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Harsh Flu Season Hits Senior-Living Firms With More Pain to Come

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The bad flu season is finally showing signs of easing up for most Americans. For senior-housing companies, the worst is yet to come.

During earning calls this month, senior-housing operators and landlords have lamented a harsh flu season that has led ailing residents to move out of their facilities and forced operators to temporarily close their doors to admissions for fear of spreading the virus.

Brookdale Senior Living Inc. Chief Financial Officer Cindy Baier said on a call Thursday that the current flu season has been the worst for seniors in two decades. Cumulatively, the company’s facilities were closed to new move-ins for more than 1,000 days in the first month and a half of 2018, Baier said. That compares with about 800 days during the entire first quarter of last year. Executives from publicly traded landlords Welltower Inc., Ventas Inc. and HCP Inc. all said that the severe flu season will hurt first-quarter results. The shares of all three firms have dropped at least 15% this year.

(Related: Manhattan Gets $20,000-a-Month Homes for New Breed of Seniors)

“The effects tend to linger into the second quarter, just because of the natural timing of when vacancies happen and how long it takes for them to be filled,” said Jeffrey Langbaum, a senior analyst at Bloomberg Intelligence. “There’s nothing they can really do to prevent it except wait for it to run its course.”

While the flu tends to hit senior-housing companies hardest during the first calendar months of the year, Brookdale and Welltower reported that the early start to the current flu season started hurting occupancy in the fourth quarter.

This winter has been especially trying. Influenza and pneumonia accounted for 9.8% of all U.S. deaths during the week ended Jan. 27, after peaking above 10 percent. While the share of doctor visits for flu-like symptoms plateaued during the week ended Feb. 10, indicating that flu season is waning, the number of deaths from this year’s outbreak could outpace those from late 2009, which was marked by the swine-flu epidemic.

Flu Vulnerability

Those elevated rates will weigh on revenue for senior-housing landlords and operators, whose elderly residents are especially vulnerable to the flu. When the virus forces residents into hospitals, senior-housing firms lose customers, leading executives on conference calls to use such terminology as “accelerated resident move-outs” and “attrition due to death.” A flu outbreak also can force facilities into quarantine, during which time residents are kept in their rooms and admissions restricted. And, like all employers, senior-housing operators have to grapple with missed workdays due to illness.

“This has been a more-costly influenza season for us in comparison to years past,” said Gail Sheridan, the chief clinical operations officer for Tealwood Senior Living, which operates in Minnesota, Wisconsin and other states. The company’s largest flu-season expense comes from paying overtime to employees to cover shifts for workers who call in sick, she said.

For Brookdale, issues other than the flu season are weighing on the company as well: Its shares fell as much as 21% Thursday after it announced that it’s ending a strategic review in which it rejected a conditional offer from a potential acquirer. Baier will take over as Brookdale’s chief executive officer at the end of the month, the company said Thursday.

—With assistance from Michelle Fay Cortez.

— Read Senior Housing Investment Gains Momentum on ThinkAdvisor.

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