In June, the CMS proposed a 1.5% net cut to home health payments for 2014 as part of move to rebase payment rates over a four-year period. Next year's cut would take an estimated $290 million from home health operators.
For freestanding, for-profit agencies, the cut will amount to 1.7%—which sent shares of companies such as Gentiva into a dive after the proposal was announced. Consolidation has been one of the strategies post-acute-care providers have used to ease the pressure on operating margins.
Gentiva last quarter reported decreased net income of $6.6 million on net revenue of $414.4 million, compared with $14.2 million in income on revenue of $427.7 million during the same period the previous year.
On the company's second quarter earnings call, President and CEO Tony Strange blamed Medicare reimbursement cuts and sequestration for hurting its home health results. While its hospice division also felt the impact of sequestration, he added that those services will see a 1% increase in Medicare payment rates that will help offset the cut to home health.
Harden, with headquarters in Austin, Texas, operates in 13 states, and has a strong presence in Texas and throughout the South and Midwest. It had $476 million in revenue in 2012, excluding long-term care, according to the release.
The deal, which is expected to close in the fourth quarter, will also allow Gentiva to be a preferred provider for 49 skilled-nursing and assisted-living facilities that Harden operates in Texas.
Follow Beth Kutscher on Twitter: @MHbkutscher