Cornerstone Healthcare, Inc., the hospice and home health subsidiary of The Ensign Group, Inc. (NASDAQ: ENSG), has acquired the assets of Tucson, Ariz.-based Agape Hospice and Palliative Care. Financial terms were not disclosed.
Agape will not rebrand as a result of this transaction and will retain staff and management. The hospice will become part of Ensign Group’s new spin-off company The Pennant Group following completion of the spin-off, which the company expects to happen in the fourth quarter of this year.
Pennant will include 61 home health and hospice agencies, 51 senior living operations, and mobile diagnostics and lab operations located across 13 states, with 23 of the senior living assets subject to leases with third-party landlords, as well as mobile diagnostic services and clinical laboratory operations. Pennant will also operate 28 senior living communities pursuant to a new, long-term triple-net leases with Ensign subsidiaries.
“This acquisition deepens our presence in Arizona where we have a strong cluster of high performing operations,” said Ensign Group CEO Barry Port. “Agape Hospice’s quality clinical product and excellent financial outcomes make it a perfect partner for our facilities and operations in the area.”
The Arizona market is becoming increasingly important to hospice companies due to the state’s evolving demographics. Currently, 17.5% of the state’s nearly 7.2 million residents are age 65 or older, according to the U.S. Census Bureau. By 2050 that number is expected to rise to 21%, according to the Arizona Department of Health Services (ADHS).
Between 2010 and 2015 ADHS anticipates that the number of Medicare-age residents in the state will increase 174% and that the number of seniors older than 85 will quadruple from 2010 levels.
Nearly 65% of Medicare beneficiaries who died in hospice nationwide during 2017 were 80 or older.
Hospice utilization also runs high in the state. In 2017, Arizona had the second-highest number of Medicare decedents who died in hospice at 59.2%, behind only Utah at 59.4%, according to the National Hospice & Palliative Care Organization.
Prior to the acquisition, Agape was a family-owned business operating from a home office.
“We founded Agape Hospice six years ago with the goal of working together with our children to improve the quality of care in our community for our seniors and others at the end of their lives,” said Tammy Burns, co-founder of Agape Hospice and Palliative Care. “The nature of health care and hospice is changing rapidly, and we believe Cornerstone Healthcare is in a great position to continue the caring tradition of Agape Hospice.”
In separate transactions, Ensign Group also recently acquired acquired the operations of Mainplace Senior Living, a 91-unit assisted living community in Orange, California, as well as the real estate and operations of The Terrace at Mt. Ogden, a 114-bed skilled nursing facility in Ogden, Utah.
The company indicated in a second-quarter earnings conference call that it plans to pursue further acquisitions in hospice, home health and other business lines.
“Even though we’ve had a solid year on the acquisition front so far, the deals we have completed to date are not representative of the number of attractive opportunities that are available to us,” said Chad Keetch, Ensign’s chief investment officer. “Our pipeline is as full as ever, but we have intentionally kept plenty of dry powder on hand for what we believe will be an increasingly more attractive buyer’s market. We are in the process of evaluating dozens of opportunities and expect to announce more deals in the third and fourth quarters.”