EDWARD BLECHSCHMIDT - GENTIVA HEALTH SERVICES INC (GTIV)
CEO Interview - published 08/06/2001

DOCUMENT # MAV614

EDWARD A. BLECHSCHMIDT is Chairman, President and Chief Executive
Officer of Gentiva Health Services, Inc., the nation's leading provider
of specialty pharmaceutical and home healthcare services. Gentiva Health
Services was launched as a new public company in March 2000 as a split
off from Olsten Corporation, where Mr. Blechschmidt was Chief Executive.
In March 2000, Olsten's worldwide staffing business was sold to Adecco,
SA. He joined the Olsten Corporation in October 1998 as President and
Chief Operating Officer and was named Chief Executive in February 1999.
Prior to Olsten he had been President and Chief Executive Officer of
both Siemens Nixdorf Americas and Siemens' Pyramid Technology since
1996, as well as Executive Vice President and Board member of parent
company, Siemens Nixdorf Informationssysteme AG of Munich, Germany.
Prior to joining Siemens, Mr. Blechschmidt served for more than 20 years
with Unisys Corporation. He holds an undergraduate degree in Business
from Arizona State University. He is a member of the Board of Directors
for the American Association of Homecare and is associated with various
local charitable organizations.

Sector: health services

TWST: Could you begin with a brief historical sketch of Gentiva Health
Services and an overview of the company as it is now.

Mr. Blechschmidt: Gentiva Health Services today is the nation's leading
provider of specialty pharmaceutical and home healthcare services and
our history is a rich one. Gentiva is the product of a spin-off from the
Olsten Corporation in March 2000. Olsten had been operating as Olsten
Health Services and had been in the healthcare industry for some 30
years. So Gentiva, which was launched in March 2000, was a spin-off from
Olsten Corporation, and we created out of that spin-off the number-one
provider of specialty pharmaceutical services in America and also the
number-one provider of home healthcare in the country. So the 30-year
history of the company has led to a significant number of inroads in
almost all states across the country, the development of significant
clinical excellence and capabilities and a lot of interesting
opportunities in the specialty pharmaceutical sector because of the
amount of activity in biotechnology and genomics.

TWST: Could you go on to describe the opportunities that are emerging
before you and the general trends that are emerging, and how you'll be
fitting into all that?

Mr. Blechschmidt: We see great opportunities in both of our segments. In
the specialty pharmaceutical business, we now have some 300 new biotech
drugs in Phase II and Phase III of the FDA approval process. Many of
these therapies will require special handling, either because there are
a limited number of patients or they require special refrigeration,
short shelf lives or are the nature of being IVs or self-injectable
drugs. This trend, we think, will only accelerate with the amount of
small startups in the genomics area. There are literally thousands of
biopharmaceutical possibilities on the drawing board today not only in
this country, but around the world. And where Gentiva specializes is
really in commercializing these new and complex drugs. And as the trends
continue with more therapies requiring pumps and so forth, Gentiva plays
a very vital role, I believe, in the healthcare continuum.

TWST: Then with regard to home care?

Mr. Blechschmidt: In the home care area, we have about 3% of the market
today. We are the only true national provider of home health and we are
the nation's largest such provider. But the demographics are very
interesting in this area and suggest that home healthcare will grow in
popularity in the coming years. First of all, it's very clear that it is
much more cost-effective to care for individuals in the home as opposed
to institutions. Increasingly, therapies are being administered in the
home, rather than in comparatively costly and uncomfortable
institutions. And certainly the demographics of America, with
approximately 1 million people per year turning age 65, really brings up
a whole social issue of how long-term care is going to be handled. With
a more affluent society and a baby-boomer generation, people generally
prefer to be in the confines of their own home as opposed to nursing
homes or some other type of institution. So we believe that there are a
lot of opportunities in this area. In the managed care arena today, some
2%-3% is home care. We believe the potential trends here could be 4%-5%
over the next five-to-seven years, which should provide us with some
significant growth in our home health business.

TWST: Is it likely then that there'll be some consolidation, that you'll
be looking for acquisitions?

Mr. Blechschmidt: We believe that there definitely is an opportunity for
consolidation in this marketplace, like other industries which
consolidated where there has been generally a highly fragmented market.
However, the healthcare industry is constantly evolving and operates in
a heavily regulated environment, so we'll have to assess these
opportunities on a case by case and quarterly basis.

TWST: Could you chart out the progress that the company expects to make
on the two sides of the business over the next three years or so? What
are the milestones that you expect to be reaching?

