year ended December 31, 2020, we accepted $109.8 million of cash for grants from the Provider Relief Fund under which grants have been made available to eligible healthcare providers for healthcare related expenses or lost revenues attributable to COVID-19.

The accepted grants were made available pursuant to the following distributions from the Provider Relief Fund:

• $101.7 million pursuant to General Distributions, with the aggregate amount ultimately determined based on a percentage of our year-over-year changes in patient care revenue and certain operating and other expenses for the first and second quarters of 2020.

• $4.6 million pursuant to the Skilled Nursing Facility Targeted Distribution, which generally related to our certified skilled nursing facilities.

• $3.5 million pursuant to the Nursing Home Infection Control Distribution, including incentive payments, which related to our skilled nursing care provided through our CCRCs.

Grants received from the Provider Relief Fund are subject to the terms and conditions of the program, including that such funds may only be used to prevent, prepare for, and respond to COVID-19 and will reimburse only for healthcare related expenses or lost revenues that are attributable to COVID-19 and have not been reimbursed from other sources or that other sources are not obligated to reimburse.

The permissible uses of grants from the Nursing Home Infection Control Distribution are further limited to certain infection control expenses.

The program requires us to report to HHS on our use of the grants, and our reporting is subject to audit.

During the year ended December 31, 2020, we recognized $109.8 million of the grants as other operating income based upon our estimates of our satisfaction of the conditions of the grants during such period.

HHS continues to evaluate future allocations of, and regulation and guidance regarding, grants made under the Provider Relief Fund.

We intend to pursue additional funding that may become available.

However, there can be no assurance that we will qualify for, or receive, grants in the amount we expect, that additional restrictions on the permissible uses or terms and conditions of the grants will not be imposed by HHS, or that future funding programs will be made available for which we qualify.

• During the year ended December 31, 2020, we received $87.5 million under the Accelerated and Advance Payment Program administered by CMS, which was temporarily expanded by the CARES Act.

Approximately $75.2 million related to our Health Care Services segment and the remainder related to our CCRCs segment.

Under the program, we requested acceleration/advancement of 100% of our Medicare payment amount for a three-month period.

The Continuing Appropriations Act, 2021 and Other Extensions Act, enacted on October 1, 2020, amended the repayment terms for accelerated/advanced payments.

As amended, recoupment of accelerated/advanced payments will begin one year after payments were issued.

Payments will be recouped at a rate of 25% of Medicare payments for the first eleven months following the anniversary of issuance and at a rate of 50% of Medicare payments for the next six months.

Any outstanding balance of accelerated/advanced payments will be due following such recoupment period.

Pursuant to the Purchase Agreement (as defined below) we expect to repay the then outstanding balance of such accelerated/advance payments related to our Health Care Services segment at the closing of the sale of 80% of our equity in our Health Care Services segment.

• Under the CARES Act, we have elected to defer payment of the employer portion of social security payroll taxes incurred from March 27, 2020 through December 31, 2020.

One-half of such deferral amount will become due on each of December 31, 2021 and December 31, 2022.

As of December 31, 2020, we have deferred payment of $72.7 million under the program.

• The CARES Act temporarily suspended the 2% Medicare sequestration for the period May 1, 2020 to December 31, 2020, which primarily benefited our Health Care Services segment.

This suspension had a favorable impact of $4.0 million on the segment’s resident fee revenue for the year ended December 31, 2020.

The Consolidated Appropriations Act, 2021, enacted on December 27, 2020, extended the sequestration suspension through March 31, 2021.

• We are eligible to claim the employee retention tax credit for certain of our associates under the CARES Act.

The refundable tax credit for 2020 is available to employers that fully or partially suspend operations during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings due to COVID-19, and is equal to 50% of qualified wages paid after March 12, 2020 through December 31, 2020 to qualified employees, with a maximum credit of $5,000 per employee.

We estimate that we will be eligible to claim tax credits of approximately $10 million for 2020.

The credit was modified and extended for wages paid from January 1, 2021 through June 30, 2021 by the Consolidated Appropriations Act, 2021, and we are assessing our eligibility to claim such credit.

There can be no assurance that we will qualify for, or receive, tax credits in the amount we expect.

In addition to the grants described above, we have received and recognized $5.9 million of other operating income from grants from other government sources.

For the years ended December 31, 2021 and 2020, we recorded $23.0 million and $105.6 million, respectively, of non-cash impairment charges in our operating results for our operating lease right-of-use assets and property, plant and equipment and leasehold intangibles, primarily due to the COVID-19 pandemic and lower than expected operating performance at certain communities.

Financial Relief.

The Coronavirus Aid, Relief, and Economic Security Act of 2020 ("CARES Act"), signed into law on March 27, 2020, and Paycheck Protection Program and Health Care Enhancement Act, signed into law on April 24, 2020, provide liquidity and financial relief to certain businesses, among other things.

Certain impacts of such programs are provided below.

• During the years ended December 31, 2021 and 2020, we accepted $0.8 million and $109.8 million, respectively, of cash from grants from the Public Health and Social Services Emergency Fund ("Provider Relief Fund") administered by U.S.

Department of Health and Human Services ("HHS"), under which grants have been made available to eligible healthcare providers for healthcare related expenses or lost revenues attributable to COVID-19.

During the three months ended December 31, 2021, we applied for the Phase 4 general distribution from the Provider Relief Fund.

We expect to receive the Phase 4 general distribution during the first half of 2022.

We intend to pursue any additional funding that may become

There can be no assurance that we will qualify for, or receive, such future grants in the amount we expect, that additional restrictions on the permissible uses or terms and conditions of the grants will not be imposed by HHS, or that future funding programs will be made available for which we qualify.

• During the year ended December 31, 2020, we received $87.5 million under the Accelerated and Advance Payment Program administered by CMS, $75.2 million of which related to our former Health Care Services segment and $12.3 million of which related to our CCRCs segment.

Recoupment of advanced payments began one year after payments were issued at a rate of 25% of Medicare payments for the first eleven months following the anniversary of issuance and at a rate of 50% of Medicare payments for the next six months.

Any outstanding balance of advanced payments will be due following such recoupment period.

During the year ended December 31, 2021, $20.8 million of the advanced payments were recouped.

Pursuant to the sale of 80% of our equity in our Health Care Services segment, $63.6 million of such obligations related to our former Health Care Services segment were retained by the unconsolidated HCS Venture (as defined below).

As of December 31, 2021, the outstanding balance of advanced payments related to our CCRCs segment was $3.1 million, for which we expect recoupment during 2022.

• During the year ended December 31, 2020, we deferred payment of $72.7 million of the employer portion of social security payroll taxes incurred from March 27, 2020 through December 31, 2020 pursuant to the CARES Act.

Pursuant to the sale of 80% of our equity in our Health Care Services segment, $9.6 million of such obligations related to our former Health Care Services segment were retained by the unconsolidated HCS Venture.

In December 2021, we paid $31.6 million of the retained deferred amount and the remaining deferred amount of $31.6 million is due December 31, 2022.

• We were eligible to claim the employee retention credit for certain of our associates under the CARES Act.

The credit for 2020 was available to employers that fully or partially suspended operations during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings due to COVID-19, and was equal to 50% of qualified wages paid after March 12, 2020 through December 31, 2020 to qualified employees, with a maximum credit of $5,000 per employee.

During the year ended December 31, 2021, we recognized $9.9 million of employee retention credits on wages paid from March 12, 2020 to December 31, 2020 within other operating income, for which we have received $3.4 million in cash as of December 31, 2021.

The credit was modified and extended by subsequent legislation for wages paid from January 1, 2021 through December 31, 2021, and we are assessing our eligibility to claim such credit.

There can be no assurance that we will qualify for, or receive, credits in the amount or on the timing we expect.

In addition to the grants described above, during the years ended December 31, 2021 and 2020, we received and recognized $1.7 million and $5.9 million, respectively, of other operating income from grants from other government sources.

We cannot predict with reasonable certainty the impacts that COVID-19 ultimately will have on our business, results of operations, cash flow, and liquidity, and our response efforts may continue to delay or negatively impact our strategic initiatives, including plans for future growth.

The ultimate impacts of COVID-19 will depend on many factors, some of which cannot be foreseen, including the duration, severity, and breadth of the pandemic and any resurgence of the disease;

The ultimate impacts of COVID-19 will depend on many factors, some of which cannot be foreseen, including the duration, severity, and breadth of the pandemic and any resurgence or variants of the disease;

the impact of COVID-19 on the nation’s economy and debt and equity markets and the local economies in our markets;

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the disproportionate impact of COVID-19 on seniors generally and those residing in our communities;

the duration and costs of our response efforts, including increased equipment, supplies, labor, litigation, testing, vaccination clinic, and other expenses;

the impact of COVID-19 on our ability to complete financings, refinancings, or other transactions (including dispositions) or to generate sufficient cash flow to cover required interest and lease payments and to satisfy financial and other covenants in our debt and lease documents;

increased regulatory requirements, including unfunded, mandatory testing;

the duration and costs of our response efforts, including increased equipment, supplies, labor, litigation, testing, vaccination clinic, health plan, and other expenses;

potentially greater use of contract labor and overtime due to COVID-19 and general labor market conditions;

the impact of COVID-19 on our ability to complete financings and refinancings of various assets or other transactions or to generate sufficient cash flow to cover required debt, interest, and lease payments and to satisfy financial and other covenants in our debt and lease documents;

increased regulatory requirements, including the costs of unfunded, mandatory testing of residents and associates and provision of test kits to our health plan participants;

increased enforcement actions resulting from COVID-19;

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and the frequency and magnitude of legal actions and liability claims that may arise due to COVID-19 or our response efforts.

