Another of the nation's largest long-term-care companies appears to have caught the consolidation fever passing through the industry.
Houston-based Living Centers of America announced last week it is considering a number of "strategic alternatives," including a sale or merger. The company said it also is contemplating a recapitalization, new acquisitions and joint ventures.
"With the changing healthcare environment, Living Centers wants to assure itself of the best possible positioning of the company as an effective provider of quality services," said Edward Kuntz, the company's chairman and chief executive officer.
The announcement comes amid weeks of rumors on Wall Street that Living Centers was up for sale.
Living Centers operates more than 200 skilled-nursing facilities in 13 states. Through subsidiaries the company also provides hospice, home-care, pharmacy and contract rehabilitation services. For the year ended Sept. 30, 1996, the company reported net income of $43.2 million on net revenues of $1.1 billion.
Kuntz cautioned that the company has not decided which direction it wants to take.
Industry analysts said they were not surprised by the company's actions.
"Any of those proposed transactions are likely given what we've seen in the industry over the last six to nine months," said Frank Morgan, an analyst with J.C. Bradford & Co. in Nashville.
Last month alone, a number of long-term-care companies struck major deals designed to consolidate operations or expand their range of services.
Vencor, the second-largest long-term-care firm behind Beverly Enterprises, said it plans to acquire TheraTx, a therapy services provider (Feb. 17, p. 38). Meanwhile, Sun Healthcare Group is buying Retirement Care of America, another nursing home operator (Feb. 24, p. 22). And Horizon/CMS Healthcare Corp. is being acquired by HealthSouth Corp., the leading rehabilitation company (Feb. 24, p. 20).
Morgan said Living Centers is most likely to spin off some of its operations, such as its pharmacy division, or to be acquired by another long-term-care company.
But John Runningen, an analyst with Robinson-Humphrey in Atlanta, said Living Centers may want to link with a different kind of company that could help it provide a fuller range of services.