Saturday, May 27, 2017

Kindred Management Still Working on Wall Street Promises

Strange Tony,

I recall your finding management's obsession with financial measures limited and uninspiring  When Kindred purchased Gentiva it projected the combined company would produce $1 billion in EBITDAR.

Every year since the buyout management came up short.   Kindred executives announced the shortfall will grow with the sale of the nursing home division.

Kindred had core EDITDAR of $950 million for 2016.  Core EBITDAR declined 3.1% to $950.1 million compared to $980.3 million in the same period in 2015. 

The company reaffirms 2017 guidance for core EBITDAR of $930 million, with a range of $910 million to $950 million.Says for 2018 reaffirms core EBITDAR of approximately $840 million.

Core EBITDAR dropped after management's $1 billion promise.  Kindred's employee numbers also fell since the Gentiva deal.

109,000 -- October 2014 - Kindred plus Gentiva employees
102,000 -- December 2015
100,100 -- December 2016

After announcing Kindred's buyout of Gentiva the number of jobs fell by 8,900.  Benefits deteriorated in nearly every area after Kindred took over Gentiva.  Even taking out of employees pockets Kindred couldn't make its EBITDAR promises.

I feel another sale may be coming.  It was the exit strategy for Gentiva managers who bragged about their ability to operate and the depth of their bench.  All Gentiva executives took the money and all but one ran with their new fortunes.  Only COO David Causby took the money and stayed for a series of $1 million Kindred bonuses.  His next one will come just for showing up on August 1.

Exit is also the route many excellent and underappreciated hospice employees take.  Our site is gearing up for another exodus.  Why is it mostly the good, caring employees who leave?  Why are they designated as not eligible for rehire?

Management is too focused on shallow measures to see the depth of commitment and caring.  They don't know what our site has lost and will lose.  Their eyes and ears are trained on EBITDAR to the exclusion of service and caring.  Executives also ignore competitive pay and benefits for those doing the work.

Anonymous  (from numbers obsessed, underachieving Kindred)

Saturday, May 13, 2017

Pray LBO Stays Away

Strange Tony,

Financial sharks circle Kindred Healthcare and some are inside the company.  Take former CEO Paul Diaz, who received a $6 million cash bonus in May 2015 for closing the deal on Gentiva.  Diaz went on to become an operating partner with Cressey and Company.  Oddly, his bio on Cressey's website makes no mention of his current Kindred board service.  Diaz is Vice Chairman of Kindred's Board of Directors. 

Should Kindred sell for a premium to Cressey and Company conflict of interest questions would arise.  Should Cressey hire Guidon Partners to co-invest on Kindred more ethical questions would surface.  A Generic Hospice commenter educated me about Diaz role with Cressey and Guidon. How many ways could Paul Diaz make money if those possibilities rang true?  He'd be on both sides of the deal.

Members of Kindred's executive team and board have leveraged buyout organizations, LBO, in their background. Firms include Warburg Pincus, Bain Capital, TPG, Summit Partners, Blackstone Group, Apollo Global Management and the aforementioned Cressey and Company.

Reuters cited two LBO firms as being interested, Blackstone and Apollo Global.  Kindred COO Kent Wallace worked as CEO for Blackstone affiliate, Vanguard Health Systems.  Kindred Board member Frederick Kleisner served on the board of an Apollo affiliate, Apollo Residential Mortgage..

Kindred's management operated much like a buyout firm by purchasing companies with copious amounts of debt.  The Gentiva buyout bought our hospice into Kindred's wider post acute tent, which it now wants to shrink or exit.  The company's obsession with measures and money have been to the detriment of mission and competent management practices at our site.  Mostly stagnant pay and deteriorating benefits have been another part of the Kindred employee experience.

Please let our new owner not be the Hannibal Lechter of finance, LBO or better known by its modern name - private equity.  Lord keep us safe from corporate predators.  For that I pray.

Anonymous (from Kindred-ever-enriching-executives)

Saturday, May 6, 2017

Mixed Messages for Employees on Kindred Call

Strange Tony,

Kindred hosted its earnings call last week.  The spin started the day before with the press release on first quarter results:

  • Kindred reported a first-quarter loss of $5.7 million, after reporting a profit in the same period a year earlier.
  • Consolidated revenues were $1.77 billion, a 3.8% year-over-year decrease.  It was below forecasts of $1.78 billion.  
  • The company expects full-year earnings in the range of 40 cents to 70 cents per share.

It's not a stirring financial report but the stock market reacted positively.  With projected earnings of 55 cents/share (midpoint) Kindred's stock has a price-earnings ratio of over 19 for 2017.  That's a heady valuation for a company potentially on the sale block, especially as it's carrying $3.2 billion in debt.

Hospice and home health held up our end of the delivery equation by doing more with less.

Mr. Breier continued, "In the first quarter, we delivered very encouraging sequential and year-over-year improvement in our Kindred at Home Division, with strong same-store volume growth in both our home health and hospice businesses. Combined with a sequential reduction of labor costs in the first quarter, we returned to historic growth levels and delivered results in line with our 2017 expectations."

The call opened with Breier's usual hollow pander to employees. 

I'd like to start my comments by extending my deep appreciation to our more than 100,000 teammates across the country. Each day our partners at Kindred work hard to improve the lives of the more than 1 million patients we care for annually. We're proud of the excellent care and clinical outcomes we deliver which are direct result of their efforts.

For all the talk of "clinical care" and "results" executives announced the termination of the clinical ladder at the end of 2017 with no plans to replace it.  To boot our branch manager informed staff there are no raises in this year's budget. 

Ben Breier:  "We’re working hard on our merit design and making sure that we're giving people a competitive market increase

We’ve worked hard at our benefit plans, reinstated our 401(k) match, working on a lots of different ways that we can make the employee experience here at Kindred, the teammate experience here at Kindred as best that it can be.

We have made great progress I think in terms of measuring employee satisfaction and the various things we’re doing. "

There's no sign of the PwC annual employee survey, which Kindred conducted twice after buying Gentiva.  The 2016 survey fell into a management hole at our hospice site.  Employees never heard the results and our branch manager said Kindred de-emphasized the survey, which was the direct result of employee feedback efforts.   Apparently, executives measured employee satisfaction and ignored the results

Staff turnover within Kindred at Home actually increased in 2016 to 23.6% from 22.6% in 2015.  That statistic meant having to hire more replacements.

We’re better and better every quarter at recruiting people into the company and keeping people longer.

Actually when you look at our turnover rates and our retention rates, we continue to really outperform even our own expectations. Our turnover remains at really kind of historical lows across our business settings and our retention rates remain at sort of historical high.

So we’re doing we think a lot of the right things, probably not all of the right things. But we are doing a lot of the right things. And I think that it still remains the contested labor market particularly for nurses in the acute setting. And that’s where kind of the real kind of hand to hand fight continues for us.

Executives "hand to hand fight" is against current employees within the company, at least our hospice site.  Our "reinstated" 401(k) match is a fraction of Gentiva's and Kindred's health insurance makes it financially difficult to see a physician outside the annual wellness visit.   

No voice, no raise, clinical ladder pay cuts and ongoing benefits erosion are the Causby/Kindred way.  This might be preparation for the next sellout and another round of executive enrichment.

Gentiva did a number of squirrely things to polish the numbers while Kindred's Paul Diaz courted the company.  Our site has experienced similarly strange but different dollar squeezing initiatives.  They are an impediment to good patient care and employee retention.  Due diligence caused undo harm to employees and patient care in the past.  It may well resurface.  Brace yourself.

Anonymous (from KindredforSale)