What changed in this filing

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Item 1. Business

2023-02-22 compared with 2022-02-15 · 172 added, 232 removed, 374 unchanged (52% of the section changed)

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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 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.

The ability of residents to age-in-place is also beneficial to our 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.

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.

During this pandemic recovery phase, we have continued to focus on the health and wellbeing of our residents and associates and "Winning the Recovery" by providing valued 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.

We are focused on priorities that will position us for growth and capitalize on positive trends in demographics, customer preferences, and lower new supply in the industry, while using scale to our advantage.

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.

We believe that we provide highly valuable services to seniors, and we continue to strive to expand the number of seniors we serve through targeted efforts to increase our occupancy levels and improve controllable expense management, 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.

• 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 drive accelerated growth.

Through this strategic priority, we intend to expand successful pilot programs to further support and extend length of employment with Brookdale.

We expect to diversify and optimize our recruiting plans, improve training, educational, and career development opportunities for associates and enhance our already compelling value proposition for our associates in the areas of compensation, leadership, career growth, and meaningful work.

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

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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.

We expect to strengthen associate engagement for an enhanced resident experience.

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

As we execute our "Winning the Recovery" strategy, we expect RevPAR will be driven by both occupancy and RevPOR growth, propelled by (i) our strategic priorities, (ii) accelerating growth within our target demographic, and (iii) significantly lower supply growth.

Our goal is to reach or exceed our historical occupancy high over the long term.

As occupancy grows, we anticipate benefiting from operating

leverage, resulting in improving margins.

With the combination of RevPAR growth and operating leverage, we expect to drive Adjusted EBITDA and cash flow growth.

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.

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

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

• Enhance healthcare and wellness.

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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.

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

• Drive innovation and leverage technology.

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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.

• Improve and grow our senior living portfolio.

As we look to return to pre-pandemic results, we intend to (i) exit non-strategic or underperforming owned assets or leases when possible, (ii) expand our footprint and services in core markets where we have, or can achieve, a clear leadership position, and (iii) explore further growth opportunities.

Over the longer term, we will also continue to invest in our development capital expenditures program through which we expand, 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 improve profitability and be the first choice in senior living by being the nation’s most trusted and effective senior living provider.

Recent Developments

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.

Centers for Medicare & Medicaid Services ("CMS").

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 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.

COVID-19 Pandemic

The COVID-19 pandemic continued to significantly affect our operations during 2022.

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

Occupancy and Revenue Recovery

We believe that recovering our occupancy lost due to the pandemic while maintaining rate discipline is critical to turning around our operational losses.

During 2020 and, to a lesser degree, 2021, we had in place restrictive measures at many of our communities, including restrictions on visitors and move-ins.

From March 2020 through February 2021 we lost 1,330 basis points of weighted average consolidated senior housing occupancy due to the pandemic, resulting in our lowest weighted average occupancy of 69.4% during February 2021.

In the aggregate, for the three years ended December 31, 2022, we estimate the pandemic resulted in $1.0 billion of lost resident fee revenue in our consolidated senior housing portfolio and former Health Care Services segment compared to our pre-pandemic expectations, including an estimated $0.4 billion of lost resident fee revenue for the year ended December 31, 2022.

Throughout 2022, we continued to execute on key initiatives to rebuild our occupancy.

By December 31, 2022, we had recovered 760 basis points of weighted average consolidated senior housing occupancy, ending with December 2022 occupancy of 77.0%.

We also increased our consolidated senior housing RevPOR by 4.5% during 2022 compared to the prior year.

During 2023, we intend to continue to focus on rebuilding our occupancy back to, or above, pre-pandemic levels.

We cannot predict

with reasonable certainty when our occupancy will return to pre-pandemic levels.

The table below sets forth our recent consolidated occupancy trend.

2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022

Weighted average 83.2 % 78.7 % 75.3 % 72.7 % 69.6 % 70.5 % 72.5 % 73.5 % 73.4 % 74.6 % 76.4 % 77.1 %

Quarter end 82.2 % 77.8 % 75.0 % 71.5 % 70.6 % 72.6 % 74.2 % 74.5 % 75.0 % 76.6 % 78.4 % 78.1 %

2022 Feb 2022 Mar 2022 Apr 2022 May 2022 Jun 2022 Jul 2022 Aug 2022 Sep 2022 Oct 2022 Nov 2022 Dec 2022 Jan 2023

Weighted average 73.4 % 73.3 % 73.6 % 73.9 % 74.6 % 75.2 % 75.9 % 76.4 % 76.9 % 77.2 % 77.0 % 77.0 % 76.6 %

Month end 74.2 % 74.4 % 75.0 % 75.3 % 76.2 % 76.6 % 77.1 % 77.9 % 78.4 % 78.2 % 78.1 % 78.1 % 77.6 %

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.

