Hospice Saw Largest 2019 M&A Deals in Care-at-Home Sector

Hospice led the charge on mergers and acquisitions during 2019. Dollar amounts for hospice transactions surpassed those in similar markets such as home health care, even though fewer deals occurred last year in the hospice, home health care and home care spaces than in 2018, according to a new quarterly M&A report from advisory firm Mertz Taggart. 

About 101 transactions occurred in those sectors combined during 2019, a 20% drop from the 127 that happened during 2018. Of those, 42 involved hospice, compared to 36 for home care and 42 for home health deals.

“Buyers weren’t as active as 2018 when looking at the care-at-home sub-industries combined,” said Mertz Taggart Managing Partner Cory Mertz “But 2019 was still a big year, particularly for hospice deals. The 42 hospice-related transactions we tracked marked a record year, and we see that trend continuing in the near future for many reasons.”

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Among those reasons are strong demographic tailwinds as the population ages, as well as greater awareness and acceptance of hospice care among the public. Utilization is also rising, exceeding 50% among Medicare decedents in 2018, the highest rate recorded for any year to date. 

Also contributing to the volume of hospice transactions is disruption in the home health care space as providers wait to gauge the fallout of the Patient-Driven Groupings Model (PDGM) payment system from the U.S. Centers for Medicare & Medicaid Services (CMS). Some of the larger companies that provide both hospice and home health pivoted towards hospice while keeping their eyes on potential disruption in home health.

Effective Jan. 1, 2020 Medicare began 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.

The largest transactions in the sector during the fourth quarter of 2019 were in the hospice space, according to Mertz Taggart.

The biggest of these sales was the $1 billion purchase of Tennessee-based hospice provider Compassus by private equity firm Towerbrook Capital Partners in collaboration with health system Ascension Health. 

Other significant transactions include Addus HomeCare Corp.’s (NASDAQ: ADUS) $130 million purchase of Hospice Partners of America. Hospice Partners of America operates 21 hospice locations that serve a combined average daily census of 1,000 patients throughout Idaho, Kansas, Missouri, Oregon, Texas and Virginia.

Kicking off Quarter 1 2020, Amedisys Inc. (NASDAQ: AMED) on Jan. 1 bought Asana Hospice for an undisclosed sum. 

Huge companies with national reach were not the only organizations that were active in the M&A market during 2019.

Texas-based Traditions Health in November acquired Pathways Hospice in Arizona and near the end of the year purchased Guiding Hospice

Mansfield, Texas-based home health provider AngMar Medical Holdings Inc., obtained its first hospice operation in October. Financial terms were not disclosed, and the name of the purchased hospice was kept confidential. The location will operate under AngMar’s new Angels Care Hospice brand. 

Texas-based Three Oaks Hospice acquired three hospice agencies in September just months after opening its doors. The purchase of Total Hospice & Palliative Care, ABS Palliative and Hospice Care and Fellowship Hospice was backed by a $21 million investment by private equity firms from Granite Growth Health Partners, Health Velocity Capital and Petra Capital Partners. Financial terms of the three acquisitions were not disclosed.

The hospice M&A market is expected to continue burgeoning through 2020.

“There has been no evidence of a slowdown in interest either by strategics or financial investors in the space, driven by the aging U.S. population, the increased demand and need for these services, and the associated cost of these services compared with other end-of-life care options,” Benjamin Bogan, partner at Stoneridge Partners told Hospice News in December.  “I anticipate this market will stay hot for 2020 and beyond.”

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