2021 Pending Sale of Health Care Services

On February 24, 2021, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with affiliates of HCA Healthcare, Inc.

(“HCA Healthcare”), providing for the sale of 80% of our equity in our Health Care Services segment for a

purchase price of $400 million in cash, subject to certain adjustments set forth in the Purchase Agreement, including a reduction for the remaining outstanding balance as of the closing of Medicare advance payments and deferred payroll tax payments related to the Health Care Services segment, which were $75.2 million and $8.2 million, respectively, as of December 31, 2020.

We expect our net cash proceeds at the closing will be approximately $300 million, subject to the timing of closing with respect to the adjustments set forth in the Purchase Agreement.

The Purchase Agreement also contains certain agreed upon indemnities for the benefit of the purchaser.

The closing of the sale transaction is anticipated to occur in the late first half or early second half of 2021, subject to receipt of applicable regulatory approvals and satisfaction of other customary closing conditions set forth in the Purchase Agreement.

Pursuant to the Purchase Agreement, at closing of the transaction, we will retain a 20% equity interest in the business.

Upon closing, we expect that the results and financial position of our Health Care Services segment will be deconsolidated from our financial statements and that our interest in the joint venture will be accounted for under the equity method of accounting.

We anticipate that the sale transaction will utilize a portion of our federal net operating loss carryforwards to offset the expected taxable gain on such transaction.

Community Portfolio Optimization

During 2020, we continued execution on our portfolio optimization initiative through which we have disposed of owned and leased communities and restructured leases.

Such activities during 2020 included restructuring our lease arrangements with Ventas announced on July 27, 2020 and closing the multi-part transaction with Healthpeak announced on October 1, 2019.

As a result of these initiatives and other lease restructuring, expiration, and termination activity, and other transactions, during the year ended December 31, 2020 we:

• Terminated our triple-net lease obligations on an aggregate of 32 communities, including through the acquisition of 27 formerly leased communities;

• Disposed of an aggregate of seven owned communities;

• Sold substantially all of our remaining ownership interests in unconsolidated ventures, including our entry fee CCRC venture with Healthpeak;

• Reduced our management of communities on behalf of former unconsolidated ventures and third parties, representing a net reduction of 25 managed communities during the year.

Summaries of these transactions, and their impact on our results of operations are set forth in "Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations." See also Note 4 to the consolidated financial statements contained in "Item 8.

Community Labor

We continue to experience pressures associated with the intensely competitive labor environment, which during 2021 included increased associate turnover, difficulty in timely filling open positions, and increasing wages.

Continued increased competition for, or a shortage of, nurses or other associates, including due to the COVID-19 pandemic, general labor market conditions, low levels of unemployment, or general inflationary pressures, have required and may require that we enhance our pay and benefits package to compete effectively for such associates.

We have increased our recruiting efforts to fill open positions, reviewed wage rates in all of our markets, made appropriate adjustments, and will monitor to remain competitive.

We seek to ensure that our communities are s taffed with full and part-time associates and our use of more expensive contract labor and overtime has increased to cover open positions.

Third-party staffing agencies from which we source contract labor have increased the rates they charge which has resulted in increases in the cost of contract labor.

Our labor expense in our same community portfolio increased 2.6% in 2021 from 2020, and we expect that our same community labor expense will grow at a higher percentage in 2022 compared to 2021 as a result of an increase in our labor costs near the end of 2021, merit and market wage rate adjustments, and an anticipated increase in hours worked as our occupancy levels grow.

As we fill more full and part-time positions, we expect to use less contract labor and overtime.

Resident Fee Rates

The rates charged at communities are highly dependent on local market conditions and the competitive environment in which the communities operate.

Substantially all of our private pay senior housing residency agreements allow for adjustments in the monthly rate payable on 90 or fewer days’ notice which enables us to seek increases in monthly rates due to inflation or other factors.

Increases for level of care changes or additional services are typically allowed immediately upon notice of the change.

Generally, we have increased our monthly rates, including rates for care and other services, for private pay residents on an annual basis beginning January 1 each year.

We have recently made the annual rate adjustment for our in-place private pay residents, which was higher than our typical annual rate adjustment.

Such adjustment reflects our increased costs associated with additional efforts to serve and care for our residents during the pandemic, the current inflationary environment, and the intensely competitive labor environment.

The rate adjustment could result in a decrease in occupancy in our communities, and any use of promotional or other discounting would offset a portion of such rate adjustments in our RevPAR and RevPOR results.

In addition, the rate adjustment may not be sufficient to offset our increased costs.

During 2021, we received net cash proceeds of $347.6 million pursuant to the sale of 80% of our equity in our Health Care Services segment and the resulting HCS Venture's subsequent sale of certain agencies to LHC Group Inc.

On October 1, 2021, we issued $230.0 million principal amount of 2.00% convertible senior notes due 2026.

We received net proceeds of $224.3 million at closing after the deduction of the initial purchasers’ discount.

We used $15.9 million of the net proceeds to pay the cost of capped call transactions entered into in connection with the issuance, which are expected generally to reduce or offset potential dilution to holders of our common stock.

During the three months ended December 31, 2021, we repaid a $45.0 million note payable and $284.4 million of mortgage debt, including $143.0 million of mortgage debt on 11 communities for which we obtained $100.0 million of debt secured by non-recourse first mortgages.

Such repayments represented substantially all of our remaining 2022 maturities.

Management’s Discussion and Analysis of Financial Condition and Results of Operations" for more information about the transactions.

As of December 31, 2021, our total liquidity was $536.8 million, consisting of $347.0 million of unrestricted cash and cash equivalents, $182.4 million of marketable securities, and $7.4 million of availability on our secured credit facility.

We continue to seek opportunities to preserve and enhance our liquidity, including through increasing our RevPAR, maintaining expense discipline, continuing to evaluate our financing structure and the state of debt markets, monetizing non-strategic or underperforming owned assets, and seeking further government-sponsored financial relief related to the pandemic.

There is no assurance that debt financing will continue to be available on terms consistent with our expectations or at all, or that our efforts will be successful in seeking further government-sponsored financial relief or regarding the amount of, or conditions required to qualify for, any such relief.

Transaction Activity

Sale of Health Care Services

On July 1, 2021, we completed the sale of 80% of our equity in our Health Care Services segment to affiliates of HCA Healthcare, Inc.

("HCA Healthcare") for a purchase price of $400.0 million in cash, subject to certain adjustments set forth in the Securities Purchase Agreement (the "Purchase Agreement") dated February 24, 2021, including a reduction for the

remaining outstanding balance as of the closing of Medicare advance payments and deferred payroll tax payments related to the Health Care Services segment (the "HCS Sale").

We received net cash proceeds of $312.6 million, including $305.8 million at closing on July 1, 2021 and $6.8 million upon completion of the post-closing net working capital adjustment in October 2021.

The Purchase Agreement also contained certain agreed upon indemnities for the benefit of the purchaser.

At closing of the transaction, we retained a 20% equity interest in the venture with HCA Healthcare ("HCS Venture").

The results and financial position of the Health Care Services segment were deconsolidated from our consolidated financial statements as of July 1, 2021 and our 20% equity interest in the HCS Venture is accounted for under the equity method of accounting subsequent to that date.

As of July 1, 2021, we recognized a $100.0 million asset within investment in unconsolidated ventures on our consolidated balance sheet for the estimated fair value of our retained 20% noncontrolling interest in the HCS Venture.

We recognized a $286.5 million gain on sale, net of transaction costs, within our consolidated statement of operations for the year ended December 31, 2021 for the HCS Sale.

Refer to Note 21 to the consolidated financial statements contained in "Item 8.

Financial Statements and Supplementary Data" for selected financial data for the Health Care Services segment through June 30, 2021.

On November 1, 2021, the HCS Venture sold certain home health, hospice, and outpatient therapy agencies in areas not served by HCA Healthcare to LHC Group Inc.

Upon the completion of the sale, we received $35.0 million of cash distributions from the HCS Venture from the net sale proceeds, which decreased our investment in unconsolidated ventures.

We continue to own a 20% equity interest in the remaining HCS Venture, which continues to operate home health, hospice, and outpatient therapy agencies in areas served by HCA Healthcare.

Community Transactions

During 2021, we continued execution on our ongoing capital recycling program through which we have exited non-strategic or underperforming owned assets or leases.

Such activities during 2021 included the sale of three owned communities and the termination of triple-net lease obligations on two communities.

Additionally, we have reduced our management of communities on behalf of former unconsolidated ventures and third parties, representing a net reduction of 42 managed communities during the year.