Mr. Blechschmidt: In the specialty pharmaceutical area, we believe this
marketplace will grow in the long run at double-digit rates. And
certainly with the bringing on of new drugs and new therapies, we would
expect to see occasional spikes beyond low double-digit growth rates.
Our challenge is really twofold. One is to continue our industry
leadership position. We have some 11% market share today in this
industry. We believe we have the opportunity to expand still further on
our leadership position and to be a major force in the specialty
pharmaceutical marketplace, not only with specialty pharmaceutical
distribution but also with new drug development and helping new
pharmaceutical companies commercialize new and novel drugs and certainly
ones that require special handling. An example of that would be an
announcement that we made with Neopharma, a Swedish company, which has a
very strong solution for Parkinson's disease, a drug called Duodopa. We
have begun assisting them with their FDA trials, and we think that this
could be a very strong contributor to our operations in late 2002 and
2003 should, as we hope, Duodopa receive FDA approval.

TWST: Could you give us a sense of the competitive advantages that you
enjoy?

Mr. Blechschmidt: First of all, being the largest specialty
pharmaceutical distribution and services company in the country, we have
a combination of both centralized distribution capability as well as 40
pharmacies around the country that can provide local distribution, in
some cases, due to state regulations of in-state pharmacy regulations
and also, though, to be able to provide very quick service for patients.
So we can offer not only case management but also emergency shipment
capability to patients we serve. In the specialty pharmaceutical
industry,  where you're distributing and managing continuous flow IV and
other complete therapies, having that capability and national presence
is, we think, very important. Because we have that national presence and
the largest network in the country, we can provide full distribution for
new companies as well as existing large pharmaceutical companies that
are trying to have a strong relationship through us with managed care.
We can take on large managed care contracts and have a national program
and presence as opposed to smaller distributors, which most typically
have smaller, local programs. We think our national program and presence
represents the future for specialty pharmaceutical distribution and
service.

TWST: Is that a distinct advantage to have the two businesses? Do they
work together in any way?

Mr. Blechschmidt: Actually, there's a certain amount of independence
between two. But there's also some symbiotic relationships that exist
between them. First, in terms of providing managed care full solutions,
where we can provide home health services, home infusion, home infusion
nursing services and specialty drug distribution, Gentiva has, I think,
a very compelling and functionable range of services. So I would say
that, while about 80% of our business is somewhat independent, there is
some useful, symbiotic relationship between the two businesses for
nursing care, managed care and full-solution healthcare and specialty
pharmaceutical services. While each is a successful stand-alone
business, they do add value to each other.

TWST: With regard to home care, the inevitable question that I think
comes into almost anybody's mind is, how do you get good, qualified
people to do the work for you? What incentives do you provide? What kind
of training, etc.?

Mr. Blechschmidt: We do see a certain amount of shortages in nurses in
the marketplace. For nurses, though, working for Gentiva, we think, is
much more attractive as opposed to hospitals and certain institutions
that function almost as assembly lines. Our nurses, on the other hand,
really get involved in patient care and follow-up and so on. So we have
found that our nurses find a career with Gentiva an enriching one. Also,
being a Fortune 1000 company, we offer a package of benefits, including
stock purchase plans, health benefits and so on, that make Gentiva an
employer of choice for nurses. So while there is a nursing shortage, we
are managing through it. We also take a lot of pride in trying to
recruit the best-quality people we can find.

TWST: You're the leading company with only 3% of the home care market.
Even apart from your own interest as a company, the development of your
company, do you think that it would be better for the patients overall
if the thing were more focused, more centralized, if it weren't so
fragmented? Would there be better health delivery that way?

Mr. Blechschmidt: We think there would be. We think that the market can
be made and you get more acceptance for reimbursement from Medicare,
from Medicaid, from managed care and so on, if you can have a little bit
more maturity of an industry. The best way to get maturity in the
industry is to have more acceptance with some larger providers which can
help standardization, and which leads to reimbursement and potentially
improved care management that utilizes all of the promise of technology.
A lot of efficiencies can be made on this. We also think that, as the
nation's largest and leading provider, we can play an instrumental role
in demonstrating the comparative benefits of home health and its
clinical, financial and other benefits. We think more and more patients
are going to be treated in the home, and we intend to be the leader in
this growing trend of care.

TWST: Do you think you can increase that 3% substantially over time?

Mr. Blechschmidt: We believe that a consolidation over time will occur.
And we certainly have the plans to continue and expand our leadership in
this marketplace.

TWST: Could you tell us something about the company internally? Number
one, are there any areas that you need to strengthen within the company?
Then perhaps you could go on to talk about the background and expertise
of your senior management team.

Mr. Blechschmidt: With our national network, we have a significant
amount of people who have a pretty varied background. I would say
probably 30% to 50% of our management comes out of a nursing background.
In the specialty pharmaceutical business, we have a lot of expertise on
the pharmaceutical industry, distribution, management, as well as
general business capabilities. So we've got a pretty varied management
team. What sets us apart a little bit, I think, is that Gentiva has a
deep commitment to clinical excellence, led by clinical specialists and
a full-time chief medical officer, and our size gives us a little bit of
that advantage to have that kind of capability. We have a chief nurse
who has been published quite a bit. So we're able to analyze trends and
opportunities, talk very technically with pharmaceutical companies as
well as managed care and demonstrate to them how they can lower their
costs and how we can provide a lower-cost model for managed care. We're
able to prove that it's less expensive to administer either specialty
pharmaceutical drugs or home healthcare in the home environment as
opposed to doing it at an institution. So we're trying to provide a big
benefit, if you will, to managed care and to Medicare by providing that
kind of capability.

