Home-care unit's sale called smart

Agency CFO reassures legislators

The Arkansas Department of Health's sale of its in-home health services program to Kindred Health Care Inc. for $39 million is a good deal for the state, the department's chief financial officer, Robert Brech, assured lawmakers on Thursday.

The state expects to net $24 million from the sale after factoring in costs associated with the transaction, including retention bonuses for about 1,800 employees and contract workers, Republican Gov. Asa Hutchinson said when he announced the deal a month ago. The sale is to close on Aug. 1.

In a related development, the Legislative Council's Review Subcommittee signed off on an amendment increasing from $900,000 to $1 million the department's contract with BKD Corporate Finance of Springfield, Mo. BKD was hired to broker, market and oversee the transition of the in-home health care services program.

The state added $100,000 to the contract by raising the "Success Fee" from $500,000 to $600,000, according to the amended contract. Brech said the contract increased because the department didn't budget enough in the original contract to pay BKD 1.5 percent of the sales price, which turned out to be $39 million.

Kindred is a publicly traded Fortune 500 company based in Louisville, Ky. It reported revenue of $7.2 billion last year and has 102,000 employees in 46 states, including Arkansas.

In the deal, the company will acquire the Health Department's 74 home health care locations that provide services in 69 counties; seven offices that provide hospice services in 42 counties; and its personal-care services, according to Kindred.

The transaction will expand Kindred's services from six offices that provide home health and hospice services in four counties to offices that provide home-health, hospice and personal-care services in 70 of Arkansas' 75 counties.

During a meeting of the Legislative Council's Executive Subcommittee, a Legislative Council co-chairman, Rep. David Branscum, R-Marshall, questioned Brech whether the sale of the program to Kindred is a good deal for the state.

Brech said the program's revenue, number of employees and number of patients have declined in recent years.

"The business was down. It was spiralling down, going down quickly," he said. "I don't think we had a chance to fix it."

Rather than winding down the program, "by going through a transition like this, not only do you maximize the value for taxpayers, but those employees have jobs," Brech said. "The contract provides a job for at least year with the same salary, and they'll get benefits from Kindred as other employees do. The patients will be taken care of."

"They [Kindred officials] are going to do what we couldn't do. I think they'll do it just as well. ... So for those that are concerned that the patients won't get the same care, they are going to be using the same employees, and those are the people on the ground, who really care," Brech said.

"I do think this is a good deal," he said, noting that Kindred's technical proposal scored the highest among the six bidders in the department's evaluation of the proposals and that Kindred submitted the highest bid.

"It made the decision very easy," Brech said. "We have not heard any complaints from other bidders, or very few."

So far, the department has declined to disclose the other bids.

"Until closing, the bids cannot be shared," Brech said in response to this newspaper's public-records request.

Branscum questioned why Kindred will be able to run the program better than the state.

Brech said the cost of state government benefits provided to the employees are much higher than those provided in the private sector. The Legislature raised the mileage reimbursement for the program's contract employees a few years ago, and a business wouldn't have done that, he said.

In addition, the program "was very administratively heavy in a lot of different ways, and they have newer technology, so that helps them," said Ann Purvis, the department's deputy director for administration.

"There are some things that they do to make them more nimble and, honestly, operationally more efficient, and we are struggling," she said.

Brech said Kindred is going to consolidate department's 74 home health care offices in 69 counties into 12 or 13 locations, "which is the right thing to do."

Branscum said he's already heard from the program's employees in Searcy County, who said they will have to travel to an office in Boone County.

But Purvis said most of the program's direct-care employees probably will be able to work within their own county because that's where the patients are. "They don't have to come into an office on a daily basis," she said.

Senate President Pro Tempore Jonathan Dismang, R-Searcy, said some lawmakers are worried about Kindred being able to provide the same level of service in rural areas as the department provides.

Kindred is used to dealing with rural communities and "that really is one of their strengths as a company, especially as you look across the nation," Purvis said.

Metro on 07/15/2016

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