Reductions to Pandemic-Related Costs

With significantly lower case volumes in 2022, our incremental direct costs to respond to the pandemic were $17.4 million for the year ended December 31, 2022, representing a 63.5% decrease compared to the year ended December 31, 2021.

On a cumulative basis, for the three years ended December 31, 2022, we have incurred $190.6 million of facility operating expense for such incremental direct costs to respond to the pandemic.

The direct costs include those for:

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

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

enhanced cleaning and environmental sanitation;

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

Government Provided Financial Relief

In the aggregate, government provided financial relief has offset our incremental direct costs to respond to the pandemic and a minor portion of our estimated lost revenue.

During the year ended December 31, 2022, we recognized $80.5 million of other operating income for government provided grants and employee retention credits, including $61.1 million of grants from the Public Health and Social Services Emergency Fund ("Provider Relief Fund").

For the three years ended December 31, 2022, we recognized an aggregate of $208.6 million of other operating income for government provided grants and employee retention credits, including pursuant to the Provider Relief Fund.

We were eligible to claim employee retention credits for certain of our associates under COVID-related legislation.

During the years ended December 31, 2022 and 2021, we recognized $9.4 million and $9.9 million of such employee retention credits within other operating income, respectively.

As of December 31, 2022, we had a receivable of approximately $14.7 million for such credits.

During the year ended December 31, 2022, we repaid the final amounts of the employer portion of social security payroll taxes deferred pursuant to pandemic-related legislation, and all remaining amounts of our advanced payments under the Accelerated and Advance Payment Program administered by the Centers for Medicare & Medicaid Services ("CMS") were recouped.

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 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 or variants of the disease;

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government financial and regulatory relief efforts that may become available to business and individuals, including our ability to qualify for and satisfy the terms and conditions of financial relief;

restrictions on visitors and move-ins at our communities as a result of infections at a community or as necessary to comply with regulatory requirements or at the direction of authorities having jurisdiction;

perceptions regarding the safety of senior living communities during and after the pandemic;

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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;

greater use of contract labor and other premium labor 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 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.

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.

Macroeconomic Conditions

A confluence of macroeconomic conditions, including an intensely competitive labor environment and higher inflation and interest rates, affected our operations during 2022 and continue to do so.

Labor Pressures

Labor costs comprise approximately two-thirds of our total facility operating expense.

We began to experience pressures associated with the intensely competitive labor environment during 2021, which continued throughout 2022.

The United States’ unemployment rate remained at or below 4.0% each month during 2022, and more than half of states experienced record low unemployment rates.

Labor pressures have resulted in higher-than-typical associate turnover and wage growth, and we have experienced difficulty in filling open positions timely.

We have increased our recruiting efforts to fill existing open positions, resulting in increasing the size of our workforce by approximately 4,800 community associates during 2022.

We continue to review wage rates in our markets and make competitive adjustments.

To cover existing open positions, during 2021 and continuing into 2022, we needed to rely on more expensive premium labor, primarily contract labor and overtime.

From its peak in December 2021 to December 2022, we have decreased our monthly contract labor expense by approximately 80%, while maintaining focus on resident satisfaction and high-quality care.

We continue to work to reduce our reliance on premium labor.

The labor component of our facility operating expense increased $122.1 million, or 9.6%, during 2022 compared to the prior year.

In our same community portfolio, such expense increased 11.0% during 2022 compared to the prior year.

These increases primarily resulted from merit and market wage rate adjustments, more hours worked with higher occupancy during the period, and an increase in the use of premium labor, primarily overtime.

For 2023, we expect to continue to experience labor cost pressure as a result of the continuing labor conditions previously described and an anticipated increase in hours worked as our occupancy levels grow.

Continued increased competition for, or a shortage of, nurses or other associates and general inflationary pressures have required and may require that we enhance our pay and benefits package to compete effectively for such associates.

Our non-labor facility operating expense comprises approximately one-third of our total facility operating expense and is subject to inflationary pressures.

The United States consumer price index increased 6.5% during 2022, with food and energy prices increasing above 10%.

We mitigated a portion of the increase in food costs with the scale benefit of a higher number of residents, along with appropriate product substitution.

