Extendicare mulls sell-off of U.S. operations amid decline
Extendicare CEO and President Timothy Lukenda
Extendicare, a major North American long-term care operator, may sell off its 158 U.S. facilities before the end of the year. The company's move to separate its Canadian and U.S. businesses could strike an ominous note to other providers as the Affordable Care Act speeds toward full implementation.
The Ontario-based company first announced the operational split in May. A strategic committee is still exploring how separation will be achieved, said Jillian Fountain, corporate secretary for parent company Extendicare Inc.
If the U.S. business is not sold, two distinct companies could be formed that would own and operate the Extendicare facilities in the two countries.
With 89 Canadian facilities in addition to those in the United States, Extendicare has challenged investors, who generally struggle to understand the complexities of both markets and accurately value the company. This is a primary reason for the separation, Fountain told McKnight's. However, payment volatility and other factors related to U.S. healthcare reform clearly spurred the decision.
The U.S. healthcare sector is experiencing “unprecedented” financial pressure amid an uncertain environment, said Extendicare CEO and President Tim Lukenda in May.
Speaking with McKnight's, Fountain was even more blunt.
“The U.S. is a very volatile and risky environment. Canada is more stable,” she said.
This will not come as news to long-term care operators, she added.
However, U.S. providers reading the tea leaves can hardly be encouraged by Extendicare's possible flight from the U.S. market. And the first quarter numbers add even more detail to the not-so-pretty picture: Extendicare's revenues from U.S. operations declined $26 million year-over-year, while revenue from Canadian facilities was up about $4 million.