Private Equity Interest in Hospice Acquisition Expected to Rise in 2019

As more private equity firms enter the post-acute health care arena, hospice organizations are increasingly pursuing mergers and acquisitions as a growth strategy, according to the recently released 4th quarter 2018 Home Health & Hospice Update from Provident Healthcare Partners.

“As health systems seek to reduce cost, we expect increased utilization of home health and hospice agencies over traditional, in-patient, post-acute care settings,” Jake Vesely, analyst, Provident Healthcare Partners told Hospice News. “Private equity firms see an opportunity to embark on a roll-up strategy of smaller hospice companies that may be lacking the data capabilities and scale necessary to comply with the new regulatory changes.”

Since 2016, Provident said it has seen interest and valuations drastically increase in hospice and doesn’t expect it to slow down anytime soon.

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“We have seen multiple national platforms built in the sector with private equity groups and publicly traded acquirors,” Vesely explained.

Key examples of these trends during the 4th quarter of 2018 include Amedisys acquisition of Compassionate Care Hospice for $340 million, making the company the third largest hospice provider in the nation.

In October 2018 Bain Capital acquired two regional companies providing hospice care, Arosa and LivHome for undisclosed amounts. Also in October, Pharos Capital Group obtained Charter Health Group, laying the foundation for further hospice and home health acquisitions.

Private equity interest in the hospice market is driven by multiple factors, according to Vesely, such as the fragmented nature of the industry, increased acceptance of palliative care services, the aging population, the changing regulatory landscape, and the transition towards a value-based care model.

“With the increasingly prevalent threat of larger payors entering the space, we continue to see smaller groups utilize M&A as a way to offset the burden of competing with data capabilities and scale,” Vesely said.