Saturday, September 21, 2013

One Gentiva: One Wall Street


Gentiva catered to Wall Street in two acts this past week.  First, the company revised its executive incentive compensation plans to meet longstanding concerns expressed by the investment community.  Gentiva badly lost the last two proxy votes on executive compensation, the nonbinding shareholder "say on pay." 

Second, Gentiva executives called Wall Street analysts to announce the Harden Healthcare acquisition.  They made this call at 9:00 am Eastern.  Investment house analysts were able to ask questions about the deal.  Employees got the call at 11:00 am Eastern, where there was no opportunity for questions.

Analysts seemed excited about the deal.  While it improved Gentiva's national footprint for hospice and home health, it essentially was doubling down on Gentiva's current model.  Harden's Community Care, Medicaid Primary Home Care, division was sold as diversifying from Medicare, until one considers Medicaid sits within the Center for Medicare and Medicaid.  The feds pay roughly two thirds of Medicaid bills while states pick up the rest.

Gentiva's CEO Tony Strange and CFO Eric Slusser sold the deal as deleveraging.  They went on to say debt would be 5.1 to 5.5 times equity in the combined company.  Not long ago Gentiva violated debt covenant restrictions well below those levels.  This resulted in a significant payment to debt holders and ratcheting up Gentiva's interest rate to junk levels.

With an asset write down Gentiva's leverage ratio rose as high as 32.25, according to Y Charts.  That's rolling the dice in private equity like fashion.

For years Gentiva had twice as much equity as debt.  Debt ballooned when Gentiva closed the Odyssey Hospice deal with $1.1 billion in borrowings.

One Gentiva will exhaust $85 million in cash, borrow $270 million and offer $53.8 million in stock to buy Harden's home health, hospice and community care offerings.

Consider how Eric described Gentiva's leverage in this year's Q2 earnings call:

The company's leverage ratio for the second quarter of 2013 was approximately 5.1 compared to a maximum allowed level of 6.25. On a net basis, the leverage ratio was 4.1.
Tony offered this in the same call:

We're going to balance that with our debt structure and managing our leverage ratio, and we're going to manage that leverage ratio to a place where we're comfortable.
In the Q and A Eric stated:

I think an acquisition strategy could be a deleveraging strategy in this environment. 

Tony and Eric can call it deleveraging, but I don't see it.  Gentiva remains highly levered and dependent on one payer, Uncle Sam via Medicare and Medicaid.  There's also the risk of getting into a strained cash position.  The first quarter of the year is when the company's principal and interest payments are due.  Gentiva is often cash flow negative in the first quarter, then generates significant cash in the next three quarters.

Refinancing $585 million in junk debt will likely result in lower interest rates and some interest savings.  I'd venture it's not enough to offset $270 million more in borrowings.

Gentiva believes the Harden acquisition will contribute to earnings within the first year.  It remains to be seen.  This is the crew that thought hospice was home health and imposed the same operating and marketing strategies to disastrous results.  While they apologized to hospice marketers, they're yet to offer their regrets to Gentiva employees.  They did offer a video on restarting the hospice heartbeat, after tearing out our heart and stomping that sucker flat.

Anyway, there's much to celebrate in Atlanta, the site of Gentiva's headquarters.  Let's hope they don't mismanage this acquisition the way they did Odyssey.

In my community there are many great hospice nurses who'll never set their foot inside a Gentiva door.  A callous corporate did its part, but much is due to an Site Leader incapable of mentoring, but fully able to torment.  It's frightening to think how this person might traumatize any new Harden divisions put under their control. An endless series of corporate representatives repeatedly tell us how this person has their complete confidence and trust.

At One Gentiva, clueless is as clueless does.


P.S.  Gentiva's leverage at year end was 5.4 times equity.

Friday, September 20, 2013

Gentiva Buying, Might Generic Hospice Sell Out?


Gentiva is buying Harden Healthcare's home health, hospice and primacy healthcare divisions from private equity firm CapStar Partners LLC.  

