Hospice Multiples Are at Unprecedented Levels

Despite hospice valuations being at all-time highs, demographic tailwinds and availability of capital should continue to drive a robust market for companies looking to acquire hospice and palliative care providers.

From 2016 to 2018, there were more than 10 transactions of $250 million or higher in total enterprise value, with at least five transactions, individually exceeding $700 million of value, the highest ever in the industry according to a report from Cain Brothers.

Many of the acquirers were companies that provided services across the care continuum and looked at hospice as a strategic advantage.

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“Valuations in the sector have also reached all-time highs, both in the public markets and in private M&A transactions,” said Matt Margulies, who leads Cain Brothers’ Home Health and Hospice Advisory practices.

Recent reports have seen multiples for hospice providers reach as high as 16 and 19 times EBITDA.

“Multiples like these are unprecedented in this sector,” added Marguiles.

Demographic tailwinds are the most significant factor driving up the intrinsic value of hospice companies, Marguiles indicated.

More than 1.7 million patients in the United States received hospice care during 2014, the most recent year for which data are available, according to the National Hospice and Palliative Care Organization. These numbers are expected to grow as the US population ages.

Positive reimbursement trends are also strong drivers of valuation according to according to a second quarter 2018 report from Provident Healthcare Partners. Hospice reimbursement amounts have been trending incrementally upwards.

Marguiles also pointed to supply-demand imbalance as a major contributing factor to rising valuations.

“Put simply, there are too many well capitalized buyers chasing a relatively small number of larger-sized home health and hospice targets,” he said. “The result is an obvious and predictable one.”