Management’s Discussion and Analysis of Financial Condition and Results of Operations" and Note 4 to the consolidated financial statements contained in "Item 8.

Financial Statements and Supplementary Data" for more information about the transactions.

As of December 31, 2021, we owned 347 communities, representing a majority of our consolidated community portfolio, leased 299 communities, and managed 33 communities.

The charts below show the foregoing changes in our portfolio from December 31, 2019 to December 31, 2020.

During the year ending December 31, 2021, we expect to close on the dispositions of three owned communities (249 units) classified as held for sale as of December 31, 2020 and terminations of a substantial portion of our management arrangements.

The closings of the various pending and expected transactions are, or will be, subject to the satisfaction of various closing

conditions, including (where applicable) the receipt of regulatory approvals.

During the year ended December 31, 2022, we expect to close on the disposition of two owned unencumbered communities classified as held for sale as of December 31, 2021 and the termination of our lease obligations on two communities for which we have provided notice of non-renewal.

The closings of the various pending and expected transactions are subject to the satisfaction of various closing conditions, including (where applicable) the receipt of regulatory approvals.

There can be no assurance that the transactions will close or, if they do, when the actual closings will occur.

Capital Expenditures

Our total community-level capital expenditures were $140.1 million for 2020, which was a decrease of $98.6 million from 2019, and $27.8 million of which was reimbursed by our lessors.

The decrease in community-level capital expenditures was partially due to our approximate $48 million reduction to our pre-pandemic full-year 2020 community-level capital expenditure plans as we delayed or canceled a number of elective capital expenditure projects in response to the pandemic.

In the aggregate, we expect our full-year 2021 non-development capital expenditures, net of anticipated lessor reimbursements, to be approximately $140 million.

In addition, we expect our full-year 2021 development capital expenditures to be approximately $10 million, net of anticipated lessor reimbursements, and such projects include those for expansion, repositioning, redeveloping, and major renovation of selected existing senior living communities.

We anticipate that our 2021 capital expenditures will be funded from cash on hand, cash equivalents, marketable securities, cash flows from operations, and reimbursements from lessors.

The Senior Living Industry

The senior living industry has undergone dramatic growth in the last 25 years, marked by the emergence of assisted living communities in the mid-1990s, and it remains highly fragmented with numerous local and regional operators.

According to data from the National Investment Center for the Seniors Housing & Care Industry ("NIC"), there were approximately 2,500 local and regional senior housing operators as of December 31, 2020, of which more than 90% operated five or fewer communities.

The senior living industry has undergone dramatic growth in the past several decades, marked by the emergence of assisted living communities in the mid-1990s, and it remains highly fragmented with numerous local and regional operators.

According to data from NIC, there were approximately 2,500 local and regional senior housing operators as of December 31, 2021, of which more than 90% operated five or fewer communities.

We are one of a limited number of large operators that provide a broad range of community locations and service level offerings at varying price levels.

The industry has attracted additional investment resulting in increased construction and development of new senior housing supply.

The industry has attracted additional investment in the last decade resulting in increased construction and development of new senior housing supply.

New community openings have subjected the senior housing industry to oversupply and increased competitive pressures.

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During and since 2016, we have experienced an elevated rate of competitive new openings, with significant new competition opening in many markets, which has adversely affected our occupancy, revenues, results of operations, and cash flow.

In 2020, competitive new openings remained elevated, but declined from 2019.

In 2020 and 2021, competitive new openings remained elevated, but declined significantly from the peak in 2017.

Beginning in early 2020, the COVID-19 pandemic resulted in additional occupancy pressure for our industry.

NIC data shows that seniors housing occupancy decreased for three consecutive quarters between March 31, 2020 and December 31, 2020, with nearly all markets falling to record low occupancy by the fourth quarter of 2020.

NIC data shows that senior housing occupancy decreased for four consecutive quarters between March 31, 2020 and March 31, 2021, with nearly all markets falling to record low occupancy by the first quarter of 2021.

We cannot predict with reasonable certainty

when demand for senior living communities will return to pre-COVID-19 levels or the extent to which the pandemic’s effect on demand may adversely affect the amount of resident fees we are able to collect from our residents.

The primary market of the senior living industry is individuals age 80 and older.

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There is a growing consumer awareness among seniors and their families concerning the types of services provided by senior living operators, which has further contributed to the demand for senior living services.

In recent years, the high level of new openings, nursing and caregiver shortages due to the pandemic, lower levels of unemployment, and implementation of higher minimum wages generally have contributed to wage pressures and increased competition for community leadership and personnel.

We continue to address new competition by focusing on operations with the objective to ensure high customer satisfaction, retain key leadership, and actively engage district and regional management in community operations;

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In addition, there continue to be various federal and state legislative and regulatory proposals to implement cost containment measures that would limit payments to healthcare providers in the future.

We cannot predict what action, if any, Congress will take on reimbursement policies of the Medicare or Medicaid programs or what future rule changes CMS will implement.

Changes in the reimbursement rates or methods or timing of government reimbursement programs could adversely affect our revenues, results of operations, and cash flow.

The senior living industry is highly competitive.

We compete with numerous organizations, including not-for-profit entities, that offer similar communities and services, such as home health care and hospice agencies, community-based service programs, retirement communities, convalescent centers, and other senior living providers.

We compete with numerous organizations, including not-for-profit entities, that offer similar communities and services, community-based service programs, retirement communities, convalescent centers, and other senior living providers.

In general, regulatory and other barriers to competitive entry in the independent living, assisted living, and memory care sectors of the senior living industry are not substantial.

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Due to the industry's low occupancy levels, certain competitors may price aggressively in order to capture market share.

Our major publicly-traded senior housing competitors are Capital Senior Living Corporation and Five Star Senior Living, Inc.

Our major private senior housing competitors include Holiday Retirement, Life Care Services, LLC, Atria Senior Living Inc., Senior Lifestyle Corp., and Sunrise Senior Living, LLC, as well as a large number of not-for-profit entities.

Our major publicly-traded senior housing competitors are AlerisLife Inc.

(f/k/a Five Star Senior Living, Inc.) and Sonida Senior Living Corporation (f/k/a Capital Senior Living Corporation).

Our major private senior housing competitors include Life Care Services, LLC, Atria Senior Living Inc., Sunrise Senior Living, LLC, Erikson Senior Living, and Senior Lifestyle Corp., and multiple regional providers with large localized market presence, as well as a large number of not-for-profit entities.

Over the long term we plan to evaluate and, where opportunities arise, pursue development, investment, and acquisition opportunities.

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In addition, several publicly-traded and non-traded real estate investment trusts ("REITs") and private equity firms have similar objectives as we do, along with greater financial resources and/or lower costs of capital than we are able to obtain.

Partially as a result of tax law changes enacted through REIT Investment Diversification and Empowerment Act ("RIDEA"), we now compete more directly with the various publicly-traded healthcare REITs for the acquisition of senior housing properties, the largest of which are Ventas and Welltower.

("Ventas") and Welltower Inc.

("Welltower").

Brookdale Senior Living Inc.

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and Alterra Healthcare Corporation, which had been operating independently since 1986 and 1981, respectively.

On November 22, 2005, we completed our initial public offering of common stock, and on July 25, 2006, we acquired American Retirement Corporation, another leading senior living provider that had been operating independently since 1978.

On November 22, 2005, we completed our initial public offering of common stock, and on July 25, 2006, we acquired American Retirement Corporation, another leading senior living provider

that had been operating independently since 1978.

On September 1, 2011, we completed the acquisition of Horizon Bay, which was the then-ninth largest operator of senior living communities in the United States.

On July 31, 2014, we completed our acquisition by merger of Emeritus Corporation, which was the then-second largest operator of senior living communities in the United States.

As of December 31, 2020, we had five reportable segments:

On July 31, 2014, we completed our acquisition of Emeritus Corporation through a merger, which was the then-second largest operator of senior living communities in the United States.

Since our acquisition of Emeritus, we have disposed of over 350 communities through sales of owned communities and terminations of triple-net lease obligations, and exited substantially all of our senior living unconsolidated venture arrangements.

On July 1, 2021, we completed the sale of 80% of our equity in our Health Care Services segment to HCA Healthcare and retained a 20% equity interest in the HCS Venture.

As of December 31, 2021, we had three reportable segments:

Independent Living;

Assisted Living and Memory Care;

Health Care Services;

and Management Services.

These segments were determined based on the way that our chief operating decision maker organizes our business activities for making operating decisions, assessing performance, developing strategy, and allocating capital resources.

On July 1, 2021, we sold 80% of our equity in the Health Care Services segment.

For periods beginning July 1, 2021, the results and financial position of the Health Care Services segment were deconsolidated from our consolidated financial statements and our 20% equity interest in the Health Care Services venture is accounted for under the equity method of accounting.

As of December 31, 2021, our Management Services operating segment is no longer identified as a reportable segment as a result of the reduction in the number of communities we manage.

Management services operations are reported within the All Other category.

Communities that we own or lease are included in the Independent Living, Assisted Living and Memory Care, or CCRCs segment, as applicable.

