Sunday, July 2, 2017

Kindred Dumps Nursing Homes for Huge Loss

Strange Tony,

Kindred announced the sale of their nursing home division late Friday.  Kindred's press release revealed details of the deal:

Kindred Healthcare, Inc. (“Kindred” or the “Company”) (KND) today announced that it has signed a definitive agreement with BM Eagle Holdings, LLC, a joint venture led by affiliates of BlueMountain Capital Management, LLC (“BlueMountain”), under which it will sell the Company’s skilled nursing facility business for $700 million in cash. The sale includes 89 nursing centers with 11,308 licensed beds and seven assisted living facilities with 380 licensed beds, which collectively have approximately 11,500 employees in 18 states. 

Kindred is closing the door on it's initial mission by selling its nursing homes.  Ventas spun off its nursing home operating division into Kindred via an initial public offering in 1998.  Kindred already agreed to pay Ventas $700 million for 36 leased nursing homes.  Ventas press release clarified:

The sale price of $700 million represents a seven percent cash yield on current annual cash rent of $50 million and an eight percent GAAP yield. The difference in yield represents the annual portion of the amortization of $23 million in cash fees Ventas previously received from Kindred. Upon the sale of the SNFs, Ventas is expected to record a gain exceeding $600 million.

Effectively Kindred will take the $700 million from BlueMountain Capital and pass it directly to Ventas.  For BM Eagle Holdings it's buy 36 Ventas nursing homes get the rest for free.

There's a huge disconnect inside this deal.  Ventas owned nursing homes sold at a huge premium and Kindred gave away the physical assets of 25 nursing homes and 3 ALF's.

Kindred's big win comes from "the creation of an approximately $380 million net operating loss carryforward associated with the sale transaction."  That will generate "approximately $140 million of cash tax benefit over time."  The two other wins are simply holding onto stuff the company already owns, working capital and a "retained Las Vegas facility, hospital-based sub-acute units and other retained assets." 

Kindred's stock has been on fire lately.  I wonder what it will do after the market digests the nursing home fire sale that disproportionately enriches Kindred's former owner..

I do worry about the 11,500 Kindred employees going to BM Eagle Holdings.  In the hospice world Kindred pay has been stagnant as benefits deteriorated.  How much worse might these employees fare under private equity ownership?

The deal is expected to close in two stages but should be completed this year.  Kindred CEO Ben Breier will get how big a bonus?  Whatever amount the board awards for this deal should be split 11,500 ways and mailed across 18 states.  Employees should get something for being sold out.  Ben Breier and Stephen Farber should get nothing for turning their back on Kindred's original mission.  Other divisions should know we're disposable as well.  Executives could turn on us at any time.

Anonymous  (from a saleable division in executive enriching Kindred)

Friday, June 30, 2017

New Kindred Executive: Venemous Toad?

Strange Tony,

Corporate assigned a new junior executive to our hospice site.  I'll call him Toad.  So far he's been very quiet.  That can be a sign of someone who prefers to watch and learn, but that's been a rare practice of prior Kindred vice presidents.  Toad's predecessors preferred to:

A.  Talk over listening
B.  Jump to conclusions over researching issues
C.  Shoot any messenger raising legitimate concerns
D.  Foster or avoid conflict rather than manage and reduce it.
E.  Play favorites
F.  Beat people up over numbers

Our new VP arrived at a time of incredible division within our hospice.  Conflict increases when leaders use strategies that keep people separated and uninformed. Ninety five percent of conflict can be resolved with one simple intervention, help people complete communication. This solution has been a mystery to Kindred managers who sow division and manage by whim.

Our hospice divide deepened when staff sold their soul to horrific management for the illusion of personal protection and connection to power.  Kindred leaders took information nuggets from soul-selling staff, instantly twisting and misusing them as weapons.  Enough hospice staff made this sick deal that our hospice culture could be terminal.

It will take a sophisticated VP with deep leadership skills and experience to save our historically great hospice.  Such people are rare in today's EBITDAR obsessed, capital optimizing, human abusing, compliance lip service-oriented world of healthcare mismanagement.

Kindred does not have systems to find and employ such leaders.  It's just not in them.  We'll see how bad Toad's venom is.  Will it be more or less toxic than those who came before him?

