Seniors Housing Weekly Update - Game Changer For LTACs
April 8, 2014
Game Changer For LTACs
Talk about the stroke of a pen. Usually this involves bad news for senior care, but in an analysis provided by Frank Morgan of RBC Capital Markets, there could be a whole new ballgame for LTAC operators, particularly Kindred Healthcare. As you know, we have been singing the praises of Kindred’s strategic plan to concentrate all its post-acute services in select, defined markets and to become the provider and partner of choice in those markets. Now, according to new legislation passed regarding new patient criteria for LTACs, a game-changer according to Morgan, Kindred could see an increase of more than $900 million in revenues over the next several years, and with that an increase of more than $140 million in EBITDA. That is huge and is on top of any other revenue and EBITDA gains that could be coming to Kindred as a result of its strategic plan. According to Morgan, this incremental EBITDA should translate into a future share price for Kindred of $42 or so, based on a seven multiple of that incremental cash flow. That means this stroke of the pen legislation could double Kindred’s value. That is huge.