Wednesday, June 20, 2018

Humana's Chief Consumer Officer Cashes In

Strange Tony,

Health insurance consumers often buy coverage on the basis of price.  One might expect a Chief Consumer Officer to do their part to keep premiums down.  Not Humana, our looming 40% owner. 

Humana's Chief Consumer Officer Jody Bilney exercised stock options worth $8.5 million.  Her net proceeds from the sale amount to $4.3 million. 

In weeks Humana and two financial rapscallions will buy Kindred's home health, hospice and community care divisions.  Many hard working, dedicated Kindred employees have gone years without raises.

Financial rapscallions did the following to employees of one acquired company:  They "eliminated positions, loading responsibilities onto other workers. Schedules became unpredictable. Employees had to pay more for fewer benefits."  That is Gentiva/Kindred at Home's likely fate, especially given the obscene levels of debt being loaded on our company.

Chief Consumer Officer Bilney just got hers.  I'm not sure how $4.3 million in stock option compensation will enable her to empathize with consumers struggling to keep outrageously expensive health insurance coverage.  I expect it will be a hindrance to her performing her job on behalf of consumers, however it will help her relate to board members, fellow executives and our new financial rapscallion owners.  She might take a chunk of her new wealth and become a TPG Capital or WCAS investor.

Lord, give us joy and peace as our earthly takeover occurs.  Protect us from arbitrary management decisions and actions inspired by greed.  Keep our hearts humble and focused on loving you and your beloved children.


Wednesday, June 13, 2018

Executives Say "No Changes" Coming with Buyout

Strange Tony,

My hospice co-workers believe our upcoming buyout will bring no changes.  They believe the latest missive from executives that answered micro questions about paychecks and PTO, avoiding the financial elephant in the room, the addition of massive debt.

Both Gentiva/Kindred at Home and Curo Health have leverage of at least 6 times EBITDA according to Moody's.  Our new owners will borrow over $3 billion to complete the two deals.  Moody's rated the new debt less than investment grade.  Their rating "reflects the company's very high debt/EBITDA following the leveraged buyout transaction and acquisition of Curo."

What kind of executives cite high leverage as the need to sellout then up the level of debt at least an order of magnitude?  Kindred at Home/Gentiva leaders did just that by inviting more moneychangers to set up in the temple. They did so in a rising interest rate environment, meaning additional debt will be more expensive.

"Three dark personalities, narcissism, Machiavellianism, and psychopathy have been studied in businesses.  Although the first two share similar traits with psychopathy, such as superficial charm, lying and manipulation, the inability to accept responsibility for their actions, and the complete lack of empathy, guilt and humility, a large body of research has demonstrated that psychopathic individuals are more dishonest, treacherous and destructive than the others.'

'While all three dark personalities can be bad news for a company, corporate psychopathy is the most dangerous.  Nevertheless, because they use hard/deceitful manipulation tactics, are perceived as more dominant, and use overt means to appear more 'attractive' to those they wish to manipulate, psychopathic individuals may have the upper hand when it comes time to identify and select the most likely to succeed candidate for employee selection and promotion."-- Cynthia Mathieu, The Devil Lurks In the Suit

"Psychopathy is a personality disorder characterized by twenty well-documented traits and characteristics.  The most visible are glib/superficial charm, a grandiose sense of self worth, a strong need for stimulation (that is, psychopaths are easily bored) and impulsivity.' 

'However, there are others, which they successfully hide from view, in particular pathological lying, conning, manipulation, a lack of empathy, remorse and guilt.  Over time, one might begin to see examples of irresponsibility, lack of realistic, long-term goals, and their failure to take responsibility for their own actions."-- Paul Babiak, co-author with Robert Hare of Snakes In Suits

Massive changes are coming, even as health insurance, PTO and mileage reimbursement remain the same.  Staffing is Kindred's biggest expense and executives count on integrating Curo in a way that saves big money and preserves revenues.  That did not happen when Gentiva integrated Harden's hospice division.  Revenue disappeared from poor management decisions that reduced the quality of patient care.

Greed is in the air and my co-workers think all is well.  Lord help and protect them.


Saturday, May 26, 2018

Kindred to Squeeze Hospice Division into Curo

Strange Tony,

Kindred at Home's new owners, Humana and two financial rapscallions, plan to combine its hospice division with Curo Health Services, another hospice acquisition.  The bigger hospice entity will be put under the smaller.  Curo has more hospice sites but Kindred's do more than twice the work as reflected by revenue numbers.

Curo has been owned by two different financial rapscallions.  Curo management knows the language and needs of greedy owners.  They skillfully met their owner's needs for cash and return.  This bodes ill for hospice employees with a calling to do good work in this world.

Both Curo and Kindred are highly levered, i.e. each has a big mortgage to pay with lots of interest expense. 

Kindred even cited high leverage as a reason to sellout.

