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October 1, 2012 6:53 pm
The Washington Post Company is diversifying into the hospice business, investing an undisclosed sum for a majority stake in Celtic Healthcare, a home healthcare and hospice services business operating in Pennsylvania and Maryland.
The newspaper owner has struggled with declining print advertising and circulation but already derives 85 per cent of its revenues from non-publishing businesses, notably its Kaplan higher education arm, which has suffered from regulatory scrutiny and falling enrolment rates.
Don Graham, chairman and chief executive officer, said the Celtic investment was “part of the Post Company’s ongoing strategy of investing in companies with demonstrated earnings potential and strong management teams attracted to our long-term investment horizon.”
Arnie Burchianti, who founded Celtic in 1996 and will remain chief executiveand co-owner, said the Post Company would bring “financial resources, long-term investment commitment and corporate values” to position Celtic for continued growth.
Neither company released financial details, but Celtic is reported to have had revenues of about $30m in 2010 and about $45m in 2011.
The company has emphasised the use of technology for medical records and clinical processes, claiming that its telemonitoring technology can reduce hospital readmission rates by 85 per cent.
Hospice and skilled nursing centres are considered a growth industry in the US, as the population ages and a wave of “baby boomers” approaches retirement. According to IBISWorld, an industry research group, the US will have 7,789 end-of-life care facilities this year, generating a combined $18.9bn in revenues.
Industry revenues have grown at an average rate of 9.8 per cent a year since 2007 and more than 40 per cent of all deaths occurred under hospice supervision in 2010. Despite that growth, the industry remains at risk of looming budget cuts to Medicare, the government programme that funds healthcare for the elderly.
Last year nursing home stocks plunged when the Centers for Medicare and Medicaid Services said it was cutting funding by 11 per cent to recoup excessive reimbursements that the companies billed to the government because of a flaw in its payments system.
Mr Burchianti was among the industry executives lobbying Congress during last year’s debt ceiling negotiation to reject further cuts to Medicare funding and co-payments to the home health benefit.
Home care groups could face more adversity next year if the US government does not reach a deal to avert automatic budget cuts that could reduce reimbursements to hospitals and doctors by 2 per cent.
The investment in Celtic takes the Post Company into another heavily regulated business. Mr Graham lobbied against “incoherent” new federal regulations on private-sector higher education.
In the group’s last annual report, which showed a 74 per cent drop in Kaplan’s operating income, Mr Graham noted that it had ended the year with $565m of debt and $745m in cash and investments.
“We’re ready to invest when good opportunities arise,” he wrote, adding: “We’re also listening to owners who want to sell businesses in fields other than education and media – if the owners want to stay and run those businesses after a sale.”
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