Kindred Holds Off On Major Home Health Acquisitions

Home health deals dramatically dropped off in 2015, and now the nation’s largest home health provider intends to sit on the sidelines moving forward.

After reporting significant consolidation and revenue growth at the end of 2015, Kindred Healthcare Inc. (NYSE: KND) indicated it won’t make any major home health purchases in the foreseeable future. For now, Kindred’s $1.8 billion merger with Genitiva Health Services Inc. last year is more than enough, CEO Benjamin Breier said last week at the Barclays Global Healthcare Conference in Miami.

“I don’t think we’ll be major acquirers of big, large-scale home health businesses across the country, because we already have market presence mostly where we want to be,” Breier said.

The integration of Gentiva’s assets and operations has been “beyond really what we or investors could have hoped for or expected,” as it makes up approximately half of the company’s EBITDA. The success has instilled in Kindred the confidence to do more such large-scale acquisitions, Breier said. Still, focus will remain on scaling up Kindred at Home’s existing assets to continue home health growth.

“The ability to grow that business organically, both in terms of the patients that we can see but also in terms of expansion of new branches to bring new census on, is really, really good,” Breier said.

However, hospice boasts size and significance for Kindred, yet it’s an underexposed area for the company, and therefore merits attention, Breier said.

“Hospice, in my view, though not perfectly reimbursed as nothing in life is, really presents this intersection of what is really good for the consumer, what is really good for regulators—and ultimately, what is really good for Medicare,” he said. “You’ll see us continue to grow that, as well.”

Though Kindred claims it won’t be as acquisitive in the home health sector specifically down the road, competition remains strong as strategic buyers continue to search for deals that add value to their portfolios. Regardless of newcomers making forays into home health and other players following in Kindred’s footsteps, the company believes it maintains its competitive advantage thanks to its years of experience.

“At some level, imitation is the best form of flattery,” Breier said. “People have watched some of the moves we’ve made into the home care space and are moving in that direction, and I think that’s right for them to do. I certainly applaud them for doing so. The one thing that we’ve learned at Kindred over the last five or six years of trying to develop this integrated model and run business that we acquire—it’s not as easy as just acquiring the business and saying, ‘Now I’m an expert in that business.’ You have to really spend time getting to understand what the ins and outs are, and I think that’s one of the years long capabilities we have at Kindred that some of our competitors will continue to chase.”

Written by Kourtney Liepelt