Kindred Healthcare Inc. is under contract to purchase the Arkansas Department of Health's in-home health care services for $39 million, the company and state announced Monday.
Because of declining patient numbers and competition with private companies, it was no longer feasible for the state to continue providing the services, Gov. Asa Hutchinson said. After figuring costs associated with the sale and transition, including retention bonuses for about 1,880 employees and contract workers, Hutchinson said, the state will net about $24 million from the transaction.
Hutchinson said the state was losing money providing in-home health services and called the decision to sell "a unique solution" that allowed the state to preserve the jobs of about 280 state employees and an additional 1,600 contract employees for up to a year. The arrangement also allows for 3,380 patients to continue coverage for at least a year.
Kindred will acquire the Department of Health's 74 home health locations providing services in 69 counties, seven offices providing hospice services in 42 counties and a personal-care services business.
"It's an example of where taxpayer dollars can be maximized, employees can be protected and services covered," Hutchinson said. "Hopefully we made the right decision on it, and it will be a long-term plus for the state."
"It was going to be a continued drain," Hutchinson added. "You think about the context of it, when the Department of Health got into in-home health care service, there was a gap in our state in coverage."
Private health care companies are eligible for Medicaid reimbursement, meaning the state was in competition with other providers. Hutchinson said the money lost in federal dollars was not enough to justify the continued expense of keeping the service operating.
Revenue from the program was $58.6 million in 2015. That had declined 18 percent from 2011.
Arkansas began evaluating a potential sale of its in-home health services last year. Employees were notified in August of last year, and Kindred was one of six bidders identified by the state. Robert Brech, chief financial officer for the state Department of Health, declined to disclose details Monday about the other bids.
Brech said he "cannot disclose the bids as they are proprietary. I can say that Kindred ... received the highest scores in the evaluation process and had the highest bid."
Asked when the bids would become public information, Brech said that "it was never anticipated that the losing bids would be made public."
When employees were notified the state's program would be sold, in-home health services had about 500 state workers and 1,800 contract employees. The program currently has about 300 regular state employees and about 1,350 personal-care aides employed as state contract employees.
Employees who stay throughout the transition will receive a bonus in addition to any payment for annual and sick leave that they are entitled to receive, Brech said. For full time regular state employees, this bonus will range from $2,600 to $5,200 depending on their years of state employment, he said. For the part time contract employees, the bonuses will range from $650 to $1,900 depending on their years of state service, he said.
To be eligible for the bonuses employees must stay until the closing date for the sale, tentatively scheduled for Aug. 1.
The state's contract with Kindred also calls for patients in rural areas to continue to receive services for up to a year, said Department of Health spokesman Meg Mirivel. Kindred will provided services in 70 of the state's 75 counties for at least a year. Currently, the state is offering services in 69 counties.
The state does not offer in-home health care services in Sebastian, Madison, Benton, Washington, Crawford or Franklin counties. Kindred is operating in Sebastian County.
"They're taking all patients as long as the patients want to stay with Kindred," Mirivel said. "Kindred will remain where patients are currently being serviced for at least a year. They're in rural areas already. We expect them to stay there."
Kindred announced a similar transaction with the state of South Carolina in February. South Carolina received $18 million as part of the deal.
Brech said, "I am fairly certain that none of the surrounding states have a state agency that provides home health services."
State health department spokesmen for Tennessee and Oklahoma said private companies operate home health services there.
Information about home health services in Louisiana, Mississippi and Missouri could not be obtained late Monday afternoon through their departments of health.
Kindred is a publicly traded, Fortune 500 company based in Louisville, Ky. It reported a revenue of $7.2 billion last year with 102,000 employees in 46 states.
"This transaction provides a tremendous opportunity to expand our Kindred at Home operations in Arkansas," company president and Chief Executive Officer Benjamin Breier said in a statement. "As the national leader in home health and hospice, we are excited to bring in our care and clinical protocols to these operations to improve the ability of patients to safely return home or to remain in their home. We look forward to the agency's caregivers joining our team and believe we can provide our new colleague with enhanced opportunities for professional growth and development."
Hutchinson praised Nate Smith, director of the Arkansas Department of Health, and Ann Purvis, deputy director for administration, for "doing the heavy lifting" over the past nine months of collecting and evaluating bids.
Bids were evaluated based on factors including a company's record of service, its willingness to retain employees and continue rural coverage. From there the state negotiated on the financial terms, Hutchinson said.
Hutchinson identified no other services or departments that would benefit from a similar arrangement.
"I'm not aware of anything that fits into this category," Hutchinson said. "It was unique. It worked for the time, for this moment. We'll see if there's anything like this down the road."
Business on 06/21/2016