The home health, hospice, and outpatient therapy services provided to our residents and seniors living outside of our communities are generally included in the Health Care Services segment, while skilled nursing and inpatient healthcare services provided in our skilled nursing units are included in the CCRCs segment.

Communities that we manage on behalf of third parties or unconsolidated ventures in which we have an ownership interest are included in the Management Services segment.

The table below shows the number of communities and units within each of our senior housing and Management Services segments as of December 31, 2020.

The home health, hospice, and outpatient therapy services provided to our residents and seniors living outside of our communities were included in the Health Care Services segment prior to July 1, 2021, while skilled nursing and inpatient healthcare services provided in our skilled nursing units are included in the CCRCs segment.

Communities that we manage on behalf of others are included in the All Other category.

The table below shows the number of communities and units within each of our senior housing segments and the All Other category as of December 31, 2021.

Communities Units % of Total Units Average Number of Units per Community

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CCRCs 19 5,202 9.1 % 274

Management Services 75 10,129 16.0 % 135

All Other 33 4,824 8.4 % 146

Total 679 57,409 100.0 % 85

For the year ended December 31, 2021, we generated 86.8% of our resident fee revenue from private pay customers, 10.3% from government reimbursement programs (primarily Medicare) and 2.9% from other payor sources.

Our sale of 80% of our equity in our Health Care Services segment to HCA Healthcare on July 1, 2021 reduced our reliance on government reimbursement programs.

Reimbursements from Medicare and Medicaid represented 5.4% of our consolidated senior housing segments' resident fee revenue for the year ended December 31, 2021.

Approximately 93.2% of resident fee revenue was derived from our senior housing segments, of which 54.4% of our resident fee revenue was generated from owned communities and 38.8% was generated from leased communities.

Our Health Care Services segment generated 12.7% of resident fee revenue.

Our former Health Care Services segment generated 6.8% of resident fee revenue.

The table below shows the percentage of our resident fee and management fee revenue attributable to each of our segments for the year ended December 31, 2021.

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Health Care Services 174,164 6.8 %

Management Services 130,690 4.4 %

All Other 20,598 0.8 %

Total resident fee and management fee revenue $ 2,564,446 100.0 %

Further operating results and financial metrics from our five segments are discussed further in "Item 7.

Further operating results and financial metrics from our three reportable segments are discussed further in "Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 21 to our consolidated financial statements contained in "Item 8.

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The majority of our independent living communities consist of both independent and assisted living units in a single community, which allows residents to age-in-place by providing them with a broad continuum of senior independent and assisted living services to accommodate their changing needs.

While the number varies depending upon the particular community, as of December 31, 2020 approximately 80% of all of the units at our independent living communities were independent living units, with the balance of the units licensed for assisted living and memory care.

Our independent living communities are generally large multi-story buildings averaging 184 units with extensive common areas and amenities to support the lifestyle preferences of more independent seniors.

While the number varies depending upon the particular community, as of December 31, 2021 approximately 80% of all of the units at our independent living communities were independent living units, with the balance of the units operating as licensed assisted living and memory care units.

Our independent living communities are generally large multi-story buildings with extensive common areas and amenities to support the lifestyle preferences of more independent seniors.

Residents may choose from studio, one-bedroom, and two-bedroom units, depending upon the specific community.

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Most of these communities also offer custom tailored concierge and personal assistance/private duty services at an additional charge, which may include medication reminders, daily check-in, transportation, shopping, escort, and companion services.

In addition to the basic services, our independent living communities that include assisted living also provide residents with personal care and convenience service options to provide assistance with ADLs.

The levels of care provided to residents vary from community to community depending, among other things, upon the licensing requirements and healthcare regulations of the state in which the community is located.

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Residents with cognitive or physical frailties and higher level service needs can often be accommodated with supplemental services in their own units or, in certain communities, are cared for in a more structured and supervised environment on a separate wing or floor.

These communities also generally have a dedicated assisted living staff and separate assisted living dining rooms and activity areas.

These communities also generally have dedicated assisted living associates and separate assisted living dining rooms and activity areas.

Assisted Living and Memory Care Communities

Our assisted living and memory care communities offer housing and 24-hour assistance with ADLs for mid-acuity and frail elderly residents.

Our assisted living and memory care communities offer housing and 24-hour assistance with ADLs for our residents.

Residents typically enter an assisted living or memory care community due to a relatively immediate need for services that may have been triggered by a medical event.

Our assisted living and memory care communities include both freestanding, multi-story communities with more than 50 beds, as well as smaller, freestanding, single story communities.

Our assisted living and memory care communities include both freestanding, multi-story communities with more than 50 units, as well as smaller, freestanding, single story communities.

Although building layouts will vary depending on specific location, the community may include (i) private studio, one-bedroom, and one-bedroom deluxe apartments, or (ii) individual rooms for one or two residents in wings or "neighborhoods" scaled to a single-family home, that would include a living room, dining room, patio or enclosed porch, laundry room, and personal care area, as well as a caregiver work station.

We also provide memory care services at freestanding memory care communities that are specifically designed for residents with dementia, including Alzheimer's disease and other forms of cognitive impairment.

Our freestanding memory care communities have approximately 20 to 70 beds and some are part of a campus-like setting which includes a freestanding assisted living community.

Our freestanding memory care communities average 39 units and some are part of a campus-like setting which includes a freestanding assisted living community.

As of December 31, 2021, we provide memory care services at 341 of our communities, aggregating 9,065 memory care units across our segments.

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Most of our CCRCs have independent living, assisted living, memory care, and skilled nursing available on one campus or within the immediate area.

Our CCRC residents are generally seniors who are seeking a community that offers a broad continuum of care that will enable them to age in place.

Generally, these residents will initially enter the community as an independent living resident and may, at a later time, advance into an assisted living or skilled nursing area as their needs change.

Our Healthcare Services Offerings

Through our Health Care Services segment we currently provide home health, hospice, and outpatient therapy services to residents of many of our communities and to seniors living outside of our communities.

As of December 31, 2020, our Health Care Services segment platform included networks in 28 states with the ability to provide home health services to approximately 60% of our units, hospice services to approximately 25% of our units, and outpatient therapy to approximately 20% of our units.

The Health Care Services segment does not include the skilled nursing and inpatient healthcare services

provided in our skilled nursing units, which are included in our CCRCs segment.

During the year ended December 31, 2020, we generated approximately 45% of our Health Care Services segment revenue from residents at our communities and approximately 55% from our patients outside our communities.

As described above, we expect to sell 80% of our equity in our Health Care Services segment pursuant to the Purchase Agreement with HCA Healthcare, which transaction is expected to occur in the late first half or early second half of 2021.

Upon closing, we expect that the results and financial position of our Health Care Services segment will be deconsolidated from our financial statements.

The home health services we provide include skilled nursing, physical therapy, occupational therapy, speech language pathology, home health aide services, and social services as needed.

Our hospice services include clinical and skilled care, as well as spiritual and emotional counseling.

Our outpatient therapy services include physical therapy, occupational therapy, speech language pathology services, and other specialized therapy.

The majority of our home health, hospice, and outpatient therapy services are reimbursed by government reimbursement programs, primarily Medicare, and non-covered services are paid directly by patients from private pay sources.

Our CCRC residents are generally seniors seeking a community offering a broad continuum of care enabling them to age-in-place.

Generally, these residents will initially enter the community as independent living residents and may, at a later time, advance into an assisted living, memory care, or skilled nursing area as their needs change.

Residents can also enter the CCRC communities directly into assisted living, memory care, or skilled nursing and, in some cases, may enter via the skilled nursing product line following an acute event and subsequently transfer from the skilled nursing unit to one of the other on-campus service lines.

Management Services

As of December 31, 2020, we managed 72 communities (9,202 units) on behalf of third parties and three communities (927 units) for which we have an equity interest, which represented approximately 16% of our senior housing capacity.

As of December 31, 2021, we managed a total of 33 communities (4,824 units) on behalf of others, which represented approximately 8% of our senior housing capacity.

Under our management arrangements, we receive management fees, which are generally determined by an agreed upon percentage of gross revenues (as defined in the management arrangement), as well as reimbursed expenses, which represent the reimbursement of certain expenses we incur on behalf of the owners.

During 2021, we expect terminations of a substantial portion of our management arrangements.

Generally either party to our management arrangements may terminate upon the occurrence of an event of default caused by the other party, generally subject to cure rights.

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Competitive Strengths

We believe our national network of senior living communities and healthcare services networks are well positioned to benefit from the future growth in the industry.

We believe our nationwide network of senior living communities is well positioned to benefit from the growth and increasing demand in the industry.

Some of our most significant competitive strengths are:

• Skilled management team with extensive experience .

Our senior management team and our Board of Directors have extensive experience in the senior living, healthcare, hospitality, and real estate industries, including the operation and management of a broad range of senior living assets.

Our senior management team has extensive experience in the senior living industry, including operating and managing a broad range of senior living assets, and related healthcare, hospitality, and real estate experience.

• Geographically diverse, high-quality, purpose-built communities .

As of December 31, 2021, we operated a nationwide base of 679 communities in 41 states.

• Ability to provide a broad spectrum of care .

