Hospice care transactions top May M&A activity

June 18, 2021 By: G. F. Gay Le Breton and Ryan Gerton  

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Two publicly-traded Louisiana companies bought hospice care providers in May, continuing their growth by acquisition strategies, and a third sold to private equity, which has shown strong interest in the home health and hospice space.

Last month, Baton Rouge-based Amedisys, Inc. announced it will acquire the home health and hospice operations of the 125-year-old Visiting Nurse Association for an undisclosed amount. This nonprofit said that it signed the deal with Amedisys because changes in the health care industry required it to find outside investors to ensure the financial viability of its programs. VNA has locations in Nebraska and Iowa.

The news on VNA came a little over a month after Amedisys announced plans to acquire the regulatory assets of a home health provider in Randolph County, North Carolina.

Amedisys sees its hospice and home health growth rates tripling on rising patient census and a robust acquisition pipeline, with hospice as a strong focus, according to CEO Paul Kusserow.

“We doubled our hospice business organically; and then we found that we could proprietarily go out and find assets and pay decent prices for them,” he said.

The home health and hospice markets are benefiting from demographic tailwinds, owing in part to a swelling baby boomer population. About 10,000 people in the U.S. become Medicare eligible every day, according to the Kaiser Family Foundation. Close to 80% of that population will suffer from at least one chronic or serious illness.

Amedisys honed in on hospice acquisition targets rather than home health during the COVID-19 era. This is largely due to the greater complexity and longer timeline in integrating purchased assets on the home health side, as well as changes in Medicare reimbursement for home health care through the Patient Driven Groupings Model begun in 2020.

Amedisys expects to do more deals in 2021, despite hospice valuations hitting an all-time high. The company is focusing on two types of transactions: smaller acquisitions with a quick turnaround, and larger, more dramatic moves that expand its core services.  For larger deals, private equity can become a roadblock to getting deals done. Amedysis Executive Vice President and Chief Financial Officer Scott Ginn noted that PE firms fight hard to establish platform investments when acquisition targets have larger infrastructure.

Amedisys currently delivers services across over 500 care centers throughout 39 states and the District of Columbia. The company earned more than $537 million in revenue during first quarter 2021, with $191.5 million from its hospice business.

Lafayette-based LHC Group, Inc. has continued to ride its own wave of acquisitions.  LHC announced two deals in May, which will add a total of 12 locations to the 25-year-old company’s network of home health, hospice and home and community-based services. This is on top of the five hospice organizations LHC acquired in the last half of 2020.

Last month, LHC agreed to purchase two Casa de la Luz provider locations in Tucson, Arizona for an undisclosed price. LHC already has a home health presence in Tucson, making it a prime target for the company, whose primary strategy is to build up its hospice footprint in markets where it already has a home health presence. Currently 77 of LHC Group’s 120 hospice operations are co-located with home health. This is up from 63 locations in 2019 and 58 in 2018.

LHC also agreed to acquire Omaha, Nebraska-based Heart n’ Home Hospice, which operates under the Treasure Valley Hospice brand, for an undisclosed price. The deal will expand LHC’s hospice care footprint in Idaho, adding six locations in the state, and marks LHC’s entry into hospice services in Oregon with four locations.

LHC is also pursuing expansion into new markets. Transactions in their current M&A pipeline total more than $300 million in exclusive discussions. In its Q1 earnings conference call, LHC revealed that it has earmarked $502.5 million for acquisitions this year, with 71% of those dollars weighted towards hospice.

LHC currently delivers service in 35 states and the District of Columbia. The company had revenue of $524.8 million during first quarter 2021, with $62.7 million from its hospice segment.

Finally, Greater New Orleans-based AmeraCare Family Hospice and Home Health sold for an undisclosed price to Traditions Health LLC, a portfolio company of New York City-based, family-owned investment firm Dorilton Capital Advisors. AmeraCare, a 20-year industry veteran, operates three facilities. Traditions entered the Louisiana market earlier in 2021 market with the acquisitions of Grace Hospice & Palliative Care and Heritage Hospice.

Traditions has been on a buying spree in the hospice and home health spaces over the past few years. The company completed 10 transactions in 2019 and 2020, and another four earlier in 2021. Traditions provides hospice, home health care and consulting services to an estimated 5,000 patients across 14 states.

G.F. Gay Le Breton is managing director for Chaffe & Associates Inc., responsible for the merger and acquisition activities of the firm. Ryan Gerton is financial analyst for the firm.

Investment banking services are provided by Chaffe Securities Inc., member FINRA/SIPC.