What changed in this filing

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Item 1. Business

2024-02-21 compared with 2023-02-22 · 161 added, 229 removed, 317 unchanged (55% of the section changed)

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together with its consolidated subsidiaries.

We are the nation's premier operator of senior living communities, operating and managing 673 communities in 41 states as of December 31, 2022, with the ability to serve more than 60,000 residents.

We are the nation's premier operator of senior living communities, operating and managing 652 communities in 41 states as of December 31, 2023, with the ability to serve approximately 59,000 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").

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.

Our senior living communities and our comprehensive network help to provide seniors with care, connection, 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, make new friends, and stay connected with 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.

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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" 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.

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.

Brookdale is committed to its mission—to enrich the lives of those we serve with compassion, respect, excellence, and integrity.

We continue to focus on the health and well-being of our residents and associates and on achieving our long-term growth potential by providing valued high-quality care and personalized service.

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

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

Our key strategic priorities are as follows:

• 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 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.

We believe that we provide highly valuable services to seniors, and we continually strive to expand the number of seniors we serve through targeted efforts to increase our occupancy levels while remaining focused on charging an appropriate rate for the services we provide.

Over the near term, as occupancy continues to recover, we believe we can further improve controllable expense management and margin through leverage of fixed expenses while we continue to meet our residents' needs, provide high-quality care and personalized service, and remain in compliance with applicable regulatory requirements.

With this strategic priority, we are working to ensure that 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, clinical and healthcare expertise, a portfolio of choices, and high-quality, 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.

Brookdale’s culture is one of people serving people.

We believe engaged associates, who are committed to our mission and culture, lead to an enhanced resident experience, higher retention, and ultimately improved operations that drive accelerated growth.

Through this strategic priority, we intend to deliver continued favorable progress toward our goal of reducing associate turnover and extending length of employment with Brookdale.

We also intend to further support enhanced training programs for associates, educational and career development opportunities for associates, and a 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.

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 believe that fostering the continued 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, dining, 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.

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 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.

As we lengthen our associates' tenure, we anticipate an enhanced resident experience.

The above three priorities coupled with robust supply-demand fundamentals are intended to provide long-term returns to our stockholders by driving organic growth through focusing on growing RevPAR (as defined below), Adjusted EBITDA (as defined below), and cash flow.

We expect RevPAR will continue to be driven by both occupancy and RevPOR (as defined below) growth, propelled by (i) our strategic priorities, (ii) accelerating growth within our target demographic, and (iii) significantly lower supply growth.

Our goal is to initially return to our pre-pandemic level of occupancy and margins, to return to generating positive (and growing) cash flow, and then to reach or exceed our historical occupancy high and expand our margins 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 increases.

Strategic innovation (including the execution of our healthcare strategy) remains an important factor for our long-term growth.

We are regularly piloting programs in multiple areas with the intent to roll out successful initiatives to accelerate our growth potential.

We also plan to continue 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, we would expect to pursue development, investment, and acquisition opportunities to further enhance and grow our senior living portfolio.

• 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 by demonstrating improved outcomes for residents.

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 and value creation (including through increasing move-ins and extending residents' average length of stay resulting in increased occupancy).

We desire 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 senior living leader, and partner to providers and payors, in the value-based healthcare ecosystem.

As an example, we have been piloting our Brookdale HealthPlus program in a growing number of assisted living communities in certain markets.

Brookdale HealthPlus, which is a community-based, technology-enabled, proactive care coordination program, is designed to help improve residents' quality of life through evidence-based preventative care coordination.

During the pilot, an independent third party found that Brookdale HealthPlus delivered measurable favorable outcomes compared to seniors with similar attributes living at home or in competitive senior living properties;

and as a result, we expect to introduce Brookdale HealthPlus to additional communities.

We also continue to pilot 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 well-being 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.

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.

We also plan to continue to invest in our technology platform, with the goal of identifying and implementing solutions to reduce complexity, increase productivity, lower costs, and increase our ability to collaborate with third parties.

• 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.

As we continue to focus on returning to, and then exceeding, our pre-pandemic results, in the near and longer term, we also intend to (i) exit certain non-strategic or underperforming owned assets when possible, (ii) exit or restructure underperforming leases as we approach lease maturity, where possible, (iii) expand our footprint and services in core markets where we have, or can achieve, a clear leadership position, and (iv) explore further growth opportunities, such as opportunistic acquisitions (including potential acquisitions of currently leased assets) and other expansions of our senior living business, subject to capital availability.

