LHC Group Stays Bullish on Hospice Expansion

Home health and hospice provider LHC Group (NASDAQ: LHCG) is determined to cast a larger shadow on the hospice space this year and next, largely through acquisitions with joint venture partners.

The company last December voiced its intention to double its hospice footprint nationally within 12 to 18 months, with a focus on co-locating hospice operations in markets where they already have an established home health presence. These plans have not slowed down amid the COVID-19 pandemic.

“We’re very bullish on hospice. I hope you heard us say that clearly. In home health, we see a lot of opportunity for consolidation in markets where we already have a footprint so we’re still looking for opportunities in home health, but the majority of our efforts — let’s call it two-thirds/one-third — now are being spent on hospice and growing that service line,” said LHC Group Chairman and CEO Keith Myers said in a presentation at the Bank of America Securities 2020 Virtual Health Care Conference.

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During 2019 and to date in 2020, the company purchased 27 home health, 11 hospice, three home- and community-based services locations and one long term care acute hospital across 13 states and the District of Columbia. Most of these transactions involved hospital joint ventures.

LHC Group engages in M&A primarily through joint ventures with hospitals and health systems, which has been the company’s most active growth front. Though the JV M&A strategy is not unique among hospice businesses, their approach is rare among publicly traded hospice and home health providers.

LHC Group kicked off the year with two hospice acquisitions. The company and its joint venture partner Ochsner Health System completed the acquisition of five Egan Home Health and Hospice locations in Louisiana, as well as the purchase of Bryant, Ark.-based Saline Memorial Hospice with its joint venture partner LifePoint Health. Financial terms for both transactions were not disclosed.

LHC Group and Ochsner launched their joint venture, called Southeast Louisiana HomeCare, in 2009. The partners expect to see the acquired locations to bring in nearly $16 million in revenue per year. The Saline Memorial acquisition with LifePoint is expected to yield $5.4 million annually.

Two pillars support the company’s push on hospice growth, demographic tailwinds stemming from aging baby boomers driving up demand for those services, as well as disruption in the home health space due to implementation of the patient-driven groupings model (PDGM).

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.

“The conversion of PDGM and our need to focus operational home health, and then the disruption/opportunity resulting from COVID, really causes us to focus more on growing home health organically and perfecting the PDGM model, and for 2020 and probably early 2021 focus more intensely on hospice,” Myers said.

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