Foothill Ranch-based Skilled Healthcare Group Inc. and other publicly traded nursing home and post-acute-care operators are looking to make up for cuts in Medicare reimbursements with acquisitions.
Skilled had $26.2 million in revenue from home-care and hospice operations in the first quarter, a 45% increase from a year earlier. The gain came largely from two acquisitions, analyst Frank Morgan of RBC Capital Markets in Toronto recently told Modern Healthcare magazine.
Overall revenue at Skilled, which has 74 nursing homes, dropped 1.4% to $219 million in the first quarter.
Skilled bought Cornerstone Hospice, which had operations in Phoenix and Colton, in October. That came shortly after its acquisition of Albuquerque, N.M.-based Altura Home Care and Rehab. The company did not disclose purchase prices on the deals, which the magazine suggested “took some of the sting out of an 11.1% cut to Medicare’s skilled-nursing facility payment rates that went into effect in October.”
Skilled also has been undertaking cost-cutting efforts in anticipation of reimbursement cuts.
Skilled Chief Executive Boyd Hendrickson has touted the Cornerstone deal as complementing the company’s existing Signature hospice and home health business.
“Hospice and home care represent important service elements within the continuum of care for seniors,” Hendrickson said.
The article noted that Skilled and other companies that operate in home health, hospice, nursing home and rehabilitative care segments have seen strategic deals help boost revenue despite payer pressures and limited volume growth. It’s likely that companies could continue to look for deals because more payment cuts could be coming down the line.
Bill Borne, chief executive of Amedisys Inc. of Baton Rouge, La., said home healthcare in particular is expecting further Medicare cuts as part of what he called a “rebasing” of payment rates under the Patient Protection and Affordable Care Act, part of the package of healthcare laws that passed Congress in 2010 and are being phased into the marketplace.
“What we’re looking to do is expand our continuum of care services. We’ll continue to take advantage of acquisitions,” Borne said.
S&P: Allergan “Franchises” Solid
Allergan Inc., the Irvine-based maker of Botox and other drugs, has “demonstrated (an) ability to retain market share in its key neurotoxin and glaucoma franchises,” ratings agency Standard & Poor’s Inc. said earlier this month.
S&P raised Allergan’s short-term credit rating and affirmed its long-term corporate credit grade in a report. The agency boosted the drug maker’s short-term rating to A-1+ from A-1, both of which are investment-grade, and affirmed an A+ long-term corporate credit rating.
S&P said that it expected steady growth in Botox—Allergan’s largest single product—in its therapeutic markets thanks to expanded use and regulatory approvals in new countries.
“This first-in-class product” holds a dominant share in the U.S. market, S&P said. It has a global market share of about 80%.
Allergan has “successfully implemented product lifestyle management strategies” for its ophthalmic pharmaceutical business as core drugs lost patent protection and faced generic competition, S&P said in its report. Ophthalmic pharmaceuticals accounted for 41% of Allergan’s $5.4 billion in sales in 2011.
S&P said that Allergan’s focus on eye-care drugs enables it to compete against much larger companies, including Switzerland-based Alcon Laboratories Inc./Novartis AG, Abbott Park, Ill.-based Abbott Laboratories and Bausch & Lomb Inc. of Rochester, N.Y.
Allergan also received praise for its “exceptional liquidity.” S&P said that Allergan’s cash balance of $2.46 billion provides a cushion against ongoing legal challenges and government investigations, including a recent controversy over its Lap-Band weight-loss device.
$5M Placement
Vertos Medical Inc. of Aliso Viejo raised $5 million in a private placement of its stock last month, according to a Securities and Exchange Commission filing.
Vertos did not disclose the acquirers in its filing. The company makes medical devices used to treat lumbar spinal stenosis, or a narrowing of the spinal canal, without major surgery.
Vertos moved to a bigger headquarters in Aliso Viejo late last year and has been growing. Chief Executive James Corbett told the Business Journal last year that it was planning to boost its doctor training as well as doubling its work force.
Vertos was founded in 2005. Its financial backers include CHL Medical Partners of Stamford, Conn.; Rowayton, Conn.-based Foundation Medical Partners; DFJ Mercury of Houston; and Superior, Colo.-based Aweida Venture Partners.
Bits and Pieces
MemorialCare Medical Group in Fountain Valley and Newport Beach-based Greater Newport Physicians received four-star “elite status” ratings by the California Association for Physician Groups. Both groups are associated with Fountain Valley-based MemorialCare Medical Foundation. … Brandman University’s School of Nursing and Health Professions opened an immersive learning and simulation center at its campus on Laguna Canyon Road in Irvine. … Cynthia Collins, previously a group vice president with Beckman Coulter Inc., a Brea-based business unit of conglomerate Danaher Corp., is now chief executive of Gaithersburg, Md.-based vaccine maker GenVec Inc.