Over the longer term, we expect that 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

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 %

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, 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;

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

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;

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

the development, availability, utilization, and efficacy of COVID-19 testing, therapeutic agents, and vaccines and the prioritization of such resources among businesses and demographic groups;

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;

changes in demand for senior living communities and our ability to adapt our sales and marketing efforts to meet that demand;

the impact of COVID-19 on our residents' and their families' ability to afford our resident fees, including due to changes in unemployment rates, consumer confidence, housing markets, and equity markets caused by COVID-19;

changes in the acuity levels of our new residents;

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, health plan, and other expenses;

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 enforcement actions resulting from COVID-19;

government action that may limit our collection or discharge efforts for delinquent accounts;

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

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.

A confluence of macroeconomic conditions, including labor pressures, high inflation, and increased interest rates, affected our operations during 2023.

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 costs comprise approximately two-thirds of our total facility operating expense and are subject to inflationary and labor environment pressures.

We began to experience pressures associated with the intensely competitive labor environment during 2021.

The United States unemployment rate remained at or below 4% each month during 2022 and 2023.

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.

We have increased our recruiting efforts to fill existing open positions, resulting in increasing the size of our workforce since the beginning of 2022.

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

Beginning in 2021, to cover existing open positions, we needed to increase our reliance on more expensive premium labor, primarily contract labor and overtime.

By increasing the number of shifts staffed with full- and part-time Brookdale associates rather than contract labor, our reliance on contract labor has moderated to pre-pandemic levels in the second half of 2023.

We continue to work to reduce our reliance on premium labor while maintaining focus on meeting our residents' needs, providing high-quality care and personalized service, and remaining in compliance with applicable regulatory requirements.

The labor component of our facility operating expense in our same community portfolio increased 11.0% during 2022 compared to the prior year.

The increase 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.

The labor component of our facility operating expense in our same community portfolio increased 1.2% during 2023 compared to the prior year.

The increase primarily resulted from wage rate adjustments, partially offset by a decrease in the use of premium labor, primarily contract labor, as our associate turnover has declined and the size of our workforce has increased since the beginning of 2022.

While the impacts of the intensely competitive labor environment have moderated in 2023, we may continue to experience labor cost pressure as a result of the labor environment conditions described above.

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.

The United States consumer price index increased 10% since December 2021.

Despite our mitigation efforts and with higher occupancy, our non-labor facility operating expense in our same community portfolio increased 7.7% for 2023 compared to the prior year.

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.

As of December 31, 2023, we had $1.5 billion of long-term variable rate debt outstanding which is indexed to the Secured Overnight Financing Rate ("SOFR") plus a weighted average margin of 239 basis points.

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

The SOFR increased since the beginning of 2022, ending 2023 more than 500 basis points higher than year-end 2021.

For 2023, our debt interest expense increased 32.9% compared to the prior year, substantially all due to an increase in our interest expense associated with our long-term variable rate debt.

Increased 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 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.

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

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

The annual rate adjustment effective January 1, 2023 for our in-place private pay residents was 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.

As a result of rate and occupancy increases, our consolidated RevPAR (as defined below) for 2023 increased 11.3% compared to the prior year.

We have recently made the annual rate adjustment effective January 1, 2024 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.

The average increase for 2024 was lower than the prior year increase and was again higher than our typical annual rate adjustment in order to help offset our increased costs.

Due to the competitive environment for new residents in our industry, our rate adjustments 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 (as defined below) results.

In addition, our rate adjustments may not be sufficient to offset our increased costs in the event that labor expenses, inflation, or interest costs grow at rates higher than anticipated.

The Senior Living Industry

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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, 2023, 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.

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.

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

The industry attracted additional investment in the last decade, prior to the start of the COVID-19 pandemic, which resulted in increased construction and development of new senior housing supply.

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

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

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.

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

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

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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.

NIC data shows that new construction starts and openings for the senior housing industry have decreased significantly for 2023 compared to the peaks in the last decade.

The more recent impact of the pandemic, the macroeconomic factors discussed above, higher construction costs, increased interest rates, and tighter credit conditions may continue to impact new constructions starts and competitive new openings for a period of time.

The primary market for our senior living services is individuals age 75 and older.

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

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.

Census projections suggest that there will be over one million new potential residents per year for the next 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.

As a result of increased mobility in society, a reduction of average family size, and increased number of two-wage earner couples, families struggle to provide care for seniors and therefore look for alternatives outside of their family for care.

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 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, 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.

Additional challenges in our industry include increased state and local regulation of the assisted living, memory care, and skilled nursing sectors, which has led to an increase in the cost of doing business.

