Vivra, Inc.

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Vivra, Inc.

400 Primrose
Suite 200
Burlingame, California 94010
U.S.A.
(415) 348-8200
Fax: (415) 375-7550

Public Company
Incorporated: 1989
Employees: 3,600
Sales: $350.5 million (1995)
Stock Exchanges: New York
SICs: 8092 Kidney Dialysis Centers; 8082 Home Health Care Services

Vivra, Inc. is the second-largest provider of dialysis treatment services in the United States, while also holding active shares in the markets of diabetes treatment and allergy and asthma care. Vivra, whose name is translated to “will live” in the French language, serves almost 12,000 patients throughout the country who need kidney dialysis treatment, through its chain of Community Dialysis Centers. The company also provides intravenous nutritional and pharmacy support to these patients through its Associated Health Services subsidiary. Another division called Health Advantage handles the company’s many diabetes management centers, while the Vivra Specialty Partners subsidiary (VSP) manages physicians’ practices that deal in the care of allergies and asthma, as well as other chronic medical conditions.

The Early Years

Although Vivra, Inc. was created in 1989, its beginnings can actually be traced back 16 years earlier. In 1973, a company called Community Psychiatric Centers (CPC) purchased three outpatient medical units that specialized in providing patients with hemodialysis treatment, a process that used artificial kidney machines to rid blood of toxins. CPC’s primary focus lay in the psychiatric field, however, so it created a separate division to handle operations of the newly-acquired hemodialysis units. This new operating division, which would one day become Vivra, began developing a program to manage the continuum of care for high-cost chronic dialysis patients. The dialysis services provided to patients were primarily reimbursed by Medicare under the End-Stage Renal Disease Program.

Through the Vivra division, CPC continued to provide (and expand) its dialysis services for the next decade. Then in 1983, CPC decided to purchase six health care offices in southern California that provided in-home nursing services for patients with chronic medical needs. The Vivra division became responsible for the operation of these offices as well, and within five years Vivra was generating annual revenues of over $80 million between its two subdivisions. Even with this great success, in 1989 CPC decided to focus solely on its psychiatric business, and made plans to divest the Vivra subsidiary. In August of that year, CPC distributed stock in Vivra to its own stockholders, giving out one share of Vivra for every ten shares of CPC held. To make the transition smoother, Vivra retained the services of CPC’s management until August of the following year, and paid a fee for the support it received.

Shortly after the split from CPC occurred, Vivra’s home health care division (now called Personal Care Health Services) received accreditation by the Joint Commission on Accreditation of Health Care Organizations. The operation also expanded from its original six offices in California to include four more offices, all of which supplied extended care (ranging from 4 to 24 hours per day) to patients in their own homes. But even with this new expansion and accreditation, Vivra’s home health care remained a somewhat small part of its total business. In 1989, Personal Care Health Services accounted for only 18 percent of the yearly revenues (and only 2 percent of the actual yearly profits), while the dialysis services generated the other 82 percent of revenue (and 98 percent of profits). Therefore, Vivra decided to focus on expanding its dialysis business, and spent approximately $875,000 purchasing two units in New Mexico.

Expansion in the Early 1990s

Entering the 1990 fiscal year, Vivra was composed of 91 dialysis centers around the United States, in addition to its home health care offices in California. Already the country’s second-largest provider of dialysis services, Vivra continued its efforts at expansion and growth. 1990 marked the expenditure of approximately $5.2 million to acquire dialysis units in five Virginia locations, as well as units in Washington, D.C., and West Virginia. This was paid for in part by income generated when the company issued a secondary offering of its stock in August of that year.

Meanwhile, Vivra was searching for another line of services to add to its repertoire that could be developed without bringing on too much financial strain and without compromising the care already being provided in the dialysis and home-care segments. Two new ventures arose. Vivra decided to form Associated Health Services, which would operate two pharmacies in California and Georgia that would supply specialized nutritional intravenous infusion therapy to dialysis patients. The company also began to explore the niche of diabetes treatment. 1990 also saw the company donate money to Moncrief Mountain Ranch, a recreational summer camp for kids with chronic and severe medical problems, such as kidney failure.

The year 1990 was not only a busy and varied one for the newly independent company, but a successful one as well. Revenues topped off at $115.7 million, surpassing the $100 million mark for the first time since the Vivra division was formed by CPC in 1973. The company had also increased the number of dialysis units in its Community Dialysis Center chain to 104, and had added one more home health care office to its Personal Care Health Services chain in California. Through 1991 and into 1992, Vivra continued to augment its dialysis service chain through new acquisitions. Revenues for 1991 rose to $140.7 million.

