Shares of Kindred Healthcare, Louisville, Ky., lost as much as 60% of their value after the nursing home chain announced it was revising its 2002 earnings forecast, citing a "dramatic increase" in resident-liability costs. The company also said it is considering a sale of its 18 nursing homes in Florida or other measures to reduce its resident-liability exposure. Kindred said it will add $55 million in reserves for resident care lawsuits over and above its normal provision for the third quarter, an adjustment relating to claims incurred in 2001 and 2002. About two-thirds of the claims come from Kindred's skilled-nursing operations in Florida. Kindred said it has contacted Ventas, Louisville, its primary landlord, to discuss the "strategic alternatives regarding its Florida operations." Kindred leases 15 of the 18 nursing homes it operates in Florida from Ventas. In a news release Ventas said it expects talks with Kindred about the Florida situation to begin within 10 days.
In July, Beverly Enterprises, Fort Smith, Ark., said it would add $43.3 million to increase its reserves for resident-care liability costs related to prior years, and warned investors it expected to report a loss of about $14 million in the second quarter because of rising patient-care liability costs. Following Kindred's disclosure, three skilled-nursing operators - Beverly; Genesis Health Ventures, Kennett Square, Pa.; and Manor Care, Toledo, Ohio -- issued news releases affirming that their liability reserves are accurate. -- Julie Piotrowski