Home Health & Hospice Week

The home health industry’s heavyweight chain just got heavier.

Five months of playing hard to get has paid off for chain Gentiva Health Services and its shareholders.

Louisville, Ky.-based Kindred Healthcare Inc. first offered $13.50 per share for Atlanta-based Gentiva earlier this year, and went public with its $14 per share offer in May (see Eli’s HCW, Vol. XXIII, No. 19). Kindred’s last public offer for the company was $17.50 per share in July, matching another unnamed suitor’s bid.

Now Gentiva and Kindred have sealed the deal with a $19.50 per share offer, according to releases from the companies. In the merger, Kindred will acquire all of the outstanding shares of Gentiva common stock for $19.50 per share in a combination of cash and stock, Gentiva says in a release. The agreement was unanimously approved by the boards of directors of both companies.

The result will be a deal worth $1.8 billion, Gentiva notes in the release. The companies expect to close the transaction in the first quarter of 2015.

HHAs already fighting a David-and-Goliath battle against their local Gentiva agency will see that uphill battle get even steeper. The merger will make Kindred at Home “the largest and most geographically diversified Home Health and Hospice organization in the United States,” Gentiva highlights. The combined company will serve more than one million patients per year; operate in 47 states; employ about 109,000 people, making it the 78th largest private employer and the 4th largest healthcare employer in the U.S.; and be the nation’s largest provider of home health and hospice services, the company says.

Shrinking Medicare reimbursement was a big factor in the deal, said Gentiva Chair Rod Wind-ley in an interview with the Wall Street Journal. “There’s tremendous continued reimbursement pressure in the industry that’s making it harder and harder for people to fight through the regulatory pressures, making something like this very attractive,” Windley told the Journal. “Bigger is always better.”

About 70 percent of the combined company’s revenue will come from government payors, which have been cutting payment for many services, Kindred CEO Paul Diaz told the Journal. But Diaz said he expects the combined company to find good sales-growth opportunities because of the aging population and the health-care system’s push to transfer more care into patients’ homes.

Gentiva’s price per share skyrocketed after the announcement, trading as high as $19.77 — an 18 percent increase. At press time, the price had dropped somewhat to $19.39. The stock had traded as low as $7.35 per share in the past year.