Richard A. Lechleiter, EVP and CFO of Kindred Healthcare, Inc. (KND), Interviews with The Wall Street Transcript

Wall Street Transcript

67 WALL STREET, New York - July 25, 2013 - The Wall Street Transcript has just published its Medical Real Estate Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: REIT Access to Capital - Affordable Care Act and Reimbursements - Hospitals, Senior Housing, Skilled Nursing and Acute Care - Medicare and Medicaid Reimbursements - Consolidation Activity - Health Care REITs

Companies include: Kindred Healthcare Inc. (KND)

In the following excerpt from the Medical Real Estate Report, the EVP and CFO of Kindred Healthcare, Inc. (KND) discusses company strategy and the outlook for this vital industry:

TWST: What were the highlights from your first-quarter earnings announcement?

Mr. Lechleiter: We started the year off well. We exceeded our internal expectations as well as Street expectations. Although we don't give quarterly earnings guidance, we clearly beat the consensus pretty handily and it was a strong start to the year, particularly in our hospital business and in our rehab therapy business; they were particularly strong, mostly driven by demand. Part and parcel to that, the cost controls that we put in place beginning last year have clearly taken hold, particularly in the hospital business where essentially we kept our operating cost per patient day flat year over year.

I'm not sure we had ever accomplished that before. And, if you look at the enterprise as a whole on a core basis - there were some charges and write-offs and so on associated with some restructuring activities - but if you look at what I'll call the core operations of the company that are expected to be recurring, you would find that we actually reduced in aggregate dollars our operating costs year over year slightly, which is a testament to the success of our cost-management initiatives that we refer to as Project Apollo inside the company. So some good traction both on what I'll call demand characteristics as well as solid cost management.

That will become more critical going into the second, third and fourth quarters of this year, because as you know the federal sequestration went into effect on April 1, which is the beginning of our second quarter, and essentially that requires a 2% reduction in all of our Medicare revenues across the enterprise. In terms of dollars and cents, that's about $5.5 million a month in reduced reimbursement for the same services we did in Q1. That's obviously in our budget, it's in our annual guidance, but it's a more daunting environment in which to operate in for the latter three quarters this year compared to the first.

Certainly you'll see some slowdown in earnings, no question, from what you saw in Q1, but in our view we've already put in place what's necessary to achieve our annual earnings guidance of $1.10 to $1.30 a share for this year. But nevertheless, it's another challenge, it's not easy; in fact it's downright difficult in this environment. The reimbursement rate pressure, I would say the best word to describe it is...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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