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

Including continued recovery from the significant challenge of the COVID-19 pandemic to our industry, additional challenges in our industry include increased state and local regulation of the assisted living, memory care, and skilled nursing sectors, which has led to an increase in the cost of doing business.

The regulatory environment continues to intensify in the number and types of laws and regulations affecting us, accompanied by increased enforcement activity by state and local officials.

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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 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.

Due to the industry's current 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, Discovery Senior Living, LLC, and Erickson Senior Living, LLC, 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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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, Inc.

("Ventas") and Welltower Inc.

and Welltower Inc.

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.

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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 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 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, Inc.

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

In 2005, we completed our initial public offering of common stock, and in 2006, we acquired American Retirement Corporation, another leading senior living provider that had been operating independently since 1978.

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

In 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.

As of December 31, 2023, we had three reportable segments:

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Total 652 55,628 100.0 % 85

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.

For the year ended December 31, 2023, we generated 93.7% of our resident fee revenue from private pay residents, 4.8% from government reimbursement programs (primarily Medicaid and Medicare), and 1.5% from other payor sources.

Our owned communities generated 58.6% of our resident fee revenue and our leased communities generated 41.4% of our resident fee

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, 2023.

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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, an emergency alert system, housekeeping, education and wellness programs, and recreational activities.

Each independent living unit is designed to feel and function like a private residence while providing 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.

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Residents in our independent living communities are able to maintain their residency for an extended period of time due to the range of service options available (not including skilled nursing).

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.

Residents with 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 dedicated assisted living associates and separate assisted living dining rooms and activity areas.

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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 units, 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.

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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 seeking a community offering a broad continuum of care enabling them to age-in-place.

Our residents of our CCRCs are generally seniors seeking a community that offers 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.

Residents can also enter the CCRCs directly into assisted living, memory care, or skilled nursing and, in some cases, may enter via the skilled nursing service 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, 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.

As of December 31, 2023, we managed a total of 30 communities (4,579 units) on behalf of others, which represented 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.

Competitive Strengths

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• Ability to provide a broad spectrum of care .

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.

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

Through our comprehensive network of

services, we help to provide seniors with care, connection, 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.

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

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

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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.

Our scale also allows us to achieve increased efficiencies with respect to various community support 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.

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

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

In addition, we have and will continue to leverage our centralized community support 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.

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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.

Consolidated Corporate Operations Support

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

Community Support Functions

We have developed a centralized support infrastructure and services platform, which we believe provides us with a significant operational advantage over local and regional operators of senior living communities.

The size of our business also allows us to achieve increased efficiencies with respect to various corporate functions such as procurement, human resources, finance, accounting, legal, information technology, and marketing.

The size of our business also allows us to achieve increased efficiencies with respect to various community support functions such as procurement, human resources, finance, accounting, legal, information technology, and marketing.

We are also able to realize cost efficiencies in the purchasing of food, supplies, insurance, benefits, and other goods and services.

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:

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

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

resident care;

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Community Staffing and Training

Each community has an Executive Director responsible for the overall day-to-day operations of the community, including quality of care and service, social services, and financial performance.

Each Executive Director receives specialized training from our learning and development associates.

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

Each community has an Executive Director responsible for the overall day-to-day operations of the community, including the community's associate relations, resident and family engagement and connection, financial performance, and regulatory compliance.

Each Executive Director receives specialized training developed by our learning and development associates.

In addition, a portion of each Executive Director's compensation is directly based on the operating performance of the community, community associate turnover, and resident and family satisfaction.

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.

We believe that the quality of our communities, coupled with support provided by our community support infrastructure has enabled us to attract high-quality, professional community Executive Directors.

Depending upon the size and type of the community, each Executive Director is supported by key leaders, a Health and Wellness Director (or nursing director), and/or a Sales Director.

The Health and Wellness Director or nursing director is directly responsible for day-to-day care of residents.

The Health and Wellness Director or nursing director is directly responsible for day-to-day care of our assisted living, memory care, and skilled nursing residents.

The Sales Director oversees the community's sales, marketing, and community outreach programs.

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 associate contact.

Other key positions supporting each community may include individuals responsible for dining services, healthcare services, resident activities, housekeeping, transportation, and maintenance.

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

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 non-management associates at each community.

We have comprehensive 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 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.

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

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

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

These inspections cover the appearance of the exterior and grounds;

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the professionalism and friendliness of associates;

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

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

the quality of activities and the dining program;

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Our quality control measures also include the survey of residents and family members on a regular basis to monitor their perception of the quality of services we provide to residents.

