Amedisys to ‘Feed the Beast’ for Hospice Segment Growth

Amedisys Inc., (NASDAQ: AMED),the third largest provider of hospice and home health in the United States, is prioritizing expansion of its hospice footprint through acquisitions and de novo activity, as the company cools down its home health care acquisition efforts due to uncertainties regarding the patient driven groupings model (PDGM).

A focus on hospice growth will help balance the company’s portfolio, which leans toward home health. The company’s first quarter 2019 revenue for hospice was $138 million, compared to $310 million for home health care.

“We are really going to feed the beast in hospice. Right now from an M&A perspective, from where should we be focusing on de novos, on tuck-ins, on deals, on integrations—we are pushing hospice,” said CEO Paul Kusserow in a presentation at the RBC Capital Markets Global Healthcare Conference. “Then this time next year we will understand the effects of PDGM, and we believe we will have the potential to get back into the home health business.“


Effective Jan. 1, 2020 Medicare will begin reimbursing home health care providers through PDGM, which classifies patients into payment categories based on clinical characteristics and other patient information, and shifts the home health payment model to a 30-day payment period rather than the current 60-day episode.

Home health care providers have been concerned about the transition amid predictions of increased bankruptcies, the use of behavioral assumptions in patient grouping methods, increased regulatory scrutiny, and potential payment cuts.

Amedisys continues to be on the lookout for acquisition opportunities following its $340 million purchase of Compassionate Care Hospice in February and its tuck-in of RoseRock Healthcare for an undisclosed amount.


“[Compassionate Care] is a good acquisition. There is no question about it,” Kusserow said. “The price was fantastic. I hope there is another one out there like it at that size at that price.”

Compassionate Care’s average daily census exceeded the company’s expectations by 200 patients at the time of the transaction’s closing. The hospice contributed $4.2 million to the Amedisys’ $13 million year-over-year increase in EBITDA.

Following the RoseRock tuck-in, Amedisys operates 138 hospice care centers in 34 states.

Industry observers such as the Braff Group and Mertz-Taggart have predicted that mergers and acquisitions will continue to be a leading growth strategy throughout the hospice market during 2019 and beyond.

Amedisys will likely not be alone in focusing on hospice growth as PDGM approaches. In a February report the M&A advisory firm the Braff Group indicated that the hospice acquisitions market will likely outstrip the home health care sector due to concerns about the new payment model.

“We believe heavily in what we are doing from a hospice perspective,” Kusserow said. “For the past four years we had no acquisitions in hospice, through same-store [growth] we basically doubled the business. So we made a big acquisition [of Compassionate Care]; we are going to be out doing denovos—7 to 9 de novos this year. And we are looking or more tuck ins.”

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