Oddly Kindred at Home will tackle its leverage problem by nearly doubling the amount of debt associated with the deal. 

So many aspects of Kindred's sellout make no sense under God's laws or timeless business principles.  We are but a bet by greedy leaders that they can dance on the edge of a financial razor blade and be enriched beyond all measure.  Judgement will come, maybe not on this earth or in our time, but it will come.  Lord, help us all.


Saturday, May 19, 2018

Money Changers: The Humana-WCAS Connection

Strange Tony,

Two of our hospice's new owners, Humana and Welsh, Carson, Anderson and Stowe (WCAS), are longtime bedfellows.  Their planned buyout of Kindred is not their first deal.  

Current Humana CEO Bruce Broussard worked for U.S. Oncology when it was acquired by WCAS in August 2004.  At the time Broussard served as U.S Oncology's Chief Financial Officer.

The proxy statement listed Broussard as one of a number of continuing investors under WCAS.  CFO Broussard held $3.1 million in U.S. Oncology stock and $4.4 million in options at the time of the buyout.  SEC filings indicate Bruce partnered with WCAS by purchasing stock in the private company, .

Bruce rose to CEO in early 2008 and helped WCAS flip U.S. Oncology in November 2010 when drug giant McKessson bought U.S. Oncology for $2.16 billion.  A financial news site reported at the time:

Welsh Carson has unofficially been looking for a buyer for years. The New York PE firm invested in US Oncology in 2004. “Welsh Carson has owned it forever,” the banking source says. “It’s well past time they wanted to sell.”

Welsh Carson also has another health care company up for sale. Earlier this year, the PE firm put Concentra, which provides health care and wellness services to employers and the general public, on the block. Barclays is advising.

The Concentra auction has stalled because there are not a “lot of logical buyers for it,” the banker says. Concentra is trying to transform itself from a worker’s health provider to a provider of primary care clinics, the source says. “The auction is not going well and they’re trying to sell themselves to another sponsor,” the person says.

Humana bought Concentra from WCAS for $790 million in November 2010.  A year later Humana hired Bruce Broussard as CEO.  The rationale for hiring Broussard included his experience running physician clinics.  He could help Humana integrate and optimize Concentra.

The Concentra deal is echoed by Humana's moves around physician clinics (recently branded Conviva) and its foray into home health and hospice care with its Kindred and Curo acquisitions.

Only Humana did not stick with its strategy.  It sold Concentra back to WCAS in 2015.

On June 1, 2015, we completed the sale of our wholly owned subsidiary, Concentra Inc., or Concentra, to MJ Acquisition Corporation, a joint venture between Select Medical Holdings Corporation and Welsh, Carson, Anderson & Stowe, a private equity fund, for approximately $1,055 million in cash, excluding approximately $22 million of transaction costs. In connection with the sale, we recognized a pre-tax gain, net of transaction costs, of $270 million which is reported as gain on sale of business in the accompanying consolidated statements of income for the year ended December 31, 2015. The accompanying consolidated statements of income include revenues related to Concentra of $411 million in 2015. 

Broussard said "Concentra’s operations did not ultimately align with Humana’s strategy as well as we had originally anticipated."  Broussard was hired to make Concentra work but four years later he flipped Concentra back to WCAS, his former employer.

It’s familiar territory for Welsh Carson, which previously owned both Concentra and Select Medical.

With Humana's financial resources Bruce Broussard could have easily bought Kindred without former employer WCAS or TPG Capital.  Including TPG Capital was a nod to the Kindred Board which has TPG director Sharad Mansukani, M.D. as a member.  Bruce had this to say about buying Kindred.

Bruce D. Broussard, Humana’s President and Chief Executive Officer, said, “Humana is focused on enhancing our capabilities for care in the home to prioritize patient wellness while delivering high-quality care in a low-cost setting. This transaction with Kindred underscores the successful and ongoing execution of our strategy by joining with the most geographically diverse home healthcare provider in the country. We are confident that these new capabilities will help Humana continue to modernize home health and meaningfully improve the member and provider experience. We look forward to completing this strategic transaction with TPG and WCAS.”

Low cost?  Humana and its partners will saddle the home division of Kindred with huge interest expenses by doubling debt for the deal.  Kindred borrowed $1.1 billion to buy Gentiva. 

Humana/WCAS/TPG will borrow $2.1 billion for virtually the same assets.

Total financing shows over $4.9 billion in debt/equity to buy Kindred for $4.1 billion.  The extra $800 million will likely go toward the Curo transaction and to pay fees/special dividends to Kindred's new owners.

When WCAS bought U.S. Oncology it listed executives and board members who committed to take a stake in the privately held company.  The proxy statement read:

Holdings expects that certain executive officers and directors of US Oncology will participate in the merger by making an investment in Holdings and acquiring shares of preferred stock and common stock on the same basis that Welsh Carson and its co-investors are investing in Holdings.

