In the mid 1990's the future was seen to be in consolidation. There were economies or profits in size, in integrated systems, in market control. Everyone was competing to survive the consolidation. The subtleties and individual human needs of citizens were disregarded in the interests of vast impersonal money making conglomerates.
In a bitterly competitive environment vast wealth and social standing were the rewards of survival in a system which was consolidating. Every cent which could be squeezed from the system, or borrowed from willing bankers went to acquisitions and mergers. Bigger was better and only the biggest would survive. The success of these companies were built on the vulnerability of the Medicare funding system. This allowed open ended charging. The prevailing wisdom was that this would go on for ever and no one seriously challenged this idea. Economies of size were seen as the way to continue to make money out of planned changes in the Medicare system. Small groups and not for profits would not survive. Time was to show how wrong they were.
The extracts on this page describe the
formation of mariner post Acute Network, the most extreme example of
this rush to consolidate and dominate. Grancare, a company with a
reputation for understaffing and poor care linked up with financial
institutions Apollo and Lehman Brothers on a buying spree in mid
1997. Within one year Grancare had absorbed several other companies
to become Mariner Post-Acute Network - a group now burdened by vast
debt. Mariner thought that it could pay this off by exploiting the
vulnerability of the Medicare system in the same way as its
predecessors had done. Within months it was in trouble.
The Evening News Jul 17, 1997
- - - -some might want to fire up the spreadsheets and compare the valuations on Sun Healthcare-RCA with the recent deals that have taken place in the industry. Those include the acquisition of Integrated Living Communities by a Goldman Sachs partnership; GENESIS HEALTH VENTURES tender offer for MULTICARE COMPANIES; a three-way deal among LIVING CENTERS OF AMERICA, GRANCARE, and Apollo Management LP; and a LEHMAN BROTHERS investment in ARV ASSISTED LIVING.
News Today :: Living Centers' profits up
Modern Healthcare August 1, 1997
Houston-based Living Centers of America reported a 7% increase in net income to $13.7 million, or 69 cents per share, for its third quarter ended June 30, - - - -
Living Centers provides long-term- care services through a network of skilled-nursing, subacute and assisted-living facilities. It plans to complete a previously announced merger with Atlanta-based GranCare by the end of September.
LONG-TERM-CARE JOCKEYING: SUN HEALTHCARE
TO BUY REGENCY :: EXEC NAMED TO LEAD MERGER OF GRANCARE, LIVING
Modern healthcare Aug. 4, 1997
Two major long-term-care companies announced plans last week to further shore up their positions in the quickly consolidating industry.
- - - - while a former hospital executive was appointed to lead the company that will be formed by the merger of GranCare and Living Centers of America.
Meanwhile, Keith B. Pitts, 40, was named chairman and chief executive officer of the company that will be formed by the merger of Houston-based Living Centers of America and Atlanta-based GranCare. New York-based Apollo Management will help finance the deal and be a part-owner in the merged company, which will be based in Atlanta and has yet to be named.
The merger was given antitrust clearance last month and is awaiting final shareholder approval. It is expected to be completed by the end of September. The combined company expects pro forma revenues of $1.9 billion (June 23, p. 50).
Pitts is a director of several public and private healthcare services companies and formerly served as executive vice president and chief financial officer of Nashville-based OrNda HealthCorp, which was acquired by Santa Barbara, Calif.-based Tenet Healthcare Corp. in January.
Until the merger is completed, GranCare said Pitts will be retained by Apollo as a consultant and will be working on the new company's cost savings and transition plans and on finalizing its management team.
COMMENT:- Political ideology demanded that health and aged care adopt the ways of the marketplace so that sick citizens could reap the supposed benefits of competition. Prevailing wisdom was that you could not survive without doing so. Not for profits therefore started to consolidate. They also formed links with for profit groups who were seen to be more competitive and so able to survive. The following article describes a not for profit that is embracing the market. Note that Grancare and Mariner Health Group are already large companies and for-profit leaders.
GOOD WORKS, GOOD BUSINESS: NOT-FOR-PROFIT
NURSING HOME GIANT PREPARES FOR HARD TIMES
Modern healthcare Nov. 10, 1997 Page 42 News
The nation's largest chain of not-for-profit nursing homes says the old cliche "no margin, no mission" best describes its approach to the business of good works.
If that's true, the Good Samaritan Society is ready for one heck of a mission.
According to the 1997 MODERN HEALTHCARE Multi-unit Providers Survey, the society is the nation's eighth-largest nursing home chain based on its total number of U.S. beds. It's almost 10 times the size of its nearest not-for-profit competitor, the Board of Social Ministry in St. Paul, Minn. (See story, p. 48). It was even ranked ahead of for-profit leaders Atlanta-based GranCare and New London, Conn.-based Mariner Health. It also was listed as the nation's largest operator of continuing-care retirement communities.
Modern healthcare Nov. 10, 1997 Page 70 Briefs
Shareholders of both Houston-based Living Centers of America and Atlanta-based GranCare late last month approved the $1.8 billion merger of the two long-term-care providers. The companies said the merger is expected to be completed within the next two weeks. The new company, called Paragon Health Network, will be based in Atlanta and will operate more than 325 long-term-care facilities in 21 states, 34 institutional pharmacies in 11 states and more than 130 rehabilitation outpatient clinics in 18 states.
