In a deal that is intended to reduce Gentiva’s reliance on Medicare generated revenue, the home health care company plans to purchase the home health, community care, and hospice based businesses of Harden Healthcare Services. Harden is a privately owned company and the deal is worth approximately $409 million.
Gentiva anticipates that its revenue for the fiscal year 2014 to be around $2.1 billion. The move to purchase this private company is in response to expected cuts in reimbursements for the services that it provides to clients across the country. Many of the cuts that Gentiva has been struggling with are a direct result of the Affordable Care Act that was signed into law in 2010. The law, more commonly referred to as Obamacare, will reduce Medicare reimbursement rates and also cut budgets throughout the Medicare system.
The move by Gentiva will reduce its dependence on these government subsidies and will increase its privately funded revenue. It will also help Gentiva to expand its potential client base to those that are dual eligibles (patients who are covered by both Medicare and Medicaid).
The offer includes $355 million in cash and $54 million in common stock options. The long-term care aspect of Harden’s business will remain with Harden and its shareholders, however.
The Executive Chairman for Gentiva, Rod Windley commented that the changes in the revenue and rates is going to compress the industry, which will place Gentiva in a good position moving into the future.
In a formal statement, he said, “The increasing healthcare needs of an aging population and ongoing rate pressures will fuel industry consolidation and Gentiva is positioned to be a leader in this effort.”
The share of revenue that is generated through Medicare was 86 percent last year and is expected to be 76 percent in 2014. Just about half of its total revenue is expected to come from home health care, while 41 percent will be generate through hospice and the remaining percentage coming from community care. Gentiva expects that the deal to buy Harden’s private home health care businesses and other assets will begin to provide revenue within 12 months of the close of the fourth quarter this year.
The deal will be funded through some of the cash reserves that Gentiva has on hand and also financing through a new credit facility. BofA Merrill Lynch is going to be financing part of the deal as well.