LHC Group Inc. (NASDAQ: LHCG) plans to aggressively grow its hospice business through mergers and acquisitions and de novos, with a focus on co-locating hospice operations in markets where they already have an established home health presence, the company’s Chief Financial Officer Josh Proffitt told attendees at the Baird 2019 Healthcare Conference in New York.
Bi-locating and tri-locating hospice with other holdings allows the company to establish a relationship with the patient that can extend throughout the continuum of care from home health and home- and community-based services to hospice, when appropriate.
“From a strategic standpoint, when we think about the provision of health care and the delivery of health care in the home environment — owning the home, so to speak — you have this longitudinal relationship with the patient that if you could either bi-locate or tri-locate — depending on the market dynamics — each of home health, hospice and community-based services, or any two of those three in the same market, you have a similar brand, and you have that stickiness with the referral community,” Proffitt said. “Maybe they need a home health episode of care, and maybe they are independent but could still use help with activities that we provide through home- and community-based services. Then that’s a relationship, and you see them through all the way to the end of life for some palliative care and then into hospice.”
Hospice currently represents 10% of the company’s business. LHC Group’s hospice portfolio includes 112 hospice locations in 35 states. Net service revenue in the second quarter of this year 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.
LHC Group has targeted an additional 130 markets for hospice expansion in areas where they already have a robust home health presence, the company indicated in an earnings conference call earlier this year.
“That’s not only the right answer clinically for the patient, but it’s the right answer for the system because you can reduce a lot of institutional stays and avoidable admissions into the hospital and other setting,” Proffitt said. “We are are 10% hospice and 10% home- and community-based services, and strategically we are wanting to grow each of those in a really meaningful way in the years to come.”
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.
LHC Group recently 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.
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.