WASHINGTON, Feb. 16, 2011 /PRNewswire/ -- Today the CtW Investment Group sent a letter to the HCP Inc. (NYSE: HCP) board of directors calling for an independent review of the REIT's proposed $6.1 billion acquisition of HCR ManorCare's skilled nursing facilities (SNFs) and other real estate assets which is expected to close in the first quarter of the year In its letter, CtW cited concerns regarding questionable Medicare billing practices outlined in studies by the Department of Health and Human Services' Office of Inspector General (OIG) and the Service Employees International Union (SEIU). Noting that in the SEIU report, ManorCare topped the list of care providers who billed Medicare for $259 million in potentially "excess" fees in 2009, CtW called for a board review of the acquisition and greater disclosure to shareholders regarding whether the potential unsustainability of the possibly excess fees could jeopardize ManorCare's ability to meet its lease obligations.
"We are deeply concerned at the heightened reimbursement risk to the company's portfolio from the proposed acquisition of ManorCare's real estate assets, especially in light of recent studies spotlighting questionable billing practices at SNFs," wrote William Patterson, CtW's Executive Director, also noting that, "ManorCare [was] the top beneficiary of above-expected reimbursements, with $259 million – more than the total of the above-expected reimbursements paid to the next 14 operators combined." Calling on the board to improve its disclosure in light of the studies, Mr. Patterson cautioned that without further background disclosure and financial disclosure, shareholders are left "peering into a $6.1 billion black hole."
On Dec. 14, 2010, HCP, the nation's largest healthcare REIT, announced it would acquire the real estate assets of privately-held HCR ManorCare for $6.1 billion in a leaseback arrangement. The company has since issued debt and equity to help fund the deal, which is the largest in HCP's history as a public company. ManorCare was taken private by the Carlyle Group in 2007 for $6.3 billion and is one of the largest providers of skilled nursing facilities and post-acute care.
The CtW Investment Group's letter to the HCP board is available at: http://ctwinvestmentgroup.com/.
SOURCE CtW Investment Group