Given our diverse mix of independent living, assisted living and memory care communities, and CCRCs, as well as our healthcare services offerings, through our clinical team and high-quality relationships with providers, we are able to meet a wide range of our residents' and patients' needs.

We believe that we are one of the few companies in the senior living industry with this capability and the only company that does so at scale on a national basis.

Given our diverse mix of independent living, assisted living, memory care, and CCRCs communities, we are able to meet a wide range of our customers' needs.

Through our comprehensive network of services, we help to provide seniors with care and services to support their lifestyle in an environment that feels like home.

We believe that we are one of the few companies in the senior living industry with this capability and the ability to do so at scale on a national basis.

We believe that our multiple product offerings create marketing synergies and cross-selling opportunities.

• Significant experience in providing healthcare services .

Through our Health Care Services segment, we currently provide, and following the closing of our transaction with HCA Healthcare, the venture will provide a range of home health, hospice, and outpatient therapy services in certain of our communities.

Additionally, through our clinical team, we provide education, wellness, and other services to residents, which we believe is a distinct competitive difference among senior housing operators.

We have significant experience in providing these services and expect to expand our offerings of these services to additional residents.

• The size of our business allows us to realize cost and operating efficiencies while continuing a local-community focus .

The size of our business allows us to realize cost savings, economies of scale in the procurement of goods and services, and access to favorable debt and financing terms.

• The size of our business allows us to realize cost and operating efficiencies.

We are the largest operator of senior living communities in the United States based on total capacity.

The size of our business allows us to realize cost savings and economies of scale in the procurement of goods and services.

Our scale also allows us to achieve increased efficiencies with respect to various corporate functions.

We intend to continue utilizing our expertise and size to capitalize on economies of scale resulting from our national platform to enhance our residents' experiences.

Our geographic footprint

and centralized infrastructure provide us with an operational advantage.

We negotiate contracts for food, insurance, and other goods and services with the advantages that scale provides.

In addition, we leverage our centralized corporate functions such as finance, human resources, legal, information technology, and marketing.

We intend to utilize our expertise and size to capitalize on economies of scale resulting from our national platform and to enhance our residents' and patients' experiences.

We believe that our geographic

footprint and centralized infrastructure provide us with a significant operational advantage over local and regional operators of senior living communities.

In addition, we have and will continue to leverage our centralized corporate functions such as finance, human resources, legal, information technology, and marketing.

Our senior housing business has typically experienced some seasonality, which we experience in certain regions more than others, due to weather patterns, geography, and higher incidence and severity of flu and other illnesses during winter months.

Although our seasonal pattern varies from year to year and occupancy patterns have been affected by the COVID-19 pandemic, historically our average monthly occupancy has generally begun to decline sequentially in the fourth quarter of the year, and we have generally expected average monthly occupancy to begin to increase towards the end of the second quarter each year.

Although our seasonal pattern varies from year to year and occupancy patterns have been affected by the COVID-19 pandemic, historically our average monthly occupancy has generally begun to decline sequentially toward the end of the fourth quarter of the year, and we have generally expected average monthly occupancy to begin to increase towards the end of the second quarter each year with the third quarter historically being the highest occupancy growth period of the year.

Utility expenses trend seasonally high in the first quarter and third quarter of each year.

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Operations Overview

We have implemented intensive standards, policies and procedures, and systems, including detailed staff resources and training, which we believe have contributed to high levels of customer service.

We have implemented intensive standards, policies and procedures, and systems, including detailed associate resources and training, which we believe have contributed to high levels of customer service.

Further, we believe our centralized support infrastructure allows our community-based leaders and personnel to focus on resident care and family connections.

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In addition, a portion of each Executive Director's compensation is directly tied to the operating performance of the community.

We continue to take actions intended to simplify the role of our Executive Directors to allow them to focus on our residents and their families and our associates.

We continue to take actions intended to simplify the role of our Executive Director to allow them to focus on our residents and their families and our associates.

We believe that the quality of our communities, coupled with support provided by the regional support infrastructure and our ability to provide industry-leading systems and training, has enabled us to attract high-quality, professional community Executive Directors.

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Other key positions supporting each community may include individuals responsible for food service, healthcare services, activities, housekeeping, and maintenance.

We believe that quality of care and operating efficiency can be maximized by direct resident and staff contact.

Associates involved in resident care, including administrative staff, are trained in support and care protocols, including emergency response techniques.

We believe that quality of care and operating efficiency can be maximized by direct resident and associate contact.

Associates involved in resident care, including administrative associates, are trained in support and care protocols, including emergency response techniques.

We have adopted formal training and evaluation procedures to help ensure quality care for our residents.

We have extensive policy and procedure manuals and hold regular training sessions for management and staff at each community.

We have extensive policy and procedure manuals and hold regular training sessions for management and non-management associates at each community.

Quality Assurance

We maintain quality assurance programs at each of our communities through our corporate and regional staff.

We maintain quality assurance programs at each of our communities through our corporate and regional associates.

Our quality assurance programs are designed to achieve a high degree of resident and family member satisfaction through the care and services that we provide and we have continued to transform our efforts throughout the pandemic through collaboration with our vendors and a combination of remote and in-person visits.

Our quality control measures include, among other things, community inspections conducted by corporate staff on a regular basis.

Our quality control measures include, among other things, community inspections conducted by corporate associates on a regular basis.

These inspections cover the appearance of the exterior and grounds;

the appearance and cleanliness of the interior;

the professionalism and friendliness of staff;

quality of resident care (including assisted living services, nursing care, therapy, and home health programs);

the professionalism and friendliness of associates;

quality of resident care (including assisted living services and nursing care);

the quality of activities and the dining program;

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We execute an integrated marketing campaign approach, including local media and outreach programs, digital advertising, social media, print advertising, e-mail, direct mail, and special events, such as health fairs and community receptions.

We generate hundreds of thousands of customer inquiries that go directly to our communities and Brookdale website.

All online forms and many calls are handled by trained senior living advisors in our Brookdale Connection Center, who schedule visits directly to our communities.

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Human Capital Resources

At Brookdale, we are dedicated to enriching the lives of those we serve with compassion, respect, excellence, and integrity.

Our Associates

We are dedicated to enriching the lives of those we serve with compassion, respect, excellence, and integrity.

We know that our success is dependent on attracting, engaging, developing, and retaining the best associates.

As of December 31, 2020, we employed approximately 45,000 associates, 70% of which were full time.

Approximately 900 associates work in or through our Brentwood, Tennessee headquarters and Milwaukee, Wisconsin office, supporting our community- and agency-based associates.

We promote a culture based on servant leadership, where we believe purpose-driven work allows each of us to have a positive impact on the residents, patients, and associates we interact with every day.

Our 2020 associate engagement survey showed that 93% of respondents know how they contribute to our success and 95% have a good understanding of our mission, vision, and cornerstones of passion, courage, partnership, and trust.

We hire associates who we believe make serving seniors their calling, do what is right even when no one is watching, connect with fellow associates and our residents and patients, and treat one another with respect.

As of December 31, 2021, we employed approximately 33,000 associates, 73% of whom were full-time.

Approximately 700 associates work in or for our Brentwood, Tennessee headquarters and Milwaukee, Wisconsin office, supporting our community-based associates.

As of December 31, 2021, approximately 80% of our associates are women, who comprise approximately 70% of the leadership roles at our communities and corporate offices.

Approximately 55% of our associates and 15% of individuals in our leadership roles are people of color.

During 2021, approximately 4,000 associates who worked directly for, or provided corporate support to, our former Health Care Services segment were transitioned to HCA Healthcare in connection with the HCS Sale.

We also experienced pressures associated with the intensely competitive labor environment.

We seek to ensure that our communities are staffed with full and part-time associates, though our use of more expensive contract labor and overtime has increased to cover open positions.

We have increased our recruiting efforts to fill open positions, reviewed wage rates in all of our markets, made appropriate adjustments, and will monitor to remain competitive.

Inclusion and Diversity

We are a business of people taking care of people, where our associates do extraordinary things every day as part of their shared commitment to Brookdale’s cornerstones and mission.

To attract and retain associates, we are committed to maintaining a welcoming and inclusive environment where people have an equal chance to grow and succeed.

We support our associates by providing an open door policy, offering training to help our people grow and to understand our commitment to providing a workplace free from discrimination and harassment, consistently enforcing our policies, and maintaining the expectation that all our associates will be treated with dignity and respect.

We also believe that true commitment to creating and fostering an inclusive and diverse workplace is best accomplished by example.

Our Board of Directors has purposefully evolved its gender composition to more closely resemble our customer and employee base, of which the majority are women.

Women now comprise 44% of our Board of Directors.

Over the last two years, we also increased the diversity of our Board of Directors and executive leadership team.

Two of the top three positions are held by women and 14% of our executive officers are racially or ethnically diverse.

Our commitment to diversity is further reflected in our workforce.

As of December 31, 2020, approximately 81% of our associates are women, who comprise approximately 73% of the leadership roles at our communities, agencies, and corporate offices, and approximately 53% of our associates and 12% of our leadership roles are people of color.

Our commitment to developing, retaining, and promoting diverse talent and advancing our inclusion strategy is ongoing.