In 1992, Vivra more actively pursued its entrance into the diabetes treatment market. In April of that year, the company acquired a diabetes management service company called Health Advantage, Inc., in exchange for shares of Vivra’s common stock. The company also purchased 11 more dialysis treatment centers around the country, bringing its Community Dialysis Center unit count to 115. Possibly the most notable move, however, was the company’s sudden push into the operation of surgical centers. First came the formation of a new subsidiary, called Surgical Partners of America, which was created to operate ambulatory surgery centers. Then came the purchase of the Green River Surgical Center in Auburn, Washington, and the Physicians Plaza Surgical Center in Bakersfield, California. These moves, along with Vivra’s mainstay dialysis and home care business, helped the company achieve $182 million in 1992 revenues.

The following year was notable for more than one reason. First, Vivra was recognized in Barron’s as a top investment pick by Richard Aster, manager of the Meridian Mutual Fund, due to the company’s reliable yearly growth and return on equity. Second, the company’s 1993 revenues surpassed the $200 million mark, topping off at $216.8 million. In the four years since Vivra had split from CPC and become its own entity, the company had more than doubled its annual income. However, in 1993 Vivra finally sold its Personal Care Health Services division, making an exit from the home health care business. The division was sold to National Medical Care, the United States’ number one kidney dialysis company and a wholly-owned subsidiary of the chemical and health care firm W.R. Grace & Co.

The Mid-1990s and Beyond

Immediately following the divestiture of Personal Care Health Services to National Medical Care, Vivra actually made a bid to merge itself with the company. Such a merger would have joined the number one and number two kidney dialysis companies in the country, giving them control of the vast majority of dialysis centers throughout the United States. But Vivra’s merger bid was rejected in early 1994, and so the company began plans to reevaluate its many holdings and divest those which were either unsuccessful or inconsistent with the company’s main focuses.

Interestingly enough, though, the first moves made by Vivra following the merger bid’s rejection were three different acquisitions that expanded the company’s range of services, rather than deleting inconsistencies. Vivra first purchased a partial interest in South Coast Rehabilitation Services of Laguna Hills, California, a provider of occupational, speech, and physical therapy services. Next came the acquisition of Celsus, Inc. and Celsus of Louisville, Inc., which dealt in the management of physician practices. Vivra also purchased AllergyClinics of America, Inc., an allergy and asthma care service company.

Vivra spent the rest of the year organizing its holdings. By the end of 1994, Vivra was well-positioned in three main areas related to chronic disease medical care: dialysis/nephrology, asthma and allergy care, and diabetes treatment. Revenues for the year had jumped once again, to $284.6 million. Entering 1995, the company finally began to divest the divisions that did not fit into one of the above three areas. The Surgical Partners of America subsidiary was sold, as well as Vivra’s stake in the South Coast Rehabilitation Services business. Also, the Vivra Physician Services division was restructured and became Vivra Specialty Partners (VSP), with a focus on the management of physician practices and networks.

Company Perspectives:

Vivra is a specialty care company. We will compete in specialty care segments where we can differentially manage the continuum of care for high-cost patient populations.

Entering the end of the decade, Vivra was responsible for the operation of over 150 dialysis centers around the country, under the name Community Dialysis Centers. 1995 revenues were at the highest level in the company’s six-year history, this time surpassing $350 million and generating an actual year-end profit of almost $38 million. Since its inception as an independent entity in 1989, Vivra had achieved substantial increases in both yearly revenues and profits every year. As the company continued to restructure its holdings and maximize its success, both in the medical care provided and in the economic environment, Vivra’s potential for future growth looked promising.

Principal Subsidiaries

Associated Health Services, Inc.; Associated Medication Services, Inc.; Asthma & Allergy CareAmerica, Inc.; Vivra Renal Care, Inc.; Community Dialysis Supply Corp.; Vivra Health Advantage, Inc.; VNS (75%); Specialty Care America, Inc.; Vivra Heart Services, Inc.; Vivra OB-GYN, Inc.; Vivra Orthopedics, Inc.; Vivra Specialty Partners, Inc.; VPSL Corp.; Celsus of Louisville; Vivra Physician Services of Colorado Springs, Inc. (83%); Vivra Laboratories, Inc.