Kindred Loses $81.6 Million in Q4, Institutes Company-Wide Pay Freeze
Kindred Healthcare’s net loss grew 14% to $81.6 million in the fourth quarter ended Dec. 31, 2012, citing an asset impairment charge, severance and restructuring costs, transaction-related costs, and employee-retention costs associated with divesting 54 nursing centers formerly leased from Ventas.
“In 2012, Kindred continued to make progress in improving quality and patient satisfaction and delivering better clinical outcomes for patients in settings across the post-acute continuum,” said Paul Diaz, Kindred’s CEO, in a statement. “From an operational standpoint, we finished the year with a solid quarter. Excluding certain items, our continuing operations earnings per diluted share of $0.46 in the fourth quarter was a significant improvement from the comparable $0.28 per share reported last year following major Medicare cuts in both our nursing center and rehabilitation therapy divisions.”
Revenues rose about 2% to $1.55 billion in the quarter, and were up 12% to $6.18 billion of the full-year 2012 compared to the previous year.
Hospital and home health combined for revenue gains of about 6% compared to 2011. Fourth quarter home health and hospice division revenues and operating income nearly doubled from last year, with annualized revenues reaching $200 million.
Kindred (NYSE:KND) now has home health and hospice operations in 12 of its 21 integrated care markets.
“Both policymakers and the marketplace are demanding that healthcare providers participate in coordinated care strategies to improve care transitions, reduce avoidable hospitalizations and lower costs,” Diaz said. “Kindred is aggressively developing a post-acute continuum of service lines in local markets, including transitional care hospitals, inpatient rehabilitation facilities, sub-acute or transitional care, and home health and hospice services, in order to partner with physician groups, hospitals, health systems and payors to better manage episodes of care while at the same time improving quality and lowering costs.”
In 2012, Kindred completed three home health and hospice acquisitions that added $75 million of annualized revenues. The company also divested 54 skilled nursing centers it had been leasing from Ventas (NYSE:VTR) and continues to divest other non-strategic assets, which Diaz said will result in further changes to Kindred’s business mix moving forward.
The post-acute care provider has $420 million of available credit going into 2013.
Looking head to 2013, Kindred maintained its previous earnings guidance and expects consolidated revenues for the year to approximate $5.9 billion. The earnings guidance assumes reductions in Medicare payments for rehabilitation therapy services and 2% sequestration cuts to all Medicare revenues that will begin on April 1, 2013.
In light of reimbursement pressures in 2012, the provider is focusing efforts to reduce costs and streamline operations through what it’s dubbing Project Apollo, expected to result in $60-70 million of cost savings in 2013.
As part of Project Apollo, Kindred recently initiated a pay freeze across the company and is pursuing other cost reductions, but is looking to stay competitive by paying a one-time bonus to around 47,000 employees who don’t participate in the company’s incentive compensation program.
Written by Alyssa Gerace