We mitigated a portion of the rising utility costs through sustainability investments we made in 2022 and recent years, such as lighting retrofits and water consumption projects.

Despite our mitigation efforts and with higher occupancy, for 2022 our non-labor facility operating expense increased $57.1 million, or 8.9%, compared to the prior year.

In our same community portfolio, such expense increased 9.2% during 2022 compared to the prior year.

For 2023, we expect to continue to experience inflationary pressures.

Interest Rates

As of December 31, 2022, we had approximately $1.6 billion of long-term variable rate debt outstanding which is indexed to the London Interbank Offer Rate ("LIBOR") or Secured Overnight Financing Rate ("SOFR"), plus a weighted average margin of approximately 230 basis points.

Accordingly, our annual interest expense related to long-term variable rate debt is directly affected by movements in LIBOR or SOFR.

The LIBOR and SOFR steadily increased throughout 2022, ending the year more than 400 basis points higher than year-end 2021.

Approximately 92% of our long-term variable rate debt is subject to interest rate cap or swap agreements, which had a weighted average fixed interest rate of 4.14% and a weighted average remaining term of 1.2 years as of December 31, 2022.

Many of our long-term variable rate debt instruments include provisions that obligate us to obtain additional interest rate cap agreements upon the maturity of the existing interest rate cap agreements.

The costs of obtaining additional interest rate cap agreements may offset the benefits of our existing interest rate cap agreements.

For the year ended December 31, 2022, our debt interest expense increased $16.5 million, or 11.6%, compared to the prior year, substantially all due to an increase in our interest expense associated with our long-term variable rate debt.

Interest earned on our cash, cash equivalents, and marketable securities partially offset such increased interest expense.

Resident Fee Increases

The rates we charge our residents are highly dependent on local market conditions and the competitive environment in which the communities operate.

As the senior living industry rebuilds occupancy lost due to the pandemic, we continue to experience a highly competitive environment for new residents.

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.

We made the annual rate adjustment effective January 1, 2022 for our in-place private pay residents, which was higher than our typical annual rate adjustment and resulted in a 4.5% net increase in same community RevPOR for 2022 compared to 2021.

We have recently made the annual rate adjustment effective January 1, 2023 for our in-place private pay residents.

The increase was again higher than our typical annual rate adjustment in order to help offset our recent increased costs as a result of labor pressures, high inflation, and increased interest rates previously described.

As a result of rate and occupancy increases, consolidated RevPAR for January 2023 increased approximately 13% compared to January 2022.

Due to the competitive environment for new residents in our recovering industry, the higher rate adjustment could slow our occupancy recovery progress or result in a decrease in occupancy in our communities.

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.

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.

The Senior Living Industry

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.

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, 2022, of which approximately 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.

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Data from NIC shows that industry occupancy began to decrease starting in 2016 as a result of new openings and oversupply.

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

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.

Competitive new openings continue to affect certain locations, but have declined significantly from the peak in 2017 and more recently have been impacted by the pandemic and the macroeconomic factors discussed above.

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

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.

We cannot predict with reasonable certainty when the senior housing industry occupancy rate will return to pre-pandemic 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.

Due to demographic trends, and continuing advances in science, nutrition, and healthcare, the senior population will continue to grow.

US Census projections suggest that, starting in 2022, there will be nearly one million new potential residents per year, and we believe that demand for senior care will increase as a result.

Census projections suggest that there will be over one million new potential residents per year for the rest of the decade, and we believe that demand for senior care will increase as a result.

As seniors are living longer and this segment of the population rapidly grows, so will the number living with Alzheimer's disease and other dementias and the burden of chronic diseases and conditions.

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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.

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;

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

enhancing our local and national marketing and public relations efforts;

and evaluating current community position relative to competition and repositioning if necessary (e.g., services, amenities, programming, and price).

Like other companies, our financial results may be negatively impacted by increasing salaries, wages, and benefits costs for our associates, particularly if such costs cannot be covered by implementing price increases.

Higher costs of food, utilities, equipment and supplies, insurance, and real estate taxes may also have a negative impact on our financial results.

Like other companies, our financial results may be negatively

impacted by increasing salaries, wages, and benefits costs for our associates, particularly if such costs cannot be covered by implementing price increases.

Higher costs of food, utilities, equipment and supplies, insurance, real estate taxes, and interest rates may also have a negative impact on our financial results.

The COVID-19 pandemic has presented significant challenges to our industry, as outlined above.

