Kindred Healthcare is exiting the skilled-nursing home business to focus on its better-performing home health, rehabilitation and long-term acute-care hospital units, the company announced Monday.
The tactical shift cost Kindred $690 million in after-tax expenses in the third quarter, mostly noncash impairment charges in preparation for the divestitures. Kindred has 91 nursing homes.
The Louisville, Ky.-based company posted a $671 million loss on continuing operations in the quarter on revenue of $1.79 billion. That is compared with a loss from continuing operations of $7 million on revenue of $1.76 billion in the year-earlier quarter.
“Our plan to exit the skilled-nursing facility business, together with the significant cost realignment initiative we are undertaking in connection with the exit, are substantial steps forward in our continuing effort to transform Kindred's strategy and growth profile to enhance shareholder value,” Kindred CEO Benjamin Breier said.
Skilled-nursing homes represent Kindred's smallest business segment with third-quarter revenue of $270.3 million. The sector posted a quarterly decline in EBITDA of 16.7% to $29.9 million compared with $35.9 million in the year-earlier quarter. Kindred said the unit suffered a 1% decline in average daily census, patient mix deterioration and higher labor costs.
In contrast, Kindred's home health and hospice segments posted a 6% increase in revenue in the quarter to $638.5 million and a 5% increase in EBITDA to $106.4 million.
In June, Kindred won a highly prized competition to privatize the state of Arkansas' home health agency. Kindred paid $39 million for the business, giving it locations in 70 counties across the state vs. just four before the winning bid.
Breier did not specify how Kindred planned to dispose of its remaining skilled-nursing homes nor did he provide a specific timeline. But he noted that the company once operated 300 facilities and has been pruning the number over the years.
He said the divestiture would reduce annual rent obligations by $90 million and annual capital expenditures by another $30 million. The company also expected to save $70 million to $100 million on management and overhead costs in the effort.
Management has scheduled an earnings call with analysts for 9 a.m. ET Tuesday.