In order to foster a sense of belonging and engagement, as well as to respond to residents' needs and desires, at many of our communities, we have established a resident council or other resident advisory committees that meet at least monthly with the Executive Director of the community.

Separate resident committees also exist at many of these communities for food service, activities, marketing, and hospitality.

In order to foster a sense of belonging and engagement, as well as to respond to residents' needs and desires, at many of our communities, we have established a resident council or other resident advisory committees that meet periodically with the Executive Director of the community.

These committees promote resident involvement and satisfaction and enable community management to be more responsive to their residents' needs and desires.

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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.

We will continue to leverage and grow our Brookdale brand to win locally in the markets we serve.

In many markets where we offer more choices for senior living based on budget, lifestyle, and care needs, we use a network selling methodology to educate prospects on all of the options available.

With our selling model, sales associates are organized to support individual and multiple communities directly.

To meet the needs of local demand and supply, we create differentiated value through the segmentation of our communities based on price, service offerings, amenities, and programs offered.

Human Capital Resources

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As of December 31, 2023, we employed approximately 36,000 associates, 70% of whom were full-time.

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 1,300 centralized and regional community support associates support our community-based associates.

As of December 31, 2023, approximately 80% of our associates are women, who comprise approximately 70% of the leadership roles at our communities and community support centers.

Approximately 60% of our associates and 17% of individuals in our leadership roles are people of color.

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

During 2023, we continued to focus on hiring the best associates and reducing turnover in order to decrease our use of more expensive premium labor.

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.

By increasing

the number of shifts staffed with full- and part-time Brookdale associates rather than contract labor, our reliance on contract labor has moderated to pre-pandemic levels in the second half of 2023.

We continue to optimize our recruiting efforts to fill open positions, analyze wage rates in our markets, and make competitive adjustments.

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.

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, which continued with the selection of our second cohort in 2023.

Approximately 40% 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

Talent Acquisition, Engagement, 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.

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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 optimized our field recruiting strategy through close collaboration with local operational leadership on current and anticipated workforce planning needs, leveraging an agile market and region-based approach to provide targeted hiring support, while continuously improving systems and processes.

We implemented additional ways to support recruiting from military settings.

Additionally, we continue to source from employment websites 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.

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

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%.

In addition to internal development opportunities, we have also launched multiple programs to advance fees and tuition assistance for certain associates to pursue relevant certifications.

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

Our 2023 annual incentive plan included the strategic objective of retaining key community leadership (Executive Directors, Health and Wellness Directors, and Sales Directors) in our same community portfolio.

As a result of our retention initiatives, our retention of key community leaders in our same community portfolio increased for 2023 compared to 2022.

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

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Changes in the regulatory framework could have a material adverse effect on our business.

Many senior living communities are also subject to regulation and licensing by state and local health and social service agencies and other regulatory authorities.

State and Local Regulation and Licensing

Many senior living communities are subject to regulation and licensing by state and local health and social service agencies and other regulatory authorities.

Although requirements vary from state to state, these requirements may address, among others, the following:

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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 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.

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.

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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.

Regulation Against Fraud, Abuse, and False Claims

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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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.

Anti-Kickback Regulation

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.

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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 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.

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.

While we endeavor to comply with all laws that regulate the licensure and operation of our business, it is difficult to predict how our revenues could be affected if we were subject to an action alleging such violations.

Confidentiality and Privacy Regulation

We are subject to federal and state laws designed to protect the confidentiality of patient health information.

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Rules that became effective in 2003 govern our use and disclosure of health information at certain HIPAA covered communities.

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

We established policies and procedures to comply with HIPAA privacy and security 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.

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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 are 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 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.

There are five states with comprehensive privacy laws effective in 2023.

Additional state legislative and regulatory efforts to regulate consumer privacy protection have passed in 2023 with laws becoming effective in 2024 and beyond.

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

COVID-19 Regulation

We have been and may continue to be subject to federal and state laws, regulations and executive orders relating to healthcare providers’ response to the COVID-19 pandemic.

While many of the regulatory requirements were temporary and expired with the end of the public health emergency in May 2023, these requirements generally may include mandatory requirements for vaccination 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.

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.

Employment-Related Regulation

We are also subject to an increasing and 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.

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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 accordance with Medicare laws, the Centers for Medicare & Medicaid Services ("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.

Generally, these rates are adjusted annually for inflation.

However, those adjustments may not reflect actual increases of the cost of providing healthcare services.

However, those adjustments may not reflect actual

increases of the cost of providing healthcare services.

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

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The regulations may affect the value of a building containing asbestos-containing materials and potential asbestos-containing materials in which we have invested.

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.

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.

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.

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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