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Consequently, we may encounter competition that could limit our ability to attract and retain residents and associates, raise or maintain resident fees, and expand our business, which could have a material adverse effect on our occupancy, revenues, results of operations, and cash flows.

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 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.

Due to the industry's lower than pre-pandemic occupancy levels, certain competitors may price aggressively in order to capture market share.

Our major senior housing competitors include Atria Senior Living Inc., Life Care Services, LLC, Sunrise Senior Living, LLC, Erickson Senior Living, AlerisLife Inc., 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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("Ventas") and Welltower Inc.

("Welltower").

Additionally, such REITs may have the ability to directly compete in the management of certain independent living facilities as a result of recent IRS rulings.

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.

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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.

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

("HCA Healthcare") and retained a 20% equity interest in the venture with HCA Healthcare ("HCS Venture").

As of December 31, 2022, we had three reportable segments:

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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 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.

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Total 673 56,892 100.0 % 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 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.

For the year ended December 31, 2022, we generated 93.5% of our resident fee revenue from private pay customers, 5.1% from government reimbursement programs (primarily Medicaid and Medicare) and 1.4% from other payor sources.

Our owned communities generated 58.4% of our resident fee revenue and our leased communities generated 41.6% of our resident fee revenue.

The table below shows the percentage of our resident fee and management fee revenue attributable to each of our segments or All Other category for the year ended December 31, 2022.

(in thousands) Resident Fee and Management Fee Revenue % of Total

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CCRCs 322,644 12.4 %

Health Care Services 174,164 6.8 %

All Other 12,020 0.5 %

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We offer a variety of senior living communities in locations across the United States.

We operate and manage independent living, assisted living, and memory care communities, and CCRCs.

We operate and manage independent living, assisted living, memory care, and continuing care retirement communities.

The majority of our units are organized in campus-like settings or stand-alone communities offering multiple service levels.

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

Each independent living community provides residents with basic services such as dining service options, 24-hour emergency response, housekeeping, education and wellness programs, and recreational activities.

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.

Each independent living community provides residents with basic services such as dining service options, an emergency alert system, housekeeping, education and wellness programs, and recreational activities.

Most of these communities also offer (either directly or through access to third-party service providers) 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 activities of daily living ("ADLs").

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As of December 31, 2022, we managed a total of 32 communities (4,725 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.

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.

Several long-term agreements also provide for early termination rights of the owner which may in some cases require an early termination fee.

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.

Competitive Strengths

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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.

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.

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In addition, we have established centralized operations groups to support all of our product lines and communities in areas such as training, regulatory affairs, asset management, dining, clinical services, sales, customer engagement, marketing, and procurement.

We have also established company-wide policies and procedures relating to, among other things:

We have also established company-wide policies and

procedures relating to, among other things:

resident care;

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Quality Assurance

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

We maintain quality assurance programs at each of our communities overseen by 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.

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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.

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.

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.

Certain resident referral programs have been established and promoted at many communities within the limitations of federal and state laws.

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As of December 31, 2022, we employed approximately 36,000 associates, 70% 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.

Approximately 1,400 corporate and regional associates support our community-based associates.

As of December 31, 2022, approximately 80% of our associates are women, who comprise approximately 70% of the leadership roles at our communities and corporate offices.

Approximately 60% 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.

During 2022, we continued to experience pressures associated with the intensely competitive labor environment.

We seek to ensure that our communities are staffed with full and part-time associates.

In 2022, we have focused on increasing our net hires in order to decrease our use of more expensive premium labor to cover existing open positions and, as a result, we increased the number of community associates by approximately 4,800 during 2022.

We have continued to diversify and optimize our recruiting efforts to fill open positions, reviewed wage rates in our markets, made adjustments, and we will monitor to remain competitive.

Inclusion and Diversity

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

In 2022, we launched our first six-month long development program focused on identifying a diverse mix of associates interested in an Executive Director career path.

Nearly 50% of the program participants identify as people of color.

This program helps equip future leaders with the skills they need to advance their career with Brookdale.

We intend to further expand the program in 2023.

Talent Acquisition, Development, and Retention

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.

We want our associates to feel valued, to find purpose and meaning in their work, 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.

In order to attract people who want the chance to be a part of something bigger than themselves, we use a variety of strategies to attract and hire diverse talent to our organization.

To support hiring managers in our communities, we partnered with our vendors to continue to optimize our recruiting technologies in order to simplify and enhance local sourcing and recruiting processes.

We also increased the number of market-based recruiters to provide additional hiring support for our community-based roles.

