Kindred-Gentiva deal may spur reforms

Ending a monthslong battle, Kindred Healthcare and Gentiva Health Services announced they will merge, creating one of the largest post-acute-care providers in the country. Industry observers hope the merger will help accelerate the movement toward coordinated care in the currently fragmented post-acute-care sector.

Louisville, Ky.-based Kindred said once the deal closes, it will be the country's fourth-largest healthcare employer, with 109,000 employees in hundreds of long-term acute-care hospitals, inpatient rehabilitation facilities, skilled-nursing facilities and hospices.

“Over the last eight weeks, we undertook a robust due diligence process and worked closely and constructively with our counterparts at Gentiva to better understand their operations, financial results and outlook,” Kindred CEO Paul Diaz said in a news release.

The new company is expected to generate about $7.1 billion in annual revenue, making it larger than another recent industry merger between Genesis HealthCare and Skilled Healthcare Group.

Rodney Windley, chairman of Atlanta-based Gentiva, who ripped Kindred during the early takeover bids, said the merger “represents a successful conclusion to a process in which, from the beginning, we have focused on maximizing value for Gentiva's shareholders consistent with our board's responsibilities, while ensuring the future success of the company,” Windley said.

The cash-and-stock deal is valued at $1.8 billion, which includes Gentiva's approximately $1.1 billion of debt. Kindred will pay $19.50 per share to Gentiva shareholders. It's also more than double Gentiva's stock price of $8.54 from May, before Kindred made an offer. The deal includes $14.50 per share in cash and $5 of Kindred common stock.

Policymakers and insurers are pushing for more cost control and care coordination in the post-acute sector, where costs have been growing faster than other healthcare costs.

Pending Gentiva shareholder approval, the transaction is expected to close in the first quarter of 2015. Kindred's shares were up about 6% since it announced the deal on Oct. 9, hovering around $21.

Follow Bob Herman on Twitter: @MHbherman