Anonymous (Waiting for next Kindred axe to fall)

Friday, June 9, 2017

Kindred Sells CFO Farber Home for Huge Loss

Strange Tony,

Kindred Healthcare executives remained mum on their bad investment in high end Louisville real estate.  Kindred flipped the luxury home for a loss of at least $250,000.  Kindred CFO Stephen Farber owned the house and benefited financially from his employer's largess.

Ferber received $300,000 more than the cost of the home and subsequent renovations.  His $250,000 in extra moving expenses came on top of $110,000 Kindred paid for Farber's 2014 relocation.  I'll venture Mr. Farber avoided realtor fees on the $2.15 million Kindred paid for the house, a benefit of roughly $125,000.  Add it up and Farber got an extra $675,000 from his employer for not getting along with his neighbor.

Kindred paid dearly for the deal, the flip loss of $250,000 and the second moving expense benefit of $250,000.  The unknown variable is the cost of the driveway, estimated as high as $360,000.  Kindred is out realtor fees of $125,000, bringing the Farber anger management subsidy to almost $1 million.

This exercise in executive enrichment should become a business ethics case at the University of Louisville.  I suggest it be studied parallel to the next Kindred executive flip.  Will it just be the nursing home division or will top dogs sell the whole company?  The time is nearing for news.  I hope it's not as disturbing as this toxic saga.

Anonymous (from the Kindred level with no raises and declining benefits)

Saturday, June 3, 2017

Executive Enrichment Club: Causby's Turn

Strange Tony,

Kindred Homeboy President David Causby had a good week, like Kindred Super President Ben Breier.  The Board granted Pit Bull 57,877 restricted shares of stock.  Causby controls over 300,000 shares after this move.  That means the $1.05 rise in stock price last week gave Causby over $300,000.  That is $150,000 per day for two days.

This is nothing compared to the $1 million check Causby will get for showing up for work on August 1, 2017.  Meanwhile, Kindred employees at our hospice get no raises this year.

Anonymous (from Kindred level where the home work is actually done)

Thursday, June 1, 2017

Breier's New Chief of Staph to Protect His Riches

Strange Tony,

Kindred President Ben Breier scored two personal gains recently.  The company deigned he needed a Chief of Staph.  Kindred's Chief Strategy Officer took on the Presidential protector role.  The move further insulates Breier from Kindred's 100,080 non-executive employees, who've suffered from declining benefits and stagnant employee pay under his reign.  Taking advantage of employees is a Kindred corporate strategy. 

Breier's second win was a new stock grant of 272,000 shares.  It will vest one third per year for the next three years.   Recall President Ben's compensation rose to $7 million last year for under performing on promises.  Kindred lost $664 million last year.  Breier earned $1 million for each $100 million the company lost.

Kindred felt generous last week as the rest of the executive team plus the board received restricted stock options.  These are usually convertible to shares in a buyout.  As Kindred stock jumped a nickel less than $1 today, Wall Street might smell another round of rich executives making millions by flipping their company.

Meanwhile, our hospice is hanging together by a thread.  Serial mismanagement left our ship floundering.  Corporate has no clue the damage they allowed to exists for years.  They should have known from the last two PwC employee surveys but Kindred, like Gentiva, shoots the messenger vs. working on causes, focusing on processes and coaching staff.

The PwC survey went the route of wage increases for 2017.  Kindred Homeboy President David Causby finally taught Breier the Gentiva way, where employees have no voice and get no raises.  We have the new Employee Experience, where employees needs for IT support outweighed pay, benefits and horrific management practices.  Did the Chief of Staph or our Chief Peephole Officer come up with that?  Either way, Kindred is culturally toxic. 

The C Suite grows richer by under performing while ignoring abysmal and unethical management.  Ben Breier had a great week personally.  He now controls 1 million shares of Kindred stock.   His holdings went up $950,000 today.  Think about that when you pay the new $8 annual 401k fee, if you are lucky to be able to save for retirement on Kindred pitiful pay.

There are more ways Kindred can throw money at Breier.  The company can buy his house for a premium price, give him additional moving expenses or institute a $1 million bonus just for showing up for work.  The board has done those before for Chief Fleecing Officer Stephen Farber and Kindred Homeboy David Causby.