We implemented processes to support recruiting from military settings.

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.

Our learning and development programs were recognized in 2022 when Brookdale was named, for the third year in a row, one of the elite Training APEX Awards winners by Training magazine.

In 2022, we began offering an advanced fees program to assist associates interested in becoming a Certified Nursing Assistant ("CNA") or Medication Technician.

Associates who qualify can have their training fees paid for, in advance, to achieve certification in these areas.

This initiative helps remove the cost barrier for those who are interested in a CNA or Medication Technician career with Brookdale.

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 and regional associates.

Our 2022 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 and regional associates.

For the year ended December 31, 2022, our retention of key community leaders in our same community portfolio was 62%, and our retention of corporate and regional associates was 82%.

We also believe that it is important to hear from our associates as a way to engage and retain them.

To that end, in 2022, we conducted engagement pulse surveys for specific populations to focus on certain actions to engage and retain them.

Total Rewards

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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.

For example, full-time associates enrolled in one of our medical plans can receive a wellness incentive for completing their annual physical.

Associates enrolled in a Brookdale medical plan are also 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.

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Some of the laws and regulations that impact our industry include:

state and local laws impacting licensure, protecting consumers against deceptive practices, and generally affecting the communities' management of property and equipment and how we otherwise conduct our operations, such as fire, health, safety, and privacy laws and regulations;

state and local laws impacting licensure, protecting consumers against unfair and deceptive trade practices, and generally affecting the communities' management of property and equipment and how we otherwise conduct our operations, such as fire, health, safety, and privacy laws and regulations;

federal and state laws governing Medicare and Medicaid, which regulate allowable costs, pricing, quality of services, quality of care, food service, resident rights (including abuse and neglect) and fraud;

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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, bi-or tri-annually, following a regulator's receipt of a complaint about a provider.

Unannounced surveys or inspections may occur annually, bi-or tri-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 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.

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 or denial of payment for 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.

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.

However, any future substantial failure to comply with any applicable legal and regulatory requirements could result in a material adverse effect to our business as a whole.

In addition, states' Attorneys General vigorously enforce consumer protection laws as those laws relate to the senior living industry.

State Medicaid Fraud and Abuse Units may also investigate assisted living and memory care communities even if the community or any of its residents do not receive federal or state funds.

We may also expend considerable resources to respond to federal and state investigations or other enforcement action under applicable laws or regulations (including investigations and actions by state Attorneys General and other state and local authorities).

However, any future substantial failure to comply with any applicable legal and regulatory requirements could result in a material adverse effect to our business as a whole.

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.

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If a state were to find that one community's citation will impact another of our communities, this will also increase costs and result in increased surveillance by the state survey agency.

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.

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.

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.

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

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 are effective in 2023.

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

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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.

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

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.

Reimbursements from Medicare and Medicaid represented 1.8% and 3.3%, respectively, of our consolidated resident fee revenue for the year ended December 31, 2022.

Medicare and Medicaid reimbursements represented 18.0% of our CCRCs segment's resident fee revenue during such period.

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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.

In accordance with Medicare laws, CMS makes annual adjustments to Medicare payment rates.

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.

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.

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Federal, state, and local laws and regulations also govern the removal, encapsulation, disturbance, handling, and/or disposal of asbestos-containing materials and potential asbestos-containing materials when such materials are in poor condition or in the event of construction, remodeling, renovation, or demolition of a building.

operators of real properties for personal injury or improper work exposure associated with asbestos-containing materials and potential asbestos-containing materials.

Such laws may impose liability for improper handling or a release to the environment of asbestos-containing materials and potential asbestos-containing materials and may provide for fines to, and for third parties to seek recovery from, owners or operators of real properties for personal injury or improper work exposure associated with asbestos-containing materials and potential asbestos-containing materials.

The presence of mold, lead-based paint, contaminants in drinking water, radon, and/or other substances at any of the communities we own or may acquire may lead to the incurrence of costs for remediation, mitigation, or the implementation of an operations and maintenance plan.

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Changes in the environmental regulatory framework (including legislative or regulatory efforts designed to address climate change) could have a material adverse effect on our business.

Because environmental laws vary from state to state, expansion of our operations to states where we do not currently operate may subject us to additional restrictions on the manner in which we operate our communities.

Available Information

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Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports are available free of charge through our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC, at the following address:

www.brookdale.com/investor.

www.brookdaleinvestors.com.

The information within, or that can be accessed through, our website addresses is not part of this report.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business