As senior housing M&A activity continues to occur at a robust pace, another large deal recently drew attention in the industry. California-based Skilled Healthcare Group Inc. announced it is merging with Pennsylvania-based Genesis HealthCare. The new company will operate under the Genesis name from Genesis’ offices in Pennsylvania. It is poised to become a significant player in the senior housing market, with more than 500 long-term and post-acute care facilities in 34 states, roughly 95,000 employees, and trailing 12 month revenues of approximately $5.5 billion.
The Affordable Care Act Drives Change
The parties’ decisions consummated the deal grew out of a desire by both companies to take advantage of new payment structures being implemented in accordance with the Affordable Care Act. In an effort to move health care payments away from the traditional fee-for-service model, the Affordable Care Act includes a number of provisions requiring that healthcare payments be based upon the quality of care people receive, rather than the number of services they receive. Genesis’ CEO George Hager expressed the companies’ desire to position themselves for this new reality, stating, “We are positioning the companies to react to a system that is changing and becoming more outcomes based and pay-for-performance based.” Mr. Hager will be the CEO of the new company, and the board of directors will include representatives from both Skilled Healthcare Group and Genesis HealthCare. In a sign that bodes well for a smooth merger, Robert Fish, Genesis HealthCare’s former CEO and the current CEO of Skilled Healthcare Group, remains excited about the deal, stating, “The combination will create an industry leader in the long-term care market, where we believe scale and the ability to drive efficiencies will be critical to future growth.” He also stated, “The combination will expand our core business lines, significantly diversify our markets, provide opportunities for increased efficiency and enhance our collective ability to provide the highest quality patient care. As the former CEO of Genesis, I can fully appreciate the tremendous value that these two excellent companies can bring as a combined enterprise, and am excited about the possibilities.”
The merger of Skilled Healthcare Group and Genesis HealthCare may be a precursor to greater consolidation in the industry, as payment provisions and other behavior changing clauses in the Affordable Care Act continue to roll out. In addition to the Affordable Care Act, the desire of many senior housing participants to take advantage of today’s low interest rates before they rise is driving consolidation in the sector. Industry professionals seeking capital for joint ventures, acquisitions or other purposes, should contact Cambridge Realty Capital to learn more about the many different financing options it offers for a wide variety of senior housing transactions.