Private equity-backed Three Oaks Hospice has purchased Hospice Partners of Kansas for an undisclosed amount. The transaction marks the Texas-based company’s entry into the Kansas and Missouri markets.
During 2019, Three Oaks Hospice received more than $21 million in private equity backing from Granite Growth Health Partners, Health Velocity Capital and Petra Capital Partners. The company entered the hospice space in May of last year and almost immediately completed three acquisitions. Three Oaks has been on a strong growth trajectory ever since.
The Hospice Partners transaction includes three locations in Kansas and Missouri and will add a modest number to Three Oaks’ average daily census. The ability to expand its footprint into two new markets whetted the company’s appetite for the acquisition.
“It’s a pretty small portion of increase in our daily census, so it was really about reaching into the market and extending our footprint with three new locations. We learned pretty quickly through diligence that we really need to be in both Kansas and Missouri, so we can operate across Kansas City state lines and into Overland Park, Kan.,” Three Oaks CEO Andrea Bohannon told Hospice News. “That was important for us when this opportunity came up, and we were immediately able to reach into both states.”
Kansas was 12th in the nation in 2018 for hospice utilization among Medicare decedents at 53.3%. Missouri, at 50.2%, was 24th. The national average is slightly more than 50%.
In addition to Kansas and Missouri, Three Oaks operates in Texas and Illinois and provides more than 200,000 patient care days annually.
In May 2019, shortly after the hospice opened its doors, Three Oaks