Kindred Buys State’s Home Health Operations for $18 Million

The nation’s largest home health provider has attained an even greater scale. Kindred Healthcare Inc. (NYSE: KND) has acquired home health licenses to cover the whole state South Carolina, in a transaction totaling approximately $18 million.

The agreement with the South Carolina Department of Health and Environmental Control (DHEC) took effect Jan. 1, Kindred announced Tuesday. Previously, the Louisville-based company had 10 offices serving 22 counties in the state. It now has 19 offices and has 650 more patients under its care. In addition, 72 former employees of the DHEC have accepted offers of employment from Kindred.

Kindred now intends to use this platform to expand home health services further, according to a company press release. It has provided home health in South Carolina since acquiring Gentiva Health Services in a blockbuster 2014 deal.

Since 1966, DHEC has provided home health services in South Carolina, according to a Notice of Transfer document soliciting bids, which was issued in August 2015.

“The South Carolina Department of Health and Environmental Control (DHEC) intends to transfer licenses held by DHEC to provide Home Health Services to another qualified provider,” the document states. “DHEC is authorized … to transfer its licenses when doing so would result in continued high quality patient care, assurance of the employment of DHEC’s home health employees, and provision of home care services adequate to meet the needs of the State.”

The home health services are organized with a parent operational division located in Columbia, with four subunits in different communities throughout the state. Each subunit is licensed for 11 or 12 counties. By obtaining the DHEC licenses, Kindred now will be able to expand its South Carolina footprint without going through the Certificate of Need process.

Revenue for the most recent fiscal year for the home health operations was about $11.5 million, according to the Notice of Transfer. Medicare accounts for about 40% of the current caseload. The other major payers are Medicare Advantage (22%), Medicaid managed care (10%), Medicaid (9%), and VA benefits (5%).

In terms of referral streams, hospitals account for 60% of patients, followed by 24% from physician offices, 5% from rehab facilities, and 3% from managed care contracts.

Kindred has been pursuing a strategy of building a full continuum of post-acute care, with rehabilitation facilities, long-term care hospitals, skilled nursing facilities, and home healthcare all being key service lines. The South Carolina acquisition and other recently announced expansions fit into that framework, President and CEO Benjamin A. Breier said in a press release.

“We believe these projects add the right assets and services to the right markets, allowing us to build upon our continuum of care model that delivers a full spectrum of post-acute care options to patients, payors and referral sources,” Breier said. “We are grateful to our many partners in these projects and are excited about continuing to grow our services in these communities.”

Written by Tim Mullaney