Kindred executives know how to enrich one another while shafting employees.  I expect any hospice that treats employees as people can raid Kindred of the caring talent that remains.  The work is holy,  but management is hellish.

Anonymous (from Kindredful)

Saturday, May 27, 2017

Kindred Management Still Working on Wall Street Promises

Strange Tony,

I recall your finding management's obsession with financial measures limited and uninspiring  When Kindred purchased Gentiva it projected the combined company would produce $1 billion in EBITDAR.

Every year since the buyout management came up short.   Kindred executives announced the shortfall will grow with the sale of the nursing home division.

Kindred had core EDITDAR of $950 million for 2016.  Core EBITDAR declined 3.1% to $950.1 million compared to $980.3 million in the same period in 2015. 

The company reaffirms 2017 guidance for core EBITDAR of $930 million, with a range of $910 million to $950 million.Says for 2018 reaffirms core EBITDAR of approximately $840 million.

Core EBITDAR dropped after management's $1 billion promise.  Kindred's employee numbers also fell since the Gentiva deal.

109,000 -- October 2014 - Kindred plus Gentiva employees
102,000 -- December 2015
100,100 -- December 2016

After announcing Kindred's buyout of Gentiva the number of jobs fell by 8,900.  Benefits deteriorated in nearly every area after Kindred took over Gentiva.  Even taking out of employees pockets Kindred couldn't make its EBITDAR promises.

I feel another sale may be coming.  It was the exit strategy for Gentiva managers who bragged about their ability to operate and the depth of their bench.  All Gentiva executives took the money and all but one ran with their new fortunes.  Only COO David Causby took the money and stayed for a series of $1 million Kindred bonuses.  His next one will come just for showing up on August 1.

Exit is also the route many excellent and underappreciated hospice employees take.  Our site is gearing up for another exodus.  Why is it mostly the good, caring employees who leave?  Why are they designated as not eligible for rehire?

Management is too focused on shallow measures to see the depth of commitment and caring.  They don't know what our site has lost and will lose.  Their eyes and ears are trained on EBITDAR to the exclusion of service and caring.  Executives also ignore competitive pay and benefits for those doing the work.

Anonymous  (from numbers obsessed, underachieving Kindred)

Saturday, May 13, 2017

Pray LBO Stays Away

Strange Tony,

Financial sharks circle Kindred Healthcare and some are inside the company.  Take former CEO Paul Diaz, who received a $6 million cash bonus in May 2015 for closing the deal on Gentiva.  Diaz went on to become an operating partner with Cressey and Company.  Oddly, his bio on Cressey's website makes no mention of his current Kindred board service.  Diaz is Vice Chairman of Kindred's Board of Directors. 

Should Kindred sell for a premium to Cressey and Company conflict of interest questions would arise.  Should Cressey hire Guidon Partners to co-invest on Kindred more ethical questions would surface.  A Generic Hospice commenter educated me about Diaz role with Cressey and Guidon. How many ways could Paul Diaz make money if those possibilities rang true?  He'd be on both sides of the deal.

Members of Kindred's executive team and board have leveraged buyout organizations, LBO, in their background. Firms include Warburg Pincus, Bain Capital, TPG, Summit Partners, Blackstone Group, Apollo Global Management and the aforementioned Cressey and Company.

Reuters cited two LBO firms as being interested, Blackstone and Apollo Global.  Kindred COO Kent Wallace worked as CEO for Blackstone affiliate, Vanguard Health Systems.  Kindred Board member Frederick Kleisner served on the board of an Apollo affiliate, Apollo Residential Mortgage..

Kindred's management operated much like a buyout firm by purchasing companies with copious amounts of debt.  The Gentiva buyout bought our hospice into Kindred's wider post acute tent, which it now wants to shrink or exit.  The company's obsession with measures and money have been to the detriment of mission and competent management practices at our site.  Mostly stagnant pay and deteriorating benefits have been another part of the Kindred employee experience.

Please let our new owner not be the Hannibal Lechter of finance, LBO or better known by its modern name - private equity.  Lord keep us safe from corporate predators.  For that I pray.

Anonymous (from Kindred-ever-enriching-executives)