Genesis Health Ventures is reshuffling its top management in anticipation of the company's split later this fall. George Hager Jr., 47, executive vice president and CFO, will head the elder-care business, which is being spun off into a separate publicly traded company called Genesis HealthCare Corp., based in Kennett Square, Pa.
John Arlotta, 53, who joined Genesis as vice chairman in July, has been named chairman and CEO of the company's institutional pharmacy line, NeighborCare, based in Baltimore.
The company's $2.6 billion in revenue last year was evenly divided between its two biggest components, with Genesis ElderCare bringing in $1.3 billion, or 51%, and NeighborCare generating $1.2 billion, or 43%. In the latest earnings report for the quarter ended June 30, the pharmacy component earned $33.4 million on $317 million in revenue, with earnings up 22.3% from the year-ago figures of $27.3 million on $310.3 million in revenue.
The elder-care line saw quarterly net income decline 16.7% to $28.9 million on revenue of $303.6 million, compared with $34.7 million on revenue of $302.7 million for the year-ago quarter.
Robert Fish, 54, will oversee the transition period of four to five months in his current post as Genesis chairman and CEO until the completion of the split and thereafter will act as an adviser. He will stay on as a board member at both companies.
Fish denied that the elder-care line was being spun off because it was a drag on the company's growing pharmacy business, but conceded there were risks associated with the nursing home industry, such as reimbursement questions and liability concerns, that did not affect the institutional pharmacy sector. He said the spinoff would isolate the business risks for each company.
"The nursing home (division) will have to live with the ups and downs of risks involved in its industry," Fish said.
In February, Genesis announced it was discontinuing its Florida nursing home operations, citing high liability costs, to focus on its business in 13 states on the East Coast. The company joined the growing ranks of nursing home chains fleeing that state (Feb. 10, p. 26).
With "two different profiles in terms of what makes them successful," Fish said combining the businesses hindered the organization's ability to compete in the marketplace. Fish said the split will enable better access to capital, more competition for resources and fewer conflicts of interest.
Hager said key personnel have been in place at both organizations at the operational and regional levels for some time, which will ensure a smooth changeover for both companies.