Will Kindred Be Deterred by Gentiva-Amedisys Combination?

StrangeTony,

The machinations continue.  See letter below.

Anonymous (from Gentiva)

June 27, 2014

Rodney Windley
Executive Chairman
Gentiva Health Services, Inc.
3350 Riverwood Parkway, Suite 1400
Atlanta, GA 30339

Tony Strange
Chief Executive Officer, President and Director
Gentiva Health Services, Inc.
3350 Riverwood Parkway, Suite 1400
Atlanta, GA 30339

Dear Rod and Tony:

We are writing to you, and the entire board of directors of Gentiva, regarding the reports in the marketplace that Gentiva may be pursuing an acquisition of Amedisys (NASDAQ:AMED). We are concerned that, while refusing to discuss Kindred’s highly attractive cash offer, the Gentiva board may be pursuing a course that would disenfranchise its shareholders through a value-destroying and highly levered transaction with Amedisys.

We believe it is incumbent on the Gentiva board, in fulfilling its fiduciary duty to its shareholders, to sit down with Kindred immediately and explore our value-enhancing proposal before entering into any agreement that could impair the value of, or preclude, a Kindred-Gentiva combination. As you know, our all-cash offer of $14.50 per share represents a 70% premium to Gentiva’s closing share price on May 14, 2014 (the day prior to Kindred making its proposal public), and would deliver immediate and certain value to Gentiva shareholders. In addition, we have expressed a willingness to offer cash and stock in a structure that would allow Gentiva shareholders to participate further in the synergies and upside potential of the proposed combination (which many Gentiva shareholders have told us they would prefer).

We have also indicated that we would be prepared to consider increasing the value of our offer if Gentiva were to commence discussions and demonstrate additional value. Even before the Amedisys reports were brought to our attention, we listened with interest to the remarks of Gentiva’s Chief Financial Officer, Eric Slusser, at the Wells Fargo Healthcare Conference, particularly his statements indicating that a vertically integrated post-acute care provider would be best positioned to deliver effective care in the long run. This is one of the many reasons why we believe the proposed combination of Kindred and Gentiva makes so much sense.

A Kindred-Gentiva combination would offer the benefits of vertical integration and position our combined company to provide integrated post-acute care at lower cost to a much broader range of patients. As both Gentiva and Amedisys focus exclusively on home health and hospice care, such a combination would not similarly advance the interests of patients or position Gentiva at the forefront of changes to the U.S. healthcare delivery system. We note that Kindred has an outstanding track record of successfully integrating acquisitions, including most recently RehabCare and Senior Home Care.

In contrast to Kindred, both Gentiva and Amedisys have experienced integration challenges in the past. We believe the combination of Kindred and Gentiva would have minimal execution risk and a high likelihood of swift and seamless integration. Kindred remains firmly committed to the proposed combination with Gentiva, but we take our responsibilities to our shareholders very seriously.

If Gentiva were to move forward with any other transaction, Kindred would review the outstanding $14.50 cash offer and consider revising or withdrawing it. As we have stated repeatedly over the last six weeks, we would strongly prefer to work with the Gentiva board to reach a negotiated agreement. We have repeatedly requested meetings with you, and are prepared to meet with you and your advisors as soon as is practicable.

We once again call upon your board to immediately commence good-faith discussions with Kindred, so that our companies can move forward with a combination that serves the interests of all our stakeholders.

Sincerely, Paul J. Diaz
Chief Executive Officer
Kindred Healthcare, Inc.

cc: Phyllis R. Yale, Chair of the Board

Generic's Management by Manipulation

Anonymous,

LinkedIn ran two pieces on bad bosses.  Together they nailed the horrific boss, one our staff suffered under for years.  One article identified:

1.  The boss lies for personal gain or to discredit others.
2.  They're envious of subordinates, peers and higher ups.
3.  Their promises are repeatedly empty.
4.  They blame others to mask their shortcomings.
5.  They fail to manage conflict and bad behavior.
6.  They send their team into harm's way at the whim of top management

The other cited:

7.  They have others fire their direct reports
8.  They make a decision in private and fail to protect their people in public if it doesn't work.
9.   They tell people in private what they believe the subordinate wants to hear.  Such inconsistent messaging is an attempt to control people by manipulation.
10.  They will not have face-to-face meetings to resolve conflict.
11.  They slip in a negative comment about another co-worker in every conversation.
12.  They don't allow people to get to know them and they don't invest time getting to know their people.  Everything is shallow and image focused.  Relationship depth is non-existent.

Given what you've shared in the past about Gentiva I bet this hits aspects of your branch manager.  I am interested in your thoughts and reactions. 

StrangeTony

VA Echoes Gentiva

StrangeTony,

How long can abusive leaders survive in a system?  Quite awhile, even with staff utilizing internal channels.  Here's testimony on the Veterans Administration in Phoenix, Arizona:

The Veterans Administration OIG Hotline received numerous allegations daily of mismanagement, inappropriate hiring decisions, sexual harassment, and bullying behavior by mid- and senior-level managers at this facility. We are assessing the validity of these complaints and if true, the impact to the facility senior leadership’s ability to make effective improvements to patients’ access to care.

This facility had staff employing unofficial systems to hide long wait times for appointments.  The OIG found inappropriate scheduling practices, i.e. widespread cheating, to be systemic throughout the VA.

I work at a Gentiva hospice site with similar management horrors.  Our branch director outright lies to corporate on at least two key measures.  Staff share concerns only to be told they are a problem and need to adjust their attitude.  The messenger is continually blamed as Gentiva managers, local and regional, share a tin ear.

It remains to be seen if the VA's OIG can find what distorts behavior so greatly.

