The Arkansas Department of Health's sale of its in-home health care services program to Kindred Health Care Inc. closed Monday.
The department sold the program to the Louisville, Ky.-based company for $39 million, and the state expects to net $24 million from the transaction. Kindred submitted the highest bid of six companies, and its bid was rated the highest overall by the department's evaluators, state officials said.
Kindred is a publicly traded Fortune 500 company. It reported revenue of $7.2 billion last year and has 102,000 employees in 46 states, including Arkansas.
"This exceeded my expectations," Gov. Asa Hutchinson said Monday in an interview.
"I think it was a good price that was negotiated, and what was really rewarding to me is that we were able to share some of that with the employees, who kept the business going all through these years and made it a success," the Republican governor said.
The program, started in 1981, offered home health care, personal care and hospice care.
But a year ago, the department notified employees of its plan to sell the program. Revenue had dropped from $71.5 million in fiscal 2011 to $58.5 million in fiscal 2015, and the program's number of in-home patients dipped from 18,649 to 13,399.
In the transaction, Kindred acquired the department's licenses to provide home health and personal care services in 69 counties and to provide hospice services in 42 counties. Kindred now provides in-home health care services in 72 of the state's 75 counties.
As part of the agreement, Kindred agreed to retain all current employees and agreed to serve all current patients upon their consent, including the home health and hospice services that Kindred previously provided in Arkansas.
"We welcome the agency's caregivers to our team as we expand Kindred At Home operations in Arkansas," Benjamin Breier, Kindred's president and chief executive officer, said Monday in a statement.
"We are excited to build on the state's program and look forward to bringing our care and clinical protocols to these operations to improve the ability of patients to safely return home or to remain in their home," Breier said.
Nancy Elphingstone, executive director of the Home Care Association of Arkansas, said Monday in an interview that it's going to take some time to know what the impact of the sale of the program will be to the industry.
The program has lost business in the transition so "anybody coming into those markets is going to have to be a little aggressive to get business back, so that could be increasing competition," Elphingstone said.
Robert Brech, chief financial officer for the state Department of Health, said that of the program's $39 million sales price, $6.8 million will be used to reimburse the department for payments made to employees and vendors after revenues dropped over the past two years. That includes $1 million to consulting company BKD Corporate Finance of Springfield, Mo., formerly Baird, Kurtz and Dobson. BKD was hired to broker, market and oversee the transition of the program.
In addition, the department is setting aside $3.9 million of the sales price to put into an escrow account, to be used for any unforeseen disputes that may arise between the department and Kindred during the next two years; using $908,000 to make severance payments of $200 to $1,600 to employees ending their employment with the department; and making $750,000 in payments for the employees' annual leave and sick leave, Brech said.
The department's appropriation allowed for 10 percent of net proceeds available at the time of closing to be distributed to employees, he noted.
"We developed a formula to distribute $2,650,000 for the retention bonus. The bonus will go to approximately 1,800 employees and will range from $563.60 to $6,858.59. The formula is a little complicated, but it is based mainly on time of service with [the state Department of Health]," Brech said.
He said he didn't have the breakdown of how many regular employees versus contract employees are moving, but Kindred has identified at least 1,500 employees as being hired.
"The number is subject to change over the next few days if additional employees complete the necessary paperwork if their intent is to be employed by Kindred," Brech said.
Kindred's home health offices will be in Brinkley, Camden, Forrest City, Harrison, Hope, Melbourne, Monticello, North Little Rock, Paragould, Russellville and Texarkana, Brech said.
The company's hospice offices will be Batesville, Camden, Forrest City, Hot Springs, Russellville and Texarkana, Brech said.
Most patients pay for the services through Medicare and Medicaid, although some patients use private health insurance, according to the department.
Metro on 08/02/2016