Brookdale is committed to inclusion and diversity – built on a foundation of trust, partnership, courage, and passion.

We define diversity as the representation of associates from different groups, ideas, perspectives, and values.

We define inclusion as a culture of policies and practices that actively engages and provides each of our associates with the opportunity to be successful at Brookdale.

We believe an inclusive and diverse culture can help achieve our mission by:

• Attracting and retaining the best talent by recruiting from a broad array of backgrounds for all levels of the organization and investing in our talent;

• Increasing growth, productivity, and engagement by fostering a workplace where all associates feel valued and contribute to their fullest potential;

• Making Brookdale the place for top talent, driving outstanding service for our residents, and increasing stockholder value;

• Equipping our associates with resources to serve the changing demographics and needs of residents.

Talent Acquisition, Development, and Retention

In order to attract people who want to do challenging yet rewarding work, we offer competitive wages and benefits as well as opportunities to grow a career at Brookdale through mentorship, education, and training opportunities.

We use a variety of recruitment strategies to attract diverse talent to our organization, including partnerships with local and national organizations.

In 2020, we established new nursing school partnerships in Jacksonville, Florida and Denver, Colorado to continue to strengthen our pipeline for caregiver and clinical roles.

Additionally, we launched a new career section on our website to attract veterans and military spouses/partners to join Brookdale.

We offer learning opportunities for our associates when they join Brookdale and throughout the year.

Our newly implemented iLearn platform provides associates access to regulatory training, continuing education courses, and leadership and professional skill courses.

We also offer a tuition reimbursement program for associates to continue to grow their career.

To identify future leaders, we conduct strategic talent reviews regularly to provide senior leaders with visibility into succession for key leadership roles.

We believe the performance of individual communities is correlated to retention of our community leaders.

Our Executive Director (ED) and Health and Wellness Director (HWD) combined annual retention at our same community portfolio has remained around 70%.

We want to attract people who want to do challenging yet rewarding work and who want to make a difference in the lives of others.

We want our associates to feel valued and to know they make an impact that stretches beyond the walls of the communities and offices.

In order to attract high quality talent, we offer competitive wages and benefits as well as opportunities to grow a career at Brookdale through education, training, and on-the-job development experiences.

Recruitment strategies

In order to attract people who want to do challenging yet rewarding work, we use a variety of strategies to attract and hire diverse talent to our organization.

For example, in 2021, we implemented an assessment solution for our sales manager and director positions.

This assessment provides additional insight to hiring managers to use during the interview and selection process.

To support hiring managers in our communities, we published unique toolkits and resources and made systems improvements to simplify and enhance local sourcing and recruiting processes.

We also deployed additional market-based recruiters and launched a range of recruiting campaigns to support our communities’ hiring needs such as rehire campaigns to encourage former associates to come back to Brookdale.

Additionally, we continue to post to and source from job sites created for under-represented groups to expand our pipeline of candidates.

We offer learning opportunities for our associates when they join Brookdale and throughout their careers to better serve our residents and to grow their career.

Within the first year of implementing our new iLearn platform, which provides associates access to continuing education courses, leadership and professional skill courses, and regulatory training, our associates completed over 1.9 million courses.

Our Brookdale University provides training and leadership development for leaders across the organization.

Our learning and development programs were recognized in 2021 when Brookdale was named, for the second year in a row, one of the elite Training APEX Awards winners by Training magazine.

Additionally, in 2021, we launched a 6-month long new leader program.

This program helps equip new leaders with the skills they need to lead their teams effectively.

Over 1,400 leaders across different races, ages, and backgrounds were enrolled in 2021.

Of those enrolled, 926 were women, 498 were people of color, and 20 identified as veterans;

over half of the associates were over the age of 40.

In 2021, we welcomed our first Certified Nursing Assistant apprentices in New Jersey as part of our ongoing efforts to provide career opportunities for front-line associates.

We intend to further pursue this and other apprenticeship opportunities in the future.

We also offer a tuition reimbursement program for associates to continue to grow their careers.

We believe the performance of our individual communities and of our company as a whole, are correlated to retention of our key community leaders and our corporate associates.

Our 2021 annual incentive plan included the strategic objectives of retaining key community leadership (Executive Directors, Health and Wellness Directors, and Sales Directors) at our same community portfolio and retaining our corporate associates.

For the year ended December 31, 2021, our retention of key community leaders in our same community portfolio was 65%, and our retention of corporate associates was 81% excluding in both cases departures directly related to enforcement of our associate vaccination requirement.

Total Rewards

We consider offering a competitive total rewards program an important aspect of being an employer of choice.

Both full-time and part-time associates may participate in our 401(k) retirement savings plan with an opportunity for a matching contribution, our associate stock purchase plan, and other benefit plans.

We provide full-time associates additional benefits, including paid time off ("PTO") and holidays as well as adoption benefits.

In 2020, over 50% of eligible full-time associates participated in our medical and dental insurance plans.

We also recognize that there may be a time when associates need financial assistance due to extraordinary circumstances such as a fire, a tornado or hurricane, or the pandemic.

Our Associate Compassion Fund provides this type of assistance for associates in need.

In 2020, approximately $1.8 million of donations of PTO by our associates were provided directly to associates in need, approximately $0.3 million of which was donated by our senior leadership team to specifically support those associates affected by COVID-19.

To attract and retain the best associates, we offer a competitive total rewards program, which we believe is an important aspect of our overall compensation.

Both full-time and part-time associates are offered benefits, including a 401(k) retirement savings plan with the opportunity for matching contributions, as well as medical, dental, and other types of insurance.

In 2021, approximately half of our eligible full-time associates participated in our medical plans.

We also know maintaining overall well-being is important, which is why we offer benefits to cover a spectrum of needs.

Associates enrolled in a Brookdale medical plan, for example, are eligible to participate in a free coach-led digital program for chronic back, knee, or hip pain.

They also are able to use a mobile phone application to help individuals process and cope with life’s challenges, for free.

Brookdale also recognizes the importance of financial wellbeing, which is why we offer access to a financial wellness program for all associates.

Industry Regulation

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federal and state residents' rights statutes and regulations;

Anti-Kickback and physicians referral ("Stark") laws;

and safety and health standards set by the Occupational Safety and Health Administration.

anti-kickback and physician self-referral ("Stark") laws;

safety and health standards set by the Occupational Safety and Health Administration;

and federal, state, and local employment-related laws and regulations.

We are unable to predict the future course of federal, state, and local legislation or regulation.

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In several of the states in which we operate there are different levels of care that may be provided based on the level of licensure.

Several of the states in which we operate, or intend to operate, assisted living and memory care communities, home health and hospice agencies, and/or skilled nursing facilities require a certificate of need before the community or agency may be opened or the services at an existing community may be expanded.

In several of the states in which we operate, or intend to operate, assisted living and memory care communities or skilled nursing facilities require a certificate of need before a community may be opened or the services at an existing community may be expanded.

Senior living communities may also be subject to state and/or local building, zoning, fire, and food service codes and must be in compliance with these local codes before licensing or certification may be granted.

These laws and regulatory requirements could affect our ability to expand into new markets and to expand our services and communities in existing markets.

Unannounced surveys or inspections may occur annually or bi-annually, or following a regulator's receipt of a complaint about a provider.

From time to time in the ordinary course of business, we receive survey reports from state or federal regulatory bodies resulting from such inspections or surveys.

Most inspection deficiencies are resolved through a plan of corrective action relating to the community's operations, but the reviewing agency may have the authority to take further action against a licensed or certified community or agency, which could result in the imposition of fines, imposition of a provisional or conditional license, suspension or revocation of a license, suspension or denial of admissions, loss of certification as a provider under federal and/or state reimbursement programs, or imposition of other sanctions, including criminal penalties.

Unannounced surveys or inspections may occur annually, bi-or tri-annually, following a regulator's receipt of a complaint about a provider.

From time to time in the ordinary course of business, we receive survey reports from state or federal regulatory bodies citing deficiencies resulting from such inspections or surveys.

Most inspection deficiencies are resolved through a plan of corrective action relating to the community's operations, but the reviewing agency may have the authority to take further action against a licensed or certified community, which could result in the imposition of fines, imposition of a provisional or conditional license, suspension or revocation of a license, suspension or denial of admissions, loss of certification as a provider under federal and/or state reimbursement programs, or imposition of other sanctions, including criminal penalties.

Loss, suspension, or modification of a license may also cause us to default under our debt and lease documents and/or trigger cross-defaults.

Sanctions may be taken against providers or facilities without regard to the providers' or facilities' history of compliance.

We may also expend considerable resources to respond to federal and state investigations or other enforcement action under applicable laws or regulations.

We may also expend considerable resources to respond to federal and state investigations or other enforcement

action under applicable laws or regulations.

To date, none of the deficiency reports received by us has resulted in a suspension, fine, or other disposition that has had a material adverse effect on our revenues, results of operations, or cash flows.

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Regulation of the senior living industry is evolving at least partly because of the growing interests of a variety of advocacy organizations and political movements attempting to standardize regulations for certain segments of the industry, particularly assisted living and memory care.