Size does matter; healthcare industry
mergers and acquisitions; Cover Story
Hospitals & Health Networks June 20, 1998
Blecher, Michele Bitoun
Save millions! Flex more muscle with insurers! Survive a harrowing market! Hospital mergers, like Godzilla's comeback flick, promise that bulk means marketplace brawn. For most of the decade, hospitals have merged in record numbers, and there's little evidence of a slowdown: Last year, hospital deals topped 200, more than double the total of just three years earlier.
FIVE LARGEST DEALS OF 1997 - - - - - - - - - - - - - -(millions)1. Vencor acquired TheraTx - - - - - - - - - - - - - $ 515
2. Mariner Health acquired Prism Health Group - - $ 92
FIVE LARGEST DEALS OF 1997 - - - -- - - - - - - - - - (millions)
1. HealthSouth acquired Horizon/CMS - - - - - - - - - - -$ 1,600
2. Genesis acquired the Multicare Companies - - - - - - - -$ 1,
3. Integrated Health Services acquired Horizon/CMS
. . . Nursing Homes for HealthSouth - - - - - - - - - - - - $ 1,300
4. GranCare acquired Living Centers of America - - - - - - $ 1,100
COMMENT:- Grancare was busy acquiring others and Mariner Health Group was a potential target
Banking: financing trends in an
acquisitive health care market - focus on long-term care.
Journal of Health Care Finance June 22, 1998
Gordon, Lawrence J.; Bressler, Andrew
The merger and acquisition (M&A) frenzy sweeping the health care industry has been particularly intense in the long-term care sector. As a result, the financial community - both lenders and investors - now views this sector differently and the approach to long-term care financing has changed.
These lower stock prices provided a buying opportunity for both strategic purchasers and financial buyers, such as buyout funds.
The introduction of the financial buyer as an alternative source of equity provided the additional capital necessary to complete several of the larger deals in 1997 - for example, Genesis Health Ventures' acquisition of The Multicare Companies with financial buyer participation from Texas Pacific Group (TPG) and The Cypress Group, and GranCare' s acquisition of Living Centers of America (LCA) with the participation of Apollo Advisors.
GranCare's acquisition (supported by Apollo Advisors) of LCA
The combined company, renamed Paragon Health Networks, will operate over 330 facilities with 38,000 beds in 21 states. With estimated revenues of $ 1.9 billion, Paragon Health Networks became the third largest U.S. long-term care company. The merger should allow the company to achieve efficiencies in its key markets and spread fixed costs over a wider patient base.
Despite dramatic M&A activity in the long-term care sector during 1997, several mid-sized, long-term care companies remain potential acquisition candidates at the time this article goes to press, including Summit Care, Mariner Health Group, Advocat, Harborside Healthcare, and Centennial Healthcare. In addition, many long-term care companies continue to develop regional concentrations, creating additional M&A opportunities as companies exit nonstrategic markets and acquire market share in others, while adding additional post-acute care services, such as home health care, sub-acute care, and specialty services.
Profits can come at high costs
The Tampa Tribune November 15, 1998
LINDSAY PETERSON and DOUG STANLEY
One of the largest was orchestrated by Leon Black, a former junk bond trader: Paragon was created from the merger of two companies last year, and this year it merged with Mariner Health Group to create the second-largest chain in the country, Mariner Post-Acute Network.
Before the summer merger, Mariner owned or leased 26 Florida homes, many of which had substandard ratings last year.
Wide gulfs exist among facilities here
The Post and Courier (Charleston, SC) April 13, 1999
Third in a series
But Mariner only recently took over the homes. It was formed in August when two companies - Paragon Health Network and Mariner Health Group - merged into the nation's second-largest long-term care provider.
That followed Paragon's creation in 1997 by uniting Living Centers of America and GranCare of Atlanta.
PSS World Medical's Long-Term Care
Subsidiary Signs Contract Valued At Over $ 75 Million
Business Wire April 22, 1999
Gulf South Medical Supply, Inc. has been providing products and services to Mariner Post-Acute Network, Inc., previously known as Amerra Health Network, for over three years with annualized revenues of over $ 16 million. The new contract, which will expire June 30, 2002, continues the services previously provided, but also includes those nursing homes which were added when Mariner Health Group merged with Amerra Health Network on July 31, 1998, bringing the total number of facilities served under the contract to 422 in 27 states.
Mariner Post-Acute Network Announces
Filing for Chapter 11 to Reorganize Debt; Normal Operations to
Continue in all Mariner Facilities
Mariner Post-Acute Network, Inc. Company Press Release January 18, 2000
In addition to the Chapter 11 filing, Mariner announced that Apollo Management, LP and its affiliates sold on December 20, 1999 substantially all the Mariner equity owned by Apollo and its affiliates. As a result, all Apollo board of directors designees resigned from the Mariner board effective January 2, 2000.
PREPARED TESTIMONY OF JOHN RANSOM DIRECTOR
OF HEALTHCARE RESEARCH RAYMOND JAMES & ASSOCIATES BEFORE THE
SENATE COMMITTEE ON AGING
Federal News Service September 5, 2000, Tuesday
From 1997-1998 Mariner Post Acute was created from the mergers of Grancare, Mariner and LCA, three former public companies.
COMMENT:- It is clear that ARV Assisted Living Inc did not become part of the Grancare takeover, descpite its relationship with Apollo.
ARV Assisted Living Announces Appointment
Business Wire January 12, 2001, Friday
Founded in 1980, ARV is one of the nation's largest operators of assisted living communities, operating 57 communities containing 6,758 units in 11 states.