The LHC Group (NASDAQ: LHCG) is fueling its hospice growth engine through the company’s hallmark joint venture strategy as well as new acquisitions, according to CFO Josh Proffitt, speaking at the William Blair 2019 Growth Stock Conference in Chicago.
LHC Group has targeted an additional 130 markets for hospice expansion in areas where they already have a robust home health presence, as part of an bilocation strategy in which the company overlaps hospice locations with its other segments.
“Hospice and home and community services segments have grown significantly over the years, and we are intensely focused on growing both those segments,” Proffitt said. “The growth outlook and the growth footprint for hospice is extremely large for LHC Group, and we couldn’t be more bullish about going out and executing on that.”
A principal goal of expansion is to “own the home,” as Proffitt described their strategy to the William Blair audience, meaning that LHC can touch patients throughout the continuum of care starting with home health and home and community services and then into hospice if and when the patient becomes eligible, creating a longitudinal relationship the patient.
Two key levers for LHC’s hospice growth are the development and expansion of joint ventures with hospitals and health systems, a strategy the company launched in 1998, in addition to traditional acquisitions.
LHC Group in May agreed to partner with Capital Region Medical Center to purchase home health and hospice assets of Mexico, Mo.-based SSM Health. Financial terms of the transaction were undisclosed.
LHC Group currently has joint ventures with 80 unique hospital systems covering 350 hospitals nationwide. The company’s overall hospice, home health, and home and community services are in range of 60% of the U.S. population age 65 and older.
Proffitt pointed to the company’s joint venture with Tennessee-based Lifepoint Healthcare, an 89-hospital system with annual revenues of $6 billion. Since the joint venture began in Jan. 2017 its holdings have grown to 14 hospice locations, 33 home health locations, and one home and home and community services location, up from an initial 10 hospice and 20 home health assets.
“That can really show you the scope of growth that you can experience in some of these joint ventures in a very short amount of time. The Lifepoint footprint is much broader than what I have described, so we have a dedicated pipeline of target markets,” Proffit said. “Every quarter I sit down with Lifepoint’s business development team to map out where we are going next to grow out that footprint. So we have a unique growth opportunity not only for new hospital partnerships but to continue to expand the ones that we have today.”
Beyond the joint venture strategy, LHC is also willing to go it alone when purchasing existing hospice companies. Their current goal is to deliver $100 to $150 million of acquired revenues year over year.
In 2018, LHC raked in more than $800 million in acquired revenue, largely through the purchase of hospice, home health, and personal care company Almost Family in an all stock transaction with an implied value of $2.4 billion.
“We are very much an acquisitions-oriented organization,” Proffitt said. “We continue with a very robust pipeline of not only joint ventures but also new acquisitions in new markets. That includes all three service lines.”