We have and will continue to conduct comprehensive interviews of numerous individuals to evaluate the many allegations, determine their validity, and if appropriate, assign individual accountability.

The OIG found systemic unethical behavior and its assigning individual accountability?  They miss widespread damage caused by top down, authoritative management that manipulates staff with distorting reward systems.

Management's sole reliance on extrinsic motivation schemes discourages learning and improvement.  Such bribes encourage people to focus on beating others in the race.  Woe to those who come in last.  If one doesn't achieve the prize, they must be punished.  Gentiva announced it would pare its losers, ultimately closing or consolidating nearly 100 sites.

Top down decisions have their place, but over reliance turns makes every decision an autocratic dictate.   Such decisions at our site level have a whimsical quality.  There's little to no analysis, exploration of history or management memory.  The criteria seems to be whatever will make our site leader look the best in the present moment.

The pathology of our branch director and the greater Gentiva continually makes things lessor.  Neither Gentiva or the Veterans Adminstration have a clue as to the heavy losses they impose with bad management theory and suboptimizing practices.  They are wed to commands, bribes and manipulations and not capable of seeing.  It's a sad state, sure to be compounded by a looming hostile takeover and healthcare pay for deformance.

Anonymous (from Gentiva)

Kindred Bids $14.50 for Gentiva

StrangeTony,

Kindred Healthcare upped its bid for Gentiva from $14 to $14.50 a share.  Kindred can acquire 14.9% of Gentiva's shares without invoking a poison pill, approved by Gentiva's board after Kindred made public its initial takeover offer.  Kindred stated it wants 100% of Gentiva's stock in the $14.50 tender offer and intends to amend the filing for the 14.9% holding if it's not successful in getting all of Gentiva's stock.

Gentiva's executives promised a response within ten days to Kindred's continued aggression.  Not long ago Kindred told Wall Street analysts it would not be deterred in its courtship of Gentiva.  Kindred leaders stated they were determined to consummate the deal.  That theme resurface in today's announcement:

"we remain confident that we will succeed in consummating this value-enhancing transaction..."

This ensures senior leaders are too occupied to notice any abusive management practices at the hospice site level.  It takes awareness and sensitivity to detect damaged leaders.  With area and regional leaders turning over faster than annually, there's a very small chance of detection.  It becomes exponentially smaller given our site leader monopolizes corporate staff when they visit, highlighting how hard they work and how people are so lacking or unfair to them.

The system of insensitive, abusive, whimsical management is firmly entrenched locally, but is sustained by an eerily similar corporate culture.  The Kindred deal acts as a balm for our branch manager.  While fighting the shark, it's hard to notice the piranha dressed as a guppy.

Anonymous (from Gentiva)

Must Listen to Understand

StrangeTony,

Kindred's investor presentation at Jeffries Global Healthcare Conference touched on its desire to buy Gentiva:

So how do we get there; well first, we really want to get into a room and work with the Gentiva management team to understand their business plan so they can understand our offer better.

One has to listen to understand.   I see Gentiva's senior leaders gave Kindred the same ear it's offered employees the last several years.

Kindred wants one group to listen and pressure Gentiva to the negotiating table, Wall Street investment houses.

All of the analysts that cover Gentiva share this view. If you look at the commentary in terms of the strategic premises we’ve talked about here, the industrial logic, the financial capabilities of the combined company, I have not seen anyone who doesn’t think this transaction doesn’t make sense, and we think ultimately it will make sense to the board and the management team of Gentiva. And again, we look forward to those conversations. 

I look forward to Gentiva senior leaders listening to employees.  We'll see which conversation occurs first.

Anonymous (from Gentiva)

Gentiva Wants to Dine, Not be Eaten

StrangeTony,

Recent investor presentations reveal Gentiva is ready to buy other companies in the post-acute care space while fighting off a hostile takeover by Kindred Healthcare.  Also, Chief Financial Officer Eric Slusser confessed Gentiva's leverage ration increased with the Harden buyout, rather than deleveraging.  That's not the first strategy that went other than predicted.  

Take revenue. Gentiva announced the Harden deal to great fanfare:

On a pro-forma basis the company should be able to generate revenues between $2.1 and $2.2 billion, while adjusted EBITDA should come in between $210 and $220 million, excluding share-based compensation.

On March 4, 2014 the company guided:

We expect 2014 revenues of $1.9 billion to $2.1 billion, an adjusted income attributable to Gentiva shareholders to be in the range of $0.85 to $1.15 per diluted share.

Gentiva closed nearly 100 sites after buying Harden's hospice, home health and community care operations.  How did that impact revenue projections? 

The Company reaffirmed its revenue guidance recently and added EBDITA guidance for the first time:

Gentiva leaders provided guidance on Adjusted EBITDA for the fiscal year 2014 which, based on its current outlook, is expected to be in the range of $177 million to $195 million.

CFO Slusser danced around Gentiva's leverage ratio rising from 5.4 to 5.8 times in Q1. Leaders called the Harden acquisition a means to delever.

Strategic Rationale--Improved capacity to de-lever: strong combined cash flows accelerates the ability to reduce leverage ratio over time

It's Gentiva, where words mean their dictionary opposite.  Integration means disintegration. 

There are two more opportunities to hear Gentiva's senior leaders tell their story to the investment community.

Morgan Stanley Leveraged Finance Conference
Wednesday, June 11, 2014
3:15 p.m. CT (4:15 p.m. ET)
New Orleans, LA

Wells Fargo Securities Healthcare Conference
Tuesday, June 17, 2014
9:25 a.m. ET
Boston, MA

Summertime is around the corner and the big boys are hungry for another company to digest.  How are things at Generic?

Anonymous (from Gentiva)