Hospice and home health provider LHC Group (NASDAQ: LHCG) is doubling down on hospice expansion through the last half of the year. Having voiced its intention to double its national hospice footprint last December, the company expects to cast a wider net in 2020 through acquisitions with joint venture partners.
Similar to many providers across the country, LHC Group was impacted by COVID-19 headwinds as 2020’s second quarter began, but saw improvements as the summer months heated up.
“Our proven long-standing strategy of partnering with hospitals and health systems to be their trusted solution for home health and hospice services positioned us well in our nation’s response to the COVID pandemic,” said LHC Group’s CEO Keith Myers in an earnings call. “During COVID-19, our existing joint venture partners more fully leveraged our capabilities as an integral part of the health care delivery team than ever before. The evidence in the value we have been demonstrating to all stakeholders and communities we serve throughout our country can be seen in the reacceleration of admissions and organic growth since our mid April low point.”
While the pace of some deals were slowed by the pandemic, LHC Group anticipates picking up steam with strong M&A activity as 2020 progresses. The company expects branching further into the hospice space despite the looming economic downturn during the coronavirus pandemic. On the home health side of its business, LHC Group is expanding through a joint venture with Orlando Health, a network of community and specialty hospitals with 450 locations spanning nine counties in Florida. LHC Group expects the joint venture to bring in approximately $3.5 million in incremental annualized revenue.
“We expect an acceleration in M&A activity in new hospital joint ventures, hospice acquisitions, and accelerate accelerated consolidation in the home health industry,” said Myers. “We fully expect even greater joint venture interest from hospitals and health systems in the future. Our pipeline of potential M&A growth opportunities is well-balanced between home health and hospice. Our M&A pipeline combined with our historic organic growth opportunity we see ahead from home health market absorption has us optimistic and bullish on both organic and M&A growth opportunities for the remainder of 2020 and beyond.”
LHC Group’s hospice segment brought in more than $61 million during the spring quarter of 2020, representing roughly 13% of the company’s overall revenue with a nearly $6 million jump from the previous year’s quarter.
“The bottom line remains robust with our in-house corporate development team remaining laser focused on acquisition and joint venture [acquisition] opportunities across each of our home health and our hospice segments,” said Josh Proffitt, who was recently named LHC Group president. “To the extent that our partners are able to focus on this aspect of their business, our pace is expected to pick back up through the back half of this year and into the next.”
LHC Group provides care in 35 states and reaches 60% of the U.S. senior population aged 65 and older. LHC Group’s expanded hospice imprint could indicate an upward trajectory for the industry at large, drawing focus on the value of end-of-life care and attracting investor buy-in. With recent research illustrating that earlier hospice can lead to savings per patient, extending branches through collaborative joint venture acquisitions could build stronger ties to referral partners throughout the health care space.