A 9.6% percent increase in admissions drove strong second quarter earnings results for LHC Group’s (NASDAQ: LHCG) hospice segment.
The segment saw the highest rate of admissions growth among the company’s service lines during the second quarter, exceeding the home health segment’s 9.1% rise.
LHC Group currently operates 104 hospice locations nationwide, representing 10.2% of the company’s business. Net service revenue for the company’s hospice segment totaled nearly $55.1 million during the second quarter, up from close to $50.1 million in Q2 2018.
The company attributed the gains in part to a recent restructuring of its hospice segment.
“In hospice in particular we are clearly seeing the benefits from the sales and operational leadership changes that we made and discussed last year,” Don Selly, president and chief operations officer for LHC Group, said in an earnings call.
The company during the past year decided to split its hospice operations into two separate geographical and operational divisions, each led by a division president of operations and sales.
“These changes, coupled with the strength of leadership at and within the division levels, have led to improved operating efficiencies and overall growth and revenue improvements,” Mark Willis, senior vice president and chief communications officer for LHC Group, told Hospice News. “We expect these improvements to continue as we grow and add more hospice agencies and operations into the LHC Group family via our [joint venture] strategy and acquisition efforts.”
Hospice admissions in the second quarter rose to 4,637 patients compared to 4,528 during Q2 2018. The reported admissions increase does not include patients engaged through the company’s 2018 merger with Louisville, Ky.-based hospice and home health provider Almost Family.
The Almost Family Merger completed in April 2018 in an all-stock merger of equals transaction with an implied value of $2.4 billion. Cost synergies resulting from the merger totaled $7.8 million during the second quarter of 2019, bringing the annual run rate to $31.2 million.
LHC Group has seen robust M&A activity thus far this year, having completed a joint venture with Pennsylvania-based Geisinger Home Health and Hospice and AtlantiCare Home Health and Hospice on April 1 and June 1, respectively.
Last week, LHC Group acquired three three home health and hospice locations in Jefferson City and Mexico, Mo., via a joint venture with Capital Region Medical Center. These acquisitions represent approximately $3.5 million in annualized revenue.
The company intends to pursue further acquisitions through the remainder of 2019. Future transactions will likely include some activity in the hospice space as the company has indicated it plans to aggressively grow its hospice business, particularly in markets where they already have a significant home health presence.
“Our opportunity pipeline managed by our in-house corporate development team remains robust,” CFO Josh Proffitt said in a second quarter earnings conference call. “We have the infrastructure in-house to capitalize on increased industry consolidation likely on the rise in 2020, particularly among the smaller providers.”
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.
M&A is not the only growth strategy that LHC Group is pursuing this year. The company has opened five de novos thus far in 2019, two home health and three home- and community-based services locations, with 30 more de novos in the pipeline for the year. According to Proffitt, these will include three or four hospices.
“We continue our strategic growth efforts not only through same store organic growth and new joint ventures and acquisitions but also the opening and the planning to open additional denovos from across the portfolio,” Proffitt said.