Humana Values Kindred at Home at 21x 2018 Buyout

Strange Tony,

Kindred at Home President David Causby made his first king's ransom when Humana and financial rapscallions bought the company on the cheap.  His second came in August 2021 when the value of his stock rose 87% in three short years.  A galling third could come when Humana monetizes our hospice yet again.

Humana's latest SEC filing indicates how richly it valued Kindred at Home relative to the paltry $9 per share amount Kindred Healthcare shareholders received in 2018. 

"compelling all-cash transaction with affiliates of TPG Capital, Welsh, Carson, Anderson & Stowe and Humana Inc."

"total funds needed to complete the merger and the transactions contemplated by the separation agreement (including the funds to pay Kindred stockholders and to pay the holders of other equity-based interests the amounts due to them under the merger agreement), which would be approximately $821.9 million."

Humana purchased 40% of Kindred at Home which represented just over one third of Kindred Healthcare's annual revenues.  Breaking down the $821.9 million in KND equity as a proportion of revenue associated with that segment reveals:

40% of Kindred at Home Humana = $114 million

60% of Kindred at Home WCAS/TPG = $171 million

Kindred Healthcare WCAS/TPG = $536 million

Humana valued its initial equity stake (which includes Curo Health) at $1.3 billion, over 10 times what shareholders received.  That increased to $2.4 billion, 21 times the value of KND equity in 2018.

Humana purchased the rest of Kindred at Home in August 2021.  Assets equals liabilities plus shareholder equity.  

Assets = $9.1 billion

Liabilities = $2.9 billion

Shareholder equity = $9.1 billion - $2.9 billion or $6.2 billion

Somehow $285 million in 2018 KAH shareholder equity turned into $6.2 billion, a multiple of 21.7 times.  

Of the $9.1 billion in assets nearly $5.8 billion is goodwill and $2.3 billion in other intangible assets.  That's $8.3 billion in assets that could potentially evaporate.

KND Shareholders weren't the only ones short-sheeted by Humana et al.  My hospice coworkers received no to paltry raises while executives robbed them of fair pay for hours worked and miles driven.  Greedy executives cannot take it with them when they leave this earthly plane. 

Anonymous

Kindred Hospice Sale on Track, Nurses in Short Supply

Strange Tony,

It turns out Humana ruined more than our hospice since buying Kindred at Home in July 2018.  In year one Humana reduced headcount, gave us crappy technology, stole pay and mileage reimbursement from staff, and cut the number of holidays and holiday pay. The next three years our owners choked the life out of our once nationally recognized hospice.

Expectations must be set for Humana's spinoff of our depleted hospice.  The cash-in remains on track, according to Humana's Q3 earnings call.

Bruce Broussard:  President and Chief Executive Officer

With respect to hospice, our intent remains to ultimately divest the majority interest in this portion of the asset. As our experience has demonstrated, we can deliver desired experiences and outcomes for patients transitioning from restorative care to hospice through partnership models. Since we closed the transaction in August we have continued to explore alternatives for the long-term ownership structure for the business and have initiated steps to reorganize the hospice business for standalone operations, while also ensuring business continuity and monitoring underlying trends. We do not have a further update on the specific transaction structure or expected transaction timing, but we will provide additional updates as appropriate moving forward. Given the continued expansion of an interest in our healthcare service platform we are committed to providing additional disclosure to give further transparency into the performance of these businesses beginning with our first quarter 2022 reporting. 

It's odd that Humana won't report on the performance of Kindred at Home until Q1 2022 as they completed the buyout in August 2021.  What do they have to hide?

Susan Diamond:  Chief Financial Officer

Similar to Home Health and Hospice peers, the business is being impacted by COVID and labor shortages. For the third quarter, home health admissions grew low single digits year-over-year, while hospice experienced a low single-digit decline year-over-year.

We will continue to closely monitor trends as we made targeted investments to sustainably improve the recruitment and retention of nurses.

Staff got the message from Broussard, Diamond and KAH President David Causby, returning their lack of loyalty.  One can't bill for services not provided due to lack of staff.

Anonymous