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Select Rehabilitation closed its surprising purchase of Kindred HealthCare’s RehabCare unit on Tuesday, and the new largest contract rehab company in the U.S. has an admission: It might not be done growing.

The Glenview, IL-based company did not disclose terms of the deal, which was finalized this week. But its revenues will exceed $1 billion annually, Select Senior Vice President of Business Development Shelley Wisnowski told McKnight’s on Wednesday.

“We’re very happy the transition went through without any issues. Now we’re just trying to blend our families together,” she said.

The contract therapy behemoth employs about 17,000 therapists at nearly 2,400 locations in 43 states. It provides services at skilled nursing through independent living facilities, as well as at schools and other facilities outside of long-term care.

Wisnowski clarified that the spark for the deal came earlier this year when Select Therapies co-founder and Executive Chairman Neal Deutsch first approached Kindred about selling its Rehabcare unit. It was not on the market at the time, Wisnowski explained.

“We had a lot of respect for RehabCare. It has always been a tough competitor, and we liked the services they offered, so Neal approached them,” she said.

Cuts won’t slow ambition

Despite Tuesday’s announcement that federal health officials would be cutting Medicare Part B physical and occupational therapy payments by 9%, the Select team remains bullish on the sector.

“In this fragmented contract therapy space, Select continues to be the strategic acquirer of choice and we look forward to future accretive acquisition opportunities — both directly in contract therapy and in adjacent spaces,” Deutsch told McKnight’s in a statement. The RehabCare pickup is Select’s eighth acquisition in as many years, and by far its biggest.

Further expansion could come through Internal growth, outside acquisitions or by delivering technology support, including communications tools, and data and other services that can help skilled nursing, assisted living and independent living providers, Wisnowski said. 

Select Rehab President Mike Capstick

“We think there will be several small regional providers that just can’t provide the level of support and the overhead infrastructure needed to really meet clients’ needs as we move forward with the value-based payment and things being based more on data and outcomes,” she noted. She said further growth could be pursued “at any time.”

Select CEO Anna Gardina Wolfe told McKnight’s on Wednesday that company growth can be expected beyond the contract therapy space.

“We have incredibly strong infrastructure and technology and hope to use that to expand to other areas,” she said. A patient app to track progress in therapy and communicate with therapists is just one example that already exists, she noted.

Wisowski said that as accountable care organizations and Medicare Advantage programs provide more data, operators will need more help incorporating it to be successful. Numerous therapy players have upped their game in recent years to meet data and analytics needs, she confirmed.

Select President and co-founder Mike Capstick reminded that the number of people over the age of 65 will double in the next 40 years, bringing the total to about 80 million. Meanwhile, the 85-and-older group will nearly quadruple by 2040.

“Skilled nursing continues to be well-positioned in the post-acute market as the low-cost provider versus IRFs or LTACS. We don’t see that market going away,” he told McKnight’s on Wednesday

C-suite, workforce changes

In addition to co-founders Deutsch, Gardina Wolfe and Capstick, the Select C-suite consists of Wisnowski and Glenda Mack, the new senior vice president of operations and former president of RehabCare.

Virtually all RehabCare field personnel and their managers came with the deal, with only a small number of redundant support or corporate positions eliminated Wisnowski explained. Some remained with corporate parent Kindred HealthCare, which three years ago embarked on a plan to shed all of its skilled nursing facilities and focus on long-term acute-care hospitals and inpatient rehab facilities and, more recently, behavioral health centers. Eventually, all employees will come under the Select Rehabilitation banner, but that timing has not been determined, Wisnowski said.

She added that the Centers for Medicare & Medicaid Services’ release of the 2021 physician pay rule this week was “extremely disappointing” because the mandated revenue-neutral nature of it will bring nearly double-digit percentage pay cuts in PT and OT.

But there is hope that a two-year moratorium can be placed on the cuts, if H.R. 8702, the Holding Providers Harmless for Medicare Cuts During COVID-19 Act, can be attached to a larger Congressional package by the end of the year.

Contract therapy has a bright future and the COVID-19 pandemic cannot stop that. In fact the public health emergency has brought value to the fore, Wisnowski believes.

“This [pandemic] is a blip on the radar. When you look at the volumes of people who are going to need our services in the future over the next 20 years, we see growth in this market. It’s not a shrinking market, even with the increase in home support services.”

Providers have already come around since the pandemic began, she added.

“When COVID hit and certain clients said don’t come see our long-term care residents right now because we don’t want them exposed to any more people than need to be exposed, they found these residents were declining in function. They weren’t able to do what they could do a month prior, and then we were called in to help. It was proof of how important therapy is in those settings,” Wisnowski explained.

“[Operators] were honestly doing what they felt was best for the residents. We totally understood that. But at the same time, we saw residents declining and getting more falls and having some negative outcomes.”