Home health services were a bright spot for Kindred Healthcare Inc. (NYSE: KND) compared to its hospital assets during the third quarter of 2015, and the major post-acute provider remains optimistic about the sector’s potential.
After revising its outlook for 2015, Kindred Healthcare reported revenue struggles within its hospital division, but saw growth in its at-home, nursing center and rehabilitation services divisions.
The company reported that consolidated revenues were up 43.6% to $1.76 billion for the period ending September 30 compared to the same quarter last year. This was below a previous estimate of $1.82 billion.
Core diluted earnings per share (EPS) from continuing operations was 23 cents, compared to 13 cents from the third quarter in 2014. Adjusted core diluted EPS was 33 cents, up from 20 cents a year prior.
Kindred at Home, the company’s home health division, saw revenues climb to $605 million, while EBITDAR increased to $102 million for the quarter. Home health revenues rose 7.3% during the quarter to $357 million—both over the prior year period on a combined basis— with episodic admissions increasing 2.6%.
“Kindred at Home has had such a wonderful quarter, and we are very pleased with it,” Kindred President and CEO Benjamin Breier said Thursday during a quarterly earnings conference call. “The experience we are seeing in home health… we are extremely bullish about it.”
The company’s hospital division same-hospital revenues fell 1.4% over the prior year period to $577 million during the quarter. Same-hospital admissions declined 3.8% during the quarter compared to the same period in 2014.
Breier blamed some of the decline on “softness” in some of its referral sources for hospitals. He also noted that the results were more likely the cause of macro trends across the industry.
Kindred has been restructuring itself to focus on managed care and experienced fluctuations in revenue within its long-term acute care (LTAC) settings. The company therefore downgraded its 2015 annual revenue outlook to $7.1 billion, down from the previous estimate of $7.2 billion, citing mainly LTAC challenges.
The company stands on a particularly strong cash flow following its disposition of more than 150 nursing centers and LTAC hospitals and recent acquisitions.
Briar also pointed out that revenue from its recent $1.8 billion merger with Gentiva Health Services, Inc. (NYSE: GTIV), which was completed in January, is not fully realized yet. However, the company was still overall positive that its restructuring amid the shift to value-based purchasing across the health system would shake out.
“There is a lot of movement afoot toward a more managed care environment,” Breier said. “…We think we’re going to be the winners as the patients move that way.”
Written by Amy Baxter