CapStar monetized its equity position in Girling Hospice, Home Care and Community Care.  Harden sold its Tri-Sun nursing home facilities to Senior Care Tri-Sun will rent the buildings back from SCC. The only part of Harden that remains will operate 49 nursing home operations. 

Deals, the buying and selling of health care companies, is a unique feature of health reform.  Private equity firms expect huge returns on their equity investments in health care companies.  Gentiva's move is the reverse of Amedisys, which sold part of their hospice/home health firm to KKR.

When might Generic Hospice sell out to a legendary private equity firm?  It's but a matter of time.


Update 9-21-13:  KKR recapitalized Harden in 2010 and provided funding for Harden's acquisition of Voyager Hospice.

Friday, September 13, 2013

A Culture of Profound Sickness


If we stood in a healthy, functional environment with experienced, wise leaders it might make sense to speak one's mind with confidence, to share honest feelings and reactions, appeal to common sense, suggest what seems fair and just and offer ways to fix what is broken.

Sadly, the current state is dysfunctional to a high degree.  Jesus advised in such situations to be "as clever as snakes."  Battles cannot be fought in full uniform or by regiment in open field.  They must be undertaken in camouflage, visual and auditory.  Strikes must come from nowhere and return to hidden places.

The language of leaders, corporate and political sounds noble, even saintly, until examined under the light of truth where they reveal power grabs, hidden agendas, paranoia and personal enrichment.  This lament does not take away the current reality but may cause one to adjust course.

Day to day individuals must discern, does today call for simple honesty or snake-like cleverness, the kind that is aware of the distortions of our world but not buying into or supporting their employ?  Some days call for saying less, for going with the flow, however nonsensical.

The small bit of recompense in this off-balance world is leaders' lack of attention.  They are quickly diverted to another scheme which requires new fanfare and boasting.  Grandiosity comes in waves, but is quickly rendered inert by incomplete managerial follow through.

This is not ideal.  It tears at our sense of reason and rightness.  A wise man once said "Avoid the company of deluded people when you can, but when you cannot, keep your own counsel."

Many find no good support within their work system, within the body politic.  Yet there are individuals who are not asleep like the crowds.  Seek them out subtly, drawing attention neither to oneself or any awakened.  Most of all seek support in one's own depths, where Soul meets Source.  This is below and beneath the clatter, the worry, the histrionic, over-reaction, payback and insanity of our leaders during these disturbing days.

This sums up Generic Hospice.  Does it also nail Gentiva?


Monday, September 2, 2013

Another Disingenuous Gentiva Promise


I "acted now" upon receiving this flyer in the mail.  It promised a mere 15 minutes to complete the online health assessment and earn 50 points toward a Wellness Incentive.  I called the number published on the inside 877-410-0186.  I sat on hold for 10 minutes.  A Gentiva Connections representative tried to help me with my request, however she did not have access to what I needed.  At the 15 minute mark she transferred me to United Healthcare Member Services.

UHC's Member Services did not "have that information" and transferred me to the Health and Wellness Portal Technical Support.  This call dropped at the 22 minute mark.  I called back.  After 30 minutes, double the time the flyer indicated, I had a web address that would get me started.

In total I spent 45 minutes to get into a position to start Gentiva's 15 minute health assessment.  It involved three phone calls and web signup.   This is the kind of complexity and service unfriendliness I found the last few years in signing up for employee benefits.

Last year's wellness incentive was a $10 per pay period break on health insurance costs.  This year's is very unclear, but completing the health assessment only gets an employee halfway there.  Not only is the prize unknown, but the second half of the journey to achieve it is also a mystery.

Complexity and poor communication lead me to believe Gentiva doesn't want to make it easy for employees to sign up for earned benefits. 


Update 9-20-13:  I'd venture I well into four hours of time spent trying to get the incentive.  Each step of the way required a call to technical support.  Time to date?  "Just 15 minutes" roughly squared.