Nashville, TN - James A. Deal, Chairman and Chief Executive Officer of Geriatrix, today announced that the Company has completed an $8 million private placement of preferred stock led by River Cities Capital Funds of Cincinnati, Ohio, and including Pacific Venture Group, Blue Chip Venture Company, Envest Ventures, Crosspoint Venture Partners and Accel V.L.P.
Geriatrix, which primarily focuses on using effective care management to improve the quality and lower the cost of healthcare for the frail elderly Medicare population, intends to use the proceeds from the financing to expand its business with Medicare HMOs in its three existing markets of Phoenix, New York and Boston and pay down debt. The Company is evaluating opportunities to expand its hospice business, currently in operation in Phoenix, through either start-up or acquisition. Geriatrix is also actively exploring expansion of its business to new markets.
Commenting on the announcement, Mr. Deal said, “We are very pleased to have completed our most recent financing, further validating the substantial opportunities Geriatrix has to improve healthcare and lower costs in the increasingly visible and underserved frail elderly market, while enhancing our ability to pursue our opportunities aggressively. A key aspect of our success in closing this transaction was our achieving profitability in the fourth quarter of 2003, through contributions from both of our core businesses. This accomplishment demonstrated the strength of our business models, as well as our potential for profitable growth as these businesses scale.
“Because of the clear results we have produced in an underserved and growing market, we believe we have strong prospects for generating further growth in our Medicare HMO business, both with existing customers, such as PacificCare, CIGNA, HIP of New York and Tufts, as well as potential new customers. The typical frail elderly Medicare HMO member residing in a nursing home has annual healthcare costs that are four times as costly as the average Medicare HMO member. Through our Care+Plus management programs, we first identify these frail elderly members for our HMO customers and then work with their physicians and nursing homes to fill gaps in their healthcare. Because of their receiving an improved level of proactive care, members remain healthier with better clinical outcomes, resulting in a reduction of their annual healthcare costs by more than half. We also provide comprehensive care services through our Post Acute+Plus programs to Medicare HMO members that are temporarily in nursing homes as they recover and rehabilitate from acute care episodes.
“We are confident of our market prospects because we are the only independent provider of these services with multiple contracts, which represent over two thousand members served by Care+ Plus and 70,000 Medicare-equivalent members served by Post Acute+Plus. Given the demographic trends, Medicare is facing in the coming decade and the growing interest at CMS in employing care management techniques to reduce healthcare costs, Geriatrix is well positioned to expand this business.
“While we only recently entered our second core business in April 2003, through the acquisition of a hospice operation in Phoenix, we are no less enthusiastic about its opportunities for growth. Unlike the market for our services to Medicare HMOs, there is a variety of established providers of hospice services, with many of the larger providers operating in Phoenix, one of the most competitive hospice markets in the country.
“Nevertheless, we have expanded our census for our Phoenix operation by 154% in the 11 months since the acquisition, to 165 patients from 65 patients, and we expect further growth in 2004. Our hospice is now the sixth largest of the sixteen hospices operating in the Phoenix market. This growth is substantially attributable to our focus on providing hospice services to nursing home patients, while at the same time experiencing considerable growth in the community-based segment of our business. Our approach enables us to leverage the unique and mutually beneficial relationships we have developed with nursing homes through our Medicare HMO business, a competitive advantage we expect to build in new markets as we expand the business.”
Mr. Deal concluded, “In addition to proven business models and significant market opportunities, our investors also recognized the extensive healthcare expertise represented in our senior management team and Board of Directors. With the Company’s improved financial strength as a result of the financings, we are confident of the ability of this team to achieve our operating, financial and shareholder value goals.”
Geriatrix provides comprehensive care management services under contract with Medicare HMOs to improve the quality and lower the cost of healthcare for the frail elderly. The Company currently provides services to over 2,000 members who reside in nursing homes, and has contracts covering 70,000 Medicare-equivalent members to provide services to members recovering in nursing homes after acute care episodes. Geriatrix also provides hospice services through its initial hospice operation.