Kindred leaving U.S. skilled nursing business
Kindred Healthcare Inc. announced plans Monday to exit the skilled nursing facility business, citing “dynamic changes” to the healthcare industry.
The decision to leave the skilled nursing sector is the “final step in a process that began years ago,” Benjamin Breier, president and CEO of the Louisville-based long-term care provider said in a press release.
“We are taking proactive strategic steps to position Kindred for long-term success against the backdrop of dynamic changes in the healthcare services industry,” Breier said. “Our plan to exit the skilled nursing facility business, together with the significant cost realignment initiative we are undertaking in connection with the exit, are substantial steps forward in our continuing effort to transform Kindred's strategy and growth profile to enhance shareholder value."
The move is estimated to reduce annual rent obligations for Kindred by $90 million, and annual expenditures by $30 million. The company also forecasts the elimination of an additional $70 million to $100 million of overhead used to support its skilled nursing business above the facility level.
"We expect our full exit from the skilled nursing facility business, upon completion, to be positive for future cash flows,” said Stephen D. Farber, executive vice president and CFO.
The company forecasts annual revenues of $7.2 billion for 2016, a number slightly lower than initial estimates due to “significant headwinds facing the skilled nursing facility business,” Breier added. Kindred remains “optimistic” about the potential growth for its home health, hospice, community care, long-term acute care and inpatient rehabilitation facility businesses, he said. When the reorganization is complete, approximately 50% of revenues will come from the home health division, the company announcement said.
Kindred, which once operated around 300 skilled facilities across the United States, currently ranks as the tenth largest nursing facility company in terms of skilled bed capacity. As of the end of last year it operated 90 facilities in 18 states, with a total of 11,535 beds.