I find it amazing how people at the top find ways to enrich one another. Does this pass the smell test, especially if the parties have knowledge that the condition stipulating payment will occur?
Gentiva entered into a five-year consulting agreement (the “Consulting Agreement”) with Javelin Healthcare Holdings, LLC, now named Harden Healthcare Holdings, LLC and an indirectly owned subsidiary of Gentiva, and Capstar, pursuant to which Capstar will provide the Surviving Company with certain transitional, strategic or commercial matters, including assistance with the development and maintenance of relationships with key customers and third party payors, and any other services as may appear to the Surviving Company from time to time to be necessary or appropriate in connection with the foregoing.
Pursuant to the Consulting Agreement, Gentiva and the Surviving Company have agreed to pay Capstar an amount equal to $1.0 million per year (commencing as of January 1, 2014) if the Community Care Rate (as defined in the Consulting Agreement) exceeds the Base Community Care Rate (as defined in the Consulting Agreement). If for a given year the Community Care Rate fails to exceed the Base Community Care Rate, Capstar will not be entitled to any payment under the Consulting Agreement for such year.
Additionally, on the Closing Date, Gentiva entered into an agreement pursuant to which Capstar Investment Partners, L.P., a Texas limited partnership in which Mr. Hicks has an indirect material interest (“Capstar L.P.”), has agreed, to terminate a certain sublease agreement in connection with the consummation of the Mergers. Under this agreement, Gentiva has agreed to pay Capstar L.P., for each of five calendar years commencing January 1, 2014, an amount equal to either (i) $750,000 if the Community Care Rate exceeds the Base Community Care Rate for such year and (ii) zero dollars if the Community Care Rate fails to exceed the Base Community Care Rate for such year.
As for 2014 Medicaid Companion Care rates:
For fiscal year 2014 and thereafter, this component will be determined by summing total reported foster/companion care coordinator wages and allocated payroll taxes and benefits from the most recently available audited cost report, inflating those costs to the rate period and dividing the resulting product by the total number of foster care units of service reported on that cost report.
If companion care rates automatically inflate in 2014 Capstar's $1.75 million payment is in the bag. One might've thought $409 million in cash and stock would've been enough for Capstar. It looks like they may pull another $8.75 million from Gentiva. How many people will be fired to fund this private equity enrichment plan?
As for Capstar's commitment to quality, none of their hospice physicians are board certified in hospice and palliative medicine. All of our site's physicians are board certified.
This deal looks more financial and less patient care oriented as news dribbles out. Leading provider now means "just a little bit better than our competition."
Our site used to provide the best service, hands down. Gentiva took that away. How much lower can it go as executive enrichment grows? Sad days, indeed.
P.S. - The Chairman of Capstar Partners, now Vice Chair of Gentiva's board, will sell nearly 2.3 million shares of GTIV, valued at over $27 million. Gentiva employees got their PTO benefit reduced.