LHC Group Accelerates Joint Venture Strategy, Looks to Build Hospice Density

LHC Group Inc. (Nasdaq: LHCG) has revved up its joint venture engine in the early part of 2019. The Lafayette, La.-based provider plans on ramping up the JV strategy in coming months, while simultaneously building hospice density in its existing home health markets.

Executives from the company highlighted those 2019 plans during a first-quarter earnings call with investors on Thursday.

LHC Group has already acquired or agreed to acquire 18 home health, hospice, or home- and community-based services locations since the start of the year. All hospital JVs, the acquisitions represent approximate annual revenues of $44 million.

JV activity has been the company’s most active growth front during Q1 2019. The company completed a JV with Geisinger Home Health and Hospice in April, with another JV with Geisinger subsidiary AtlantiCare expected to close by June 1. More recently, LHC Group plans to enter into a JV agreement with SSM Health, a multi-state health system based in St. Louis.

Though the JV M&A strategy is not unique among hospice businesses, their approach is rare among publicly traded hospice and home health providers, Stephens analyst Dana Hambly told Hospice News.

“LHC Group’s M&A strategy that focuses on the joint ventures with health care systems is really part of the company’s DNA going back to its founding,” Hambly said. “In 2018, around 40%of LHC Group’s net revenue came through equity joint ventures.”

JV activity was a key factor in LHC Group’s decision to raise its FY19 guidance, coupled with better-than-expected cost controls and a lower tax rate assumption, according to a note Hambly shared with Hospice News.

In addition to JV activity, the company continues to pursue growth through tuck-in acquisitions, with the goal of co- or tri-locating hospices in markets where their home health locations are well established.

“With 231 million available on our credit facility, and an accordion feature that can provide an additional $200 million of capacity, we are well positioned to remain in growth mode on the joint venture and acquisition front for the foreseeable future,” LHC Group CFO Josh Proffitt said.

LHC Group reported first quarter 2019 revenue of $502.6 million, up 72% from first quarter 2018. Contributing factors include a 6.2% rise in hospice admissions, as well as a 5.7% increase in home health. Net first quarter revenues for the company’s hospice segment totaled more than $51.7 million.

LHC Group joint ventures will also play a key role throughout 2019 as the company positions itself for the recently unveiled value-based primary care initiative, as well as the Patient-Driven Groupings Model (PDGM) for its home health business.

The U.S. Centers for Medicare & Medicaid Services (CMS) in April announced the Primary Cares Initiative (PCI), creating five new payment models that incentivize primary care providers to keep patient at home, reduce hospitalizations and health care costs. Details of the program will be released in coming months, but hospice and home health providers — as bastions of community-based care — could play a pivotal role.

“The Primary Care Initiative from CMS will help our hospice offering, as it places an emphasis on integrating hospice with other care settings and encouraging other players to align payment quality and reporting which would of course play to our strengths,” Myers said.

PCI is expected to launch in 2020 and continue into 2021.

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