TWST: What are the problems or the risks for the company going forward?
What could go wrong?

Mr. Blechschmidt: Healthcare in America is mostly a regulated industry.
So the government does have some capability to be able to control
pricing relative to Medicare reimbursement and are looking at various
drugs and so on and so forth. So one thing that could affect this is new
legislation. Now we believe, however, that the current environment in
Washington is that legislators have a better level of expertise and
understanding of our industry and they're really trying to provide a
fair playing field for companies. The US needs to have quality,
profitable healthcare companies. They do not need to bankrupt an
industry. Companies need to be profitable so that they can continue to
improve on clinical excellence, to continue to be able to recruit
quality people, to be able to attract people in the industry so that
they can have a healthcare delivery system that is the best in the
world. I believe that Washington understands the importance of this. And
we believe this should provide opportunities for us as the leader in
both of our segments, given that we are highly committed to clinical
expertise and a very efficient model in an industry which can help
control the overall cost of healthcare. So, for example, the more that
we can move people to home care as opposed to paying very large Medicare
dollars for having patients in institutions, the better off we would be
in terms of lowering the overall healthcare costs in the country. So we
think we are swimming with the tide and playing a valuable role in the
American healthcare sector. However, with that said, from time to time,
there is legislation that gets passed that is either favorable or
unfavorable on a near-term basis. But we believe in the long term that
common sense will prevail.

TWST: So you feel that you're more or less in tune with the mood of the
country as a whole?

Mr. Blechschmidt: I would certainly think so. We are in a segment for
which the trends should be favorable, not unfavorable to us, along those
lines. Another thing that could happen, certainly, on the unfavorable
side is more and more scrutiny and time delays in getting new biotech
drugs approved. This has given, I think, some pharmaceutical companies
today some concerns over how long sometimes the process takes. Certainly
the growth rates of our industry will be impacted on how quickly some of
these new biotech drugs that require special handling and so on do get
approved. Again, though, we see good recognition of this challenge in
Washington.

TWST: Is the company profitable right at this time?

Mr. Blechschmidt: Yes, it is.

TWST: Could you comment on your stock price? How do you feel about it?

Mr. Blechschmidt: When we went public in March 2000, we opened up at
about $5.50. And today, we're trading at about $18.00. So over this
period of time, going up about 3 times, I think we are pleased with that
progress, especially in this challenging period for the market. However,
on the other hand, we are not satisfied with where we are because we
think we have tremendous opportunities ahead of us. And so while the
history so far has been reasonably good, we look forward to some very
good opportunities ahead of us. So when we look at our overall
enterprise value, compare the revenue, and compare it to other
companies, we think we have a lot of upward opportunity.

TWST: Where would you realistically expect the company to be, say, in
the year 2004? What would you be looking for at that time?

Mr. Blechschmidt: That's a very good question, considering that most
Wall Street interviews I have only care about the next 90 days.

TWST: We focus on the long term.

Mr. Blechschmidt: In the long run, we would certainly like to see even
larger market share leadership in our segments. We would see some very
interesting things in the specialty pharmaceutical side with working
very closely with a number of pharmaceutical companies, both in
supporting clinical trials and specialty pharmaceutical distribution. We
think in 2004, a number of genomic opportunities will begin to be
identified and exist from trials and getting prepared for distribution
opportunities. So we see ourselves involved heavily in that promising
product line. We would certainly hope to be viewed as the premier leader
in clinical excellence in our segments. And we would hope to see the
government also recognize that home health is really a vehicle to lower
the overall healthcare cost in America and that it should be viewed on a
consolidated line item budget when they are analyzing healthcare cost.

TWST: Would you give us the three or four best reasons why the long-term
investor should be paying close attention to Gentiva?

Mr. Blechschmidt: I'd say, number one is, we represent a tremendous low-
risk alternative of participation in the biotech industry as a leader in
biotech product distribution. Number two, our starting point today is
one of being debt-free and generating positive cash flow, which I think
has not been fully appreciated. Number three, the potential earning
power that we possess, based upon the growth and trends that are
happening in healthcare, makes us a very, very interesting opportunity
over the long run. Starting out in a leadership position, there are
definite opportunities for consolidation and so forth which we could
certainly participate in. Finally, we are committed to improving
enterprise value in this company.

TWST: Thank you. (MC)

EDWARD A. BLECHSCHMIDT
 Chairman, President & CEO
 Gentiva Health Services, Inc.
 3 Huntington Quadrangle, 2S
 Melville, NY 11747
 (631) 501-7000
 www.gentiva.com
 e-mail: michael.johns@gentiva.com

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Copyright 2001 The Wall Street Transcript Corporation
All Rights Reserved


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