Our operations could suffer from future regulatory developments, such as federal assisted living and memory care laws and regulations, as well as mandatory increases in the scope and severity of deficiencies determined by survey or inspection officials or an increase the number of citations that can result in civil or criminal penalties.

Our operations could suffer from future regulatory developments, such as federal assisted living and memory care laws and regulations, as well as mandatory increases in the scope and severity of deficiencies determined by survey or inspection officials or an increase in the number of citations that can result in civil or criminal penalties.

Certain current state laws and regulations allow enforcement officials to make determinations on whether the care provided by one or more of our communities exceeds the level of care for which the community is licensed.

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If regulatory requirements increase, whether through enactment of new laws or regulations or changes in the enforcement of existing rules, including increased enforcement brought about by advocacy groups, in addition to federal and state regulators, our operations could be adversely affected.

finding by survey and inspection officials may serve as the basis for false claims lawsuits by private plaintiffs and may lead to investigations under federal and state laws, which may result in civil and/or criminal penalties against the community or individual.

Any adverse finding by survey and inspection officials may serve as the basis for false claims lawsuits by private plaintiffs and may lead to investigations under federal and state laws, which may result in civil and/or criminal penalties against the community or individual.

There are various extremely complex federal and state laws governing a wide array of referrals, relationships, and arrangements and prohibiting fraud by healthcare providers, including those in the senior living industry, and governmental agencies are devoting increasing attention and resources to such anti-fraud initiatives.

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Because of these incentives, so-called "whistleblower" suits have become more frequent.

Additionally, since we operate communities and agencies that participate in federal and/or state healthcare reimbursement programs, we are subject to federal and state laws that prohibit anyone from presenting, or causing to be presented, claims for reimbursement which are false, fraudulent, or are for items or services that were not provided as claimed.

Additionally, since we operate communities that participate in federal and/or state healthcare reimbursement programs, we are subject to federal and state laws that prohibit anyone from presenting, or causing to be presented, claims for reimbursement which are false, fraudulent, or are for items or services that were not provided as claimed.

Similar state laws vary from state to state.

Violation of any of these laws can result in loss of licensure, citations, sanctions, and other criminal or civil fines and penalties, the refund of overpayments, payment suspensions, or termination of participation in Medicare and Medicaid programs, which may also cause us to default under our debt and lease documents and/or trigger cross-defaults.

We are subject to certain federal and state laws that regulate financial arrangements by healthcare providers, such as the Federal Anti-Kickback Law, the Stark laws, and certain state referral laws.

The Federal Anti-Kickback Law makes it unlawful for any person to offer or pay (or to solicit or receive) "any remuneration ...

We are subject to certain federal and state laws that regulate financial arrangements by healthcare providers, such as the federal Anti-Kickback Statute, the Stark laws, and certain state referral laws.

The federal Anti-Kickback Statute makes it unlawful for any person to offer or pay (or to solicit or receive) "any remuneration ...

directly or indirectly, overtly or covertly, in cash or in kind" for referring or recommending for purchase any item or service which is eligible for payment under the Medicare and/or Medicaid programs.

Authorities have interpreted this statute very broadly to apply to many practices and relationships between healthcare providers and sources of patient referral.

If we were to violate the Federal Anti-Kickback Law, we may face criminal penalties and civil sanctions, including fines and possible exclusion from government reimbursement programs, which may also cause us to default under our debt and lease documents and/or trigger cross-defaults.

If we were to violate the federal Anti-Kickback Statute, we may face criminal penalties and civil sanctions, including fines and possible exclusion from government reimbursement programs, which may also cause us to default under our debt and lease documents and/or trigger cross-defaults.

Adverse consequences may also result if we violate federal Stark laws related to certain Medicare and Medicaid physician referrals.

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We established procedures to comply with HIPAA privacy requirements at these communities.

We were required to be in compliance with the HIPAA rule establishing administrative, physical, and technical security standards for health information by 2005.

We were required

to be in compliance with the HIPAA rule establishing administrative, physical, and technical security standards for health information by 2005.

To the best of our knowledge, we are in compliance with these rules.

In addition, states have begun to enact more comprehensive privacy laws and regulations addressing consumer rights to data protection or transparency.

For example, the California Consumer Privacy Act became effective in 2020, and we expect additional federal and state legislative and regulatory efforts to regulate consumer privacy protection in the future.

For example, the California Consumer Privacy Act became effective in 2020 and the California Privacy Rights Act, Colorado Privacy Act, and Virginia Consumer Data Protection Act will become effective in 2023.

We expect additional federal and state legislative and regulatory efforts to regulate consumer privacy protection in the future.

These legislative and regulatory developments will impact the design and operation of our business and our privacy and security efforts.

We are subject to federal and state laws, regulations and executive orders relating to healthcare providers’ response to the COVID-19 pandemic.

These requirements vary based on provider type and jurisdiction but generally include mandatory requirements for testing of residents and/or staff, implementation of infection control standards and procedures, imposition of restrictions on new admissions or readmissions of residents, requiring screening of all persons entering a community, imposition of restrictions or limitations on who and how residents may be visited, and imposition of mandatory notification requirements to residents, families, staff, and regulatory bodies related to positive COVID-19 cases.

These requirements vary based on provider type and jurisdiction but generally may include mandatory requirements for vacation of staff, testing of residents and/or staff, providing COVID-19 related paid leave, implementation of infection control standards and procedures, imposition of restrictions on new admissions or readmissions of residents, required screening of all persons entering a community, imposition of restrictions or limitations on who and how residents may be visited, and imposition of mandatory notification requirements to residents, families, staff, and regulatory bodies related to positive COVID-19 cases.

Enhanced or additional penalties may apply for violation of such requirements.

For more information regarding the impacts of such regulation on our senior housing portfolio, see the COVID-19 pandemic update in Recent Developments above.

We are also subject to a wide variety of federal, state, and local employment-related laws and regulations which govern matters including, but not limited to, wage and hour requirements, equal employment opportunity obligations, leaves of absence and reasonable accommodations, employee benefits, the right of employees to engage in protected concerted activity (including union organizing), and occupational health and safety requirements.

Because labor represents such a large portion of our operating expenses, changes in federal, state, and local employment-related laws and regulations could increase our cost of doing business.

Furthermore, any failure to comply with these laws can result in significant protracted litigation, government investigation, penalties, or other damages which could harm our reputation and have a material adverse effect on our business.

Medicare and Medicaid Programs

We rely on reimbursement from government programs, including the Medicare program and, to a lesser extent, Medicaid programs, for a portion of our revenues.

Reimbursements from Medicare and Medicaid represented 11.3% and 3.2%, respectively, of our total resident fee revenues for the year ended December 31, 2020.

During the period, Medicare reimbursements represented 76.8% of our Health Care Services segment revenue, and Medicare and Medicaid reimbursements represented 18.5% of our CCRCs segment revenue.

Our sale of 80% of our equity in our Health Care Services segment to HCA Healthcare on July 1, 2021 reduced our reliance on government reimbursement programs.

We continue to rely on reimbursement from the Medicare and Medicaid programs for a portion of our revenues in our senior housing segments.

Reimbursements from Medicare and Medicaid represented 1.9% and 3.5%, respectively, of our consolidated senior housing segments' resident fee revenue for the year ended December 31, 2021.

Medicare and Medicaid reimbursements represented 18.8% of our CCRCs segment's resident fee revenue during such period.

Medicare is a federal program that provides certain hospital and medical insurance benefits to persons age 65 and over and certain disabled persons.

We receive revenue for our home health, hospice, skilled nursing, and outpatient therapy services from Medicare.

We receive revenue for our skilled nursing services from Medicare.

Medicaid is a medical assistance program administered by each state, funded with federal and state funds pursuant to which healthcare benefits are available to certain indigent or disabled patients.

We receive reimbursements under Medicaid (including state Medicaid waiver programs) for many of our assisted living and memory care communities.

These government reimbursement programs are highly regulated, involve significant administrative discretion, and are subject to frequent and substantial legislative, administrative, and interpretive changes, which may significantly affect reimbursement rates and the methods and timing of payments made under these programs.

Continuing efforts of government to contain healthcare costs could materially and adversely affect us, and reimbursement levels may not remain at levels comparable to present levels or may not be sufficient to cover the costs allocable to patients eligible for reimbursement.

Medicare reimbursement for home health and skilled nursing services is subject to fixed payments under the Medicare prospective payment systems.

In accordance with Medicare laws, CMS makes annual adjustments to Medicare payment rates in many prospective payment systems under what is commonly known as a "market basket update." Each year, the Medicare Payment Advisory Commission ("MedPAC"), a commission chartered by Congress to advise it on Medicare payment issues, recommends payment policies to Congress for a variety of Medicare payment systems.

Congress is not obligated to adopt MedPAC recommendations and based on previous years, there can be no assurance that Congress will adopt MedPAC's recommendations in any given year.

Reimbursement levels under the Medicare and Medicaid programs may not remain at levels comparable to present levels or may not be sufficient to cover the costs allocable to patients eligible for reimbursement.

Medicare reimbursement for skilled nursing services is subject to fixed payments under the Medicare prospective payment systems.

