Thursday, October 9, 2014

Gentiva Sold: Kindred Wins!


Gentiva's stock roared, up nearly three dollars on the day as the company announced it would sell 100% of its shares to Kindred Healthcare.  Gentiva shareholders will receive $14.50 in cash and $5 in Kindred stock in the buyout. 

It was fascinating to hear Gentiva executives describe the deal to employees.  Senior leaders pressed hard to get the bid up to $18.50 and eventually the agreed upon $19.50.  They will endeavor to ensure that benefits remain as planned, although employees' 2015 health insurance surprise is yet to be revealed.  

Kindred does not need two executive suites and the acquirer calls the shots on who remains.  Kindred expects $70 million in annual cost savings after year one, so Gentiva's top layer could soon be gone. 

Kindred's investor call occurred at 9:00 am.  Due diligence gave Kindred confidence in Gentiva as an operator, in the company's financial performance and its accomplishments via the OneGentiva initiative.  

From my view OneGentiva aligned employees in ensuring the company's senior leaders are personally enriched.  Patient care is a clear afterthought.  Who can forget senior leaders declaring earlier this year:

We've had some rocky years.  In this industry there's been a negative environment that's been out there in both the home health and hospice.  We all hope that will subside over time and we'll get back to focusing on the patient need, patient care and the industry will start to climb again.

Gentiva's employee call came at 3:30 pm.  Leaders stated Gentiva employees did the work that enabled executives to return this incredible deal.  Which set of Gentiva employees deserve the credit?  Is it the 47,000 cited in CEO Tony Strange's December 2013 investor presentation or the 46,000 referred to in sellout documents.  How will the 1,000 employees who lost jobs be rewarded in Gentiva's incredible deal?  How will the current 46,000 actually benefit?

Gentiva leaders have three months to put their words into action.  Will they share the tiniest bit of over $40 million in cash flow the last quarter?  How much did that grow in the just ended third quarter?  This crew is not know for sharing.  In my tenure with the company there has been one year of raises and it was paltry.

The handful at the top will be richly rewarded.  This is the gross value of their stock holdings.

The number does not include stock issued between now and the deal's close, nor does it include change of control or severance obligations, also known as golden parachutes.  

It's hard on the ego to go from running a company to heading up a division.  Gentiva's hospice, home health and community care operations will end up in the Kindred at Home division.

Gentiva's 46,000 employees should keep their heads up between now and the deal's close.  Kindred's slides show Gentiva with 39,500 caregivers as of June 30, 2014.  What happened to 6,500 Gentiva workers?  Have they been whittled during the due diligence process or is more pain to come?  

Unfortunately, no Wall Street analyst honed in on the discrepancy between buyer and seller on total employment.  It's our burden to experience. 

Kindred CEO Paul Diaz said the deal is immediately accretive, i.e. will have a positive impact on the company's financials.  This portends a continuation of Gentiva's low to no raise wage practices.  Diaz' effusiveness as to Gentiva's operations focused mostly on financial measures.  This is another bad sign.  

Yes, Gentiva employees should wait for concrete action by Kindred's integration teams.  Kindred is free to offer more substantial language in its aims toward Gentiva employees.  Nothing prevents leadership from offering an overall human resource strategy to employees joining the Kindred family.

I asked a longtime physician how many healthcare mergers/acquisitions improved care in his time practicing.  Only one out of ten did.  That merger occurred in a time when leadership had balance between the various management disciplines.  That era is long gone.  

There is a limit as to how much people can give a company.  I've seen Gentiva push beyond that numerous times and pay the price via turnover.  Kindred's integration teams should be wary of making the same mistake.

Anonymous (from Gentiva)

P.S. - The 2015 surprise is a 15% reduction in employer health insurance contributions

1 comment:

  1. It was crap to have to find out from online news sources instead of from our employer. Is this reflective of Kindred or Gentiva management style? Kindred will not keep both FSUs. Kindred home care division's billing is centralized in Grapevine Tx. The FSUs think they are the Titanic, unsinkable. Think again. The Q.A Kindred sent out on said little to no change in the field. That means the branches. Kindred didn't define 'significant presence' being kept in Atlanta and Kansas City (and our Hospice manager at the KC FSU said earlier today that Kindred doesn't even know the KC FSU exists at this point. Is she dumb or does she think we are? ) which could mean the hospitals and nursing branches, not necessarily the FSUs. I too picked up on the tid bit about lessening debt and expecting profit. Not many coworkers have figured that out yet.