Genesis Healthcare in $52.7M settlement with U.S.
Genesis Healthcare Inc., a major nursing home operator based in Kennett Square, said Monday that it would pay $52.7 million under an "agreement in principle" to settle four separate U.S. Department of Justice investigations.
Genesis Healthcare Inc., a major nursing home operator based in Kennett Square, said Monday that it would pay $52.7 million under an "agreement in principle" to settle four separate U.S. Department of Justice investigations.
The investigations involve allegations that Genesis units acquired since 2012 improperly billed the government for hospice services in Nevada, provided inadequate staffing at some facilities from 2005 through 2013, and violated Medicare rules for physical therapy at two subsidiaries.
Numerous large nursing-home and therapy companies have agreed to similar settlements in recent years. In January, for example, Kindred Healthcare Inc. subsidiaries agreed to pay $125 million to settle alleged False Claim Act violations.
Last week, U.S. officials accused the owner of a network of Florida nursing homes of a scheme to defraud Medicare and Medicaid of more than $1 billion over the last 14 years.
Genesis, which returned to the ranks of publicly traded companies in early 2015 through a merger with Skilled Healthcare Group Inc., had already set aside $39.1 million to settle the Justice Department investigations. It will record an additional $13.6 million contingency loss in the quarter ended June 30, the company said.
Since the acquisition of Skilled, the stock market has not been a friendly place for Genesis, as the company has struggled under a heavy debt load and a broad shift of care from nursing homes to home or community settings. Its shares fell from nearly $9 in early February of last year to as little as $1.38 in June. The shares closed at $2.09, up 3 cents.
In a bid to help Genesis' stock price, holders of a majority of its shares agreed to a lock-up of their holdings until July 31, 2017. That could help the stock by limiting the number of shares available for sale on the New York Stock Exchange.
Genesis, which has nursing homes in 34 states and counts Pennsylvania and New Jersey among its five biggest markets, had a net loss of $426 million on $5.62 billion of revenue last year. Its interest expense of more than $500 million was almost as much as its cash earnings.
As part of its efforts to cut debt, Genesis paid off a $156.5 million term loan that had an interest rate of about 11 percent in March.
At the same time, a replacement $120 million term loan was put in place - including some portions with an interest rate as high at 14 percent.
Chad Vanacore, who follows Genesis for Stifel Nicolaus & Co., said in a note to investors that Genesis still faces industry headwinds, but also said the agreements announced Monday are "positive and clear near-term liquidity issues."
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