Daily Editors' Notes

Kindred bid shows that not all the fishing will be taking place upstream

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John O'Connor
John O'Connor

Some might wonder why a skilled care giant like Kindred Healthcare would launch a $533 million hostile takeover bid of home-health provider Gentiva.

The real question should be why such efforts haven't been happening more often. Going forward, it's a safe bet they will be.

There seems to be a general fixation among many skilled operators about how best to align with hospitals and health networks. It's easy to see why this upstream bias exists. After all, new Medicare rules will likely reward SNFs who ramp up to play with the big boys, and punish those who sit out. Most skilled operators are smart enough to realize they ignore this reality at their own risk.

But there are plenty of reasons to go fishing downstream as well. Alignments with assisted living, homecare, hospice, independent living and even adult day care operators are not merely things to contemplate. In coming years, providing all-in-one senior living options may be what separates survivors from the rest. Besides, those upstream providers are looking for operators who have already built extensive networks downstream from them. As Kindred's recent actions show, some firms will be rather aggressive in their efforts to expand.

Not that this is all starting today. The reality is that many operators have already formed alliances with downstream partners. And we're already seeing isolated mergers and buyouts.

That's not to say operators need to choose between the upstream or downstream option. Frankly, the choices will likely be framed by other matters. These include local market conditions, staff expertise, policy incentives, access to capital, management comfort zones and other factors that still remain hidden.

It's worth noting that before Paul and Terry Klaassen showed how assisted living could flourish, most experts scoffed at the concept of private-pay senior care.

Since then, a virtual army of operators has carved out a handsome living by challenging prevailing notions. Yes, a silo mentality has long existed in this field. But that hardly means that change has not also been taking place. And from the looks of things, the latter is just starting to gain real traction.

As for those who think the future of skilled care will be as an acute care adjunct, I'm not so sure I fully agree. Certainly, plenty of operators may opt to go that route — and for sensible reasons.

But others are likely to find alternate streams that offer good fishing.

John O'Connor is McKnight's Editorial Director.

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Daily Editors' Notes

McKnight's Daily Editor's Notes features commentary on the latest in long-term care news. Entries are written by Editorial Director John O'Connor on Monday and Friday; Staff Writer Tim Mullaney on Tuesday, Editor James M. Berklan on Wednesday and Senior Editor Elizabeth Newman on Thursday.

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