No such disclosure exists for Kindred's sellout to Humana and two financial rapscallions. SEC filings mention employment agreements for David Causby and Ben Breier that may cause conflicts of interest.  There is no wording as to how our current board might participate in the deal going forward.

Hospice delivers on Christ's Sermon on the Mount calling and is the strange bedfellow in this greed filled mix.  I expect numerous employee violations from CEOs Bruce Broussard and David Causby, the mysterious Curo crew and Humana/WCAS/TPG.

Evidence indicates they prize the earthly over the sacred, the profane over the holy and the diminishing of people over nourishing God's beloved children.

Money-changers will soon buy our hospice and impose their twisted priorities.  Lord, help us all.

Anonymous (wanting to serve God's children, not Mammon)

Saturday, May 12, 2018

Massive Change Looms for Kindred

Strange Tony,

Kindred Healthcare's sellout to Humana and two financial rapscallions looked traumatic enough for dedicated employees.  The deal involved splitting Kindred, a company cobbled together in early 2015.  It also drove a knife through Kindred's strategic vision of a one-stop shop for post acute healthcare services.

Executives and conflicted Board members defended the deal.with:

The structure was developed based on extensive work with investment bankers and other advisors who have experience with similarly complex transactions.  It was determined that a structure with two companies owned by a group of investment partners would yield the most optimal result for our employees executives, our patients and our stockholders..

Investment bankers, other advisors and our new owners charge fees for advising and executing the deal.  Kindred executives could release the total amount of these fees, which will dwarf the paltry $4.4 million the company paid for employee retirement benefits in 2017.  This "optimal result for employees" includes no changes to base salaries or pay rates after the transaction close.

The first challenge is trashing Kindred's strategic vision..

The next challenge arises from purchase of Curo Health Services, the second complex deal announced by Humana and its financial rapscallion partners.  Our new owners like Curo's "highly capable management team and a tech-enabled, centralized model for hospice care."

The double merged company "will leverage data and analytics to measure and advance evidence-based clinical outcomes for patients and seamlessly coordinate the transition from home care, to in-home palliative care, and thoughtfully into hospice."

Curo does not have home health.  Its systems are hospice only.  Curo employees suffered under financial rapscallion owners GTCR and Thomas Lee Partners.  Curo's systems measure financial performance in order to give their private owners the cash they desire. 

Our consortium ownership wants Kindred at Home to grow EBITDA, which is the basis for Humana to buy out its partners in future years.  Our owners may pull out chunks of company cash along the way.  It's what financial rapscallions do. 

Curo has more hospice locations, 245 vs 178 for Kindred.  There will be huge overlap in some markets and new owners normally salivate over slashing redundant expenses while keeping all the revenue.  Flashback to Gentiva's buyout of Harden Healthcare in 2014:

Harden-related synergies are expected to be approximately $28 million by 2015. This includes approximately $16 million from the elimination of overlapping corporate costs, and the remainder from the consolidation of regional area and branch organizations, as well as other cost-savings initiatives

Gentiva butchered the integration with Harden Healthcare's hospice sites.  Hospices aren't puzzles that can be casually disassembled, combined and reassembled.  When service suffers patients and referral sources notice. If service gets bad enough they switch their preferred hospice.  Employees can do likewise.

Curo's hospices are less than half the size of Kindred's on an average revenue basis.  For the year ended 9-30-17 Curo averaged $2 million in revenue per hospice vs. Kindred's $4.1 million. 

Merging Kindred at Home's 178 hospices into Curo is a huge challenge, especially as it's hot on the heels of the Kindred split.  Curo encompasses eight hospice brands, while Kindred at Home still has a smattering of various home health and hospice brands.

Over time Humana will want brand harmony.  What's a potential solution to Curo/Kindred's brand proliferation?

Con may be appropriate for our new ownership group.  How much Viva will they bring employees?

Anonymous (soon to be Curo'ed)

Thursday, May 10, 2018

Humana CEO's $5 Million Stock Sale

Strange Tony,

Business news reported Humana CEO Bruce Broussard sold $5 million in stock on May 3, 2018.  His $5 million in proceeds exceeds by $600,000 the amount Kindred spent last year company wide on retirement benefits.  At least one employee will be able to retire in style. 

Anonymous (from Kindred, soon to be Conviva Hospice)

Saturday, May 5, 2018

Loyal Employee Stockholders Shafted

Strange Tony,

Kindred gave Gentiva shareholders a combination of cash and KND stock, which was valued at $18.46 on 1-30-15.  Just over three years later Kindred executives crafted a deal selling the company for $9 per share.

Gentiva had an employee stock purchase plan.  Any loyal employees who held onto their new Kindred stock took it on the chin as management turned their $5 in KND stock into $2.44.

That level of distress is attractive to financial rapscallions, who plan to make big money fluffing up Kindred for the put/call flip to Humana.

Anonymous (in unbalanced Kindred)