In accordance with Medicare laws, CMS makes annual adjustments to Medicare payment rates in many prospective payment systems under what is commonly known as a "market basket update." The Improving Medicare Post-Acute Care Transformation Act of 2014 (the "IMPACT Act") requires standardized assessment data for quality improvement, payment, and discharge planning purposes across the spectrum of post-acute care, including skilled nursing.

The IMPACT Act will require skilled nursing facilities to begin reporting standardized patient assessment data, new quality measures, and resource use measures.

Failure to report such data when required would subject a facility to a 2% reduction in market basket prices then in effect.

The IMPACT Act further requires HHS and the Medicare Payment Advisory Commission to study and report to Congress by 2022 regarding alternative post-acute care payment models, including payment based upon individual patient characteristics and not care setting.

Medicaid reimbursement rates for many of our assisted living and memory care communities also are based upon fixed payment systems.

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In addition, Medicaid reimbursement can be impacted negatively by state budgetary pressures, which may lead to reduced reimbursement or delays in receiving payments.

Audits and Investigations

As a result of our participation in the Medicare and Medicaid programs, we are subject to various government reviews, audits, and investigations to verify our compliance with these programs and applicable laws and regulations.

CMS has engaged a number of third party firms, including Recovery Audit Contractors (RAC), Zone Program Integrity Contractors (ZPIC), and Unified Program Integrity Contractors (UPIC) to conduct extensive reviews of claims data to evaluate the appropriateness of billings submitted for payment.

Audit contractors may identify overpayments based on coverage requirements, billing and coding rules, or other risk areas.

In addition to identifying overpayments, audit contractors can refer suspected violations of law to government enforcement authorities.

An adverse determination of government reviews, audits, and investigations may result in citations, sanctions, other criminal or civil fines and penalties, the refund of overpayments, payment suspensions, or termination of participation in Medicare and Medicaid programs.

Our costs to respond to and defend any such audits, reviews, and investigations may be significant and are likely to increase in the current enforcement environment, and any resulting sanctions or criminal, civil, or regulatory penalties could have a material adverse effect on our business, financial condition, results of operations, and cash flow.

The Improving Medicare Post-Acute Care Transformation Act of 2014

The Improving Medicare Post-Acute Care Transformation Act of 2014 (the "IMPACT Act"), which became law in 2014, requires standardized assessment data for quality improvement, payment, and discharge planning purposes across the spectrum of post-acute care, including home health, hospice, and skilled nursing.

The IMPACT Act will require such agencies and facilities to begin reporting standardized patient assessment data, new quality measures, and resource use measures.

Failure to report such data when required would subject an agency or facility to a 2% reduction in market basket prices then in effect.

The IMPACT Act further requires HHS and MedPAC to study and report to Congress by 2022 regarding alternative post-acute care payment models, including payment based upon individual patient characteristics and not care setting.

The IMPACT Act also includes provisions impacting Medicare-certified hospices, including increasing survey frequency to once every 36 months, imposing a medical review process for facilities with a high percentage of stays in excess of 180 days, and updating the annual aggregate Medicare payment cap.

Home Health Claim Review Demonstrations

In 2016, CMS announced that it would implement a 3-year Medicare pre-claim review demonstration for home health services in the states of Illinois, Florida, Texas, Michigan, and Massachusetts.

The pre-claim review is a process through which a request for provisional affirmation of coverage is submitted for review before a final claim is submitted for payment.

CMS began the

pre-claim review demonstration in Illinois in August 2016, which CMS paused in April 2017.

The pre-claim review demonstration resulted in increased administrative costs and reimbursement delays for our Illinois home health agency.

In December 2018, CMS indicated it was continuing the process for obtaining approval under the Paperwork Reduction Act of a 5-year Medicare claim review demonstration for Illinois, which would be further expanded to Florida, Texas, North Carolina, and Ohio.

The Home Health Review Choice Demonstration ("RCD") was implemented on June 1, 2019 in Illinois and September 30, 2019 in Ohio.

To allow home health agencies to transition to the Patient-Driven Grouping Model ("PDGM"), CMS announced in October 2019 that it was rescheduling the implementation of the RCD for the remaining states of Texas, North Carolina, and Florida.

The demonstration began in Texas on March 2, 2020, and in North Carolina and Florida on August 31, 2020.

CMS has stated that they will monitor the transition to PDGM and assess the need for any changes.

Under the RCD, as currently proposed, providers have an initial choice of three options for review:

pre-claim review, post-payment review, or minimal post-payment review with a 25% payment reduction for all home health services.

We derive a significant portion of our home health revenue from these states.

The implementation of the RCD has adversely affected our revenue, results of operations, and cash flows.

Home Health Value-Based Purchasing

On January 1, 2016, CMS implemented Home Health Value-Based Purchasing ("HHVBP").

The HHVBP model was designed to give Medicare certified home health agencies incentives or penalties, through payment bonuses, to give higher quality and more efficient care.

HHVBP was rolled out to nine pilot states:

Arizona, Florida, Iowa, Maryland, Massachusetts, Nebraska, North Carolina, Tennessee, and Washington, a majority of which we currently have home health operations.

Bonuses and penalties began in 2018 with the maximum of plus or minus 3% and are scheduled to grow to plus or minus 8% by 2022.

Payment adjustments are calculated based on performance in three process measures, nine outcome measures, five patient satisfaction measures, and three agency self-reported measures.

During the year ended December 31, 2020, our home health revenue declined approximately 1% due to HHVBP and we expect an additional decline of approximately 1% during 2021.

The Bipartisan Budget Act of 2018

The Bipartisan Budget Act of 2018 (the "BBA"), enacted in February 2018, includes several provisions impacting Medicare reimbursement to home health, hospice, and outpatient therapy providers.

With respect to home health providers, the BBA (1) bases payment on a 30-day episode of care beginning January 1, 2020, coupled with annual determinations by CMS to ensure budget neutrality (including taking into account provider behavior), (2) eliminated retroactive payment adjustments based upon the level of therapy services required beginning January 1, 2020, (3) extended the 3% add-on payment for home health services provided to residents in rural areas beginning January 1, 2018, coupled with a reduction and phase out of such add-on payment over the following four fiscal years, and (4) established a market basket update of 1.5% for the year beginning January 1, 2020.

With respect to hospice providers, the BBA established a new payment policy related to early discharges to hospice care from hospitals, which imposes a financial penalty on hospitals for each early discharge to hospice care beginning October 1, 2018.

With respect to outpatient therapy providers, the BBA permanently repealed the Medicare Part B outpatient therapy cap effective January 1, 2018 and continued the targeted medical review process with a reduction of the applicable threshold triggering such review to $3,000 effective January 1, 2018.

CMS Final Rule 1689-FC for Medicare Home Health Prospective Payment

Based on the CMS final rule published in September, 2019, beginning in fiscal year 2021 (as amended by the CARES Act), CMS estimated that the net impact of the payment provisions of the proposed changes would result in an increase of 1.3% in reimbursement to home health providers and finalized the methodology used to determine the rural add-on payment for 2020 through 2022 as well as regulations text changes regarding certifying and recertifying patient eligibility for Medicare home health services and remote patient monitoring.

Additionally, the proposed rule includes changes to the home health prospective payment system ("HHPPS") case-mix adjustment methodology through the use of a new PDGM for home health payments.

This change affected home health revenue beginning on or after January 1, 2020 and also includes a change in the unit of payment from 60-day episodes of care to 30-day episodes of care.

Pandemic-Related Legislation

The CARES Act temporarily suspended the 2% Medicare sequestration for the period May 1, 2020 to December 31, 2020.

The Consolidated Appropriations Act, 2021, enacted on December 27, 2020, extended the sequestration suspension through March 31, 2021.

During the year ended December 31, 2020, we received $ 87.5 million under the Accelerated and Advance Payment Program administered by CMS, which was temporarily expanded by the CARES Act.

Under the program, we requested acceleration/

advancement of 100% of our Medicare payment amount for a three-month period.

The Continuing Appropriations Act, 2021 and Other Extensions Act, enacted on October 1, 2020, amended the repayment terms for accelerated/advanced payments.

As amended, recoupment of accelerated/advanced payments will begin one year after payments were issued.

Payments will be recouped at a rate of 25% of Medicare payments for the first eleven months following the anniversary of issuance and at a rate of 50% of Medicare payments for the next six months.

Any outstanding balance of accelerated/advanced payments will be due following such recoupment period.

The Medicare and Medicaid reimbursement programs are highly regulated, involve significant administrative discretion, and are subject to frequent and substantial legislative, administrative, and interpretive changes, which may significantly affect

reimbursement rates and the methods and timing of payments made under these programs.

As a result of our participation in such programs, we are subject to government reviews, audits, and investigations to verify compliance with these programs and applicable laws and regulations.

CMS has engaged third-party firms to review claims data to evaluate appropriateness of billings.

In addition to identifying overpayments, audit contractors can refer suspected violations to government authorities.

An adverse outcome of government scrutiny may result in citations, sanctions, other criminal or civil fines and penalties, the refund of overpayments, payment suspensions, or termination of participation in Medicare and Medicaid programs.

Environmental Matters

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What changed 10-K

Item 1. Business