Acquisitions Spur Amedisys’ Hospice Growth

Amedisys Inc. (NASDAQ: AMED) is continuing to use acquisitions to build up its hospice footprint as the company braces for disruption to its home health care business stemming from the forthcoming transition to the patient driven groupings model (PDGM). 

In the third quarter of 2019 Amedisys hospice segment revenue rose to $162 million, a 57% increase over Q3 2018. The segment’s EBITDA rose 47%. Major contributors to these results were the acquisitions of Compassionate Care Hospice (CCH) and Tulsa, Okla.-based RoseRock Healthcare.

CCH in particular has boosted the company’s third quarter performance due to generation of additional revenues as well as cost controls in the integration process.


“Thus far CCH integration has exceeded our internal modeling expectations, and we expect to continue that trend of exceeding projections entering 2020,” Amedisys President and CEO Paul Kusserow said in an earnings conference call. “As you will recall when we acquired the asset, we laid out a margin improvement and growth plan that would require initial investment in the business and cause some initial disruption as we harvest synergies. Through thoughtful planning we have been able to mitigate some of the anticipated negative impact; 2020 will be a year of continued focus on ramping the business development staff within the CCH care centers and further margin optimization as we work to make the growth and margin profile of CCH mirror the Amedisys legacy hospice business.”

Amedisys holds 100% ownership of CCH, obtained for fixed price of $340 million. The acquisition boosted third-quarter earnings for the hospice segment by $46 million in revenue and $7 million of EBITDA. Year to date, CCH has brought in $123 million in revenue and $13.6 million in consolidated EBITDA.

Given uncertainties in the home health care market as a result of PDGM, Amedisys is continuing to double down on hospice growth, particularly through acquisitions.


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.

“We are continuing to build and buy in hospice. We continue to work a full hospice tuck-in pipeline while streamlining our internal acquisition integration and absorption process as we wait for industry disruption in home health early next year,” Kusserow said. “We will buy opportunistically in home health once we see what PDGM looks like and build networks to expand our personal care coverage as well as innovate to allow more people to stay in their homes.”

The hospice mergers & acquisitions market continues to be robust. Fourteen hospice transactions took place during the second quarter of 2019, up from eight hospice-related acquisitions during the first quarter, according to a report from M&A advisory firm Mertz-Taggart.

The hospice merger and acquisitions market has been thriving in recent years, with several top providers such as Amedisys, LHC Group, and others prioritizing expansion of their hospice footprint through acquisitions.

The number of Q2 transactions outstrips the previous year’s activity; seven transactions occurring in the first quarter of 2018, followed by eight in the second quarter.

“Hospice will remain a hot space for the foreseeable future, though CMS did rebase payment rates for the four levels of hospice care in its Fiscal Year 2020 final rule,” the Mertz Taggart report indicated.

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