TORONTO, Aug. 22, 2013 /CNW/ - Centric Health Corporation ("Centric Health" or the "Company") (TSX:CHH), Canada's leading diversified healthcare services company, today announced that a Judicial Review by the Ontario Divisional Court yesterday ruled that the Ontario Ministry of Health and Long-Term Care (MOHLTC) can implement its previously announced changes to the OHIP funding model for publicly funded physiotherapy provided in long-term care and retirement homes. The changes took effect immediately upon the rendering of the decision.
"We are disappointed that the Court has upheld the implementation of changes to publicly funded physiotherapy, which we fundamentally believe are not in the best interests of seniors and will have a negative impact on the quality of life of those affected by the changes," said David Cutler, President and Chief Executive Officer, Centric Health Corporation. "Since the MOHLTC announced the changes to the funding model in April, our Seniors Wellness team has been working diligently to develop new revenue streams, in particular with our Bundled Services initiative, which has added 162 new service contracts since the beginning of October last year. We have great strength in our Physiotherapy business, and we believe we are well positioned to take advantage of a number of potential opportunities to generate supplementary revenue going forward."
"While these changes will have an impact on the revenue and EBITDA contribution of the Seniors Wellness component of our Physiotherapy segment in the short to medium term, Centric Health has a strong and well diversified platform for sustainable long-term growth, with strong organic growth opportunities within each of our business segments and compelling synergy and cross-selling opportunities amongst the business segments," added Mr. Cutler.
At this time, the Company estimates that the decrease in direct public funding resulting from the implementation of the MOHLTC changes to the OHIP funding model will negatively impact annual revenue by approximately $27 million (or approximately 6% of consolidated revenue for the 12 months ended June 30, 2013) and consolidated adjusted EBITDA by approximately $5.0 million to $6.5 million (or approximately 13% consolidated adjusted EBITDA for the 12 months ended June 30, 2013), before taking into account the offsetting impact of the Company's actions to mitigate the effect of the change. The full impact on 2013 adjusted EBITDA is expected to be approximately $3.0 million to $4.0 million as the Company transitions into the new funding environment.
The Company is taking proactive steps through existing and new revenue streams to mitigate the impact to its business resulting from changes to the funding model. The vast majority of the Company's existing Long-Term Care Homes have verbally committed to continuing to outsource their physiotherapy service contracts with Centric Health under the new funding model, which pays the homes directly on an annual fee-per-bed basis. The initial proposed fee is $750 per bed per annum, which equates to approximately half of the previous fees billed. In addition, the Company is pursuing opportunities through private homecare, private pay services of rehabilitation and other ancillary services to Retirement Homes, and publicly funded physiotherapy services through Community Care Access Centres. It is expected that the average number of annual treatments per resident will be significantly reduced but reimbursed at a higher tariff. Other re-imbursement alternatives are being explored. In addition, the Company will immediately implement a cost containment program to support adjusted EBITDA margins.
The changes to the funding model will have little to no negative impact on the Company's 105 owned and 36 network physiotherapy clinics across Canada, which generated revenue of approximately $124.6 million in 2012, primarily through insurers and private pay. However, opportunities for additional revenue exist, and the Company has submitted 21 RFPs for its existing physiotherapy clinics to service people across the Province for care that will begin in clinics under the new funding model.
"Above all, Centric Health remains committed to the highest standards of excellence in the provision of rehabilitation and restorative care services and outcomes," said Mr. Cutler.
About Centric Health
Centric Health's vision is to be Canada's premier healthcare company, providing innovative solutions centered on patients and healthcare professionals. As a diversified healthcare company with investments in several niche service areas, Centric Health currently has operations in medical assessments, disability and rehabilitation management, physiotherapy and surgical centres, homecare, specialty pharmacy and wellness and prevention. With knowledge and experience of healthcare delivery in international markets and extensive and trusted relationships with payers, physicians, and government agencies, Centric Health is pursuing expansion opportunities into other healthcare sectors to create value for all stakeholders with an unwavering commitment to the highest quality of care. Centric Health is listed on the TSX under the symbol CHH. For further information, please visit www.centrichealth.ca.
This press release contains statements that constitute "forward-looking statements" within the meaning of applicable Canadian securities legislation. These forward-looking statements include, among others, statements regarding the financial impact of public funding changes on the Company (including future oriented financial information), growth opportunities of the Company, the ability to mitigate the impact of public funding changes, business strategy, plans and other expectations, beliefs, goals, objectives, information and statements about possible future events. Readers are cautioned not to place undue reliance on such forward-looking statements. Forward-looking statements are based on current expectations, estimates and assumptions that involve a number of risks, which could cause actual results to vary and in some instances to differ materially from those anticipated by Centric Health and described in the forward-looking statements contained in this press release. The forward-looking statements are based on information currently available and what management currently believes are reasonable assumptions, including direct funding of physiotherapy services to long-term care facilities by government and the continued outsourcing of physiotherapy services by long-term care facilities. Other material factors or assumptions that were applied in formulating the forward-looking statements include the assumption that the business and economic conditions affecting the Company's operations will continue substantially in their current state, including, with respect to industry conditions, general levels of economic activity and other government regulations. No assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do so, what benefits Centric Health will derive therefrom. These forward-looking statements reflect current expectations of the Company as at the date of this press release and speak only as at the date of this press release. The Company does not undertake any obligation to publicly update or revise any forward-looking statements except as may be required by applicable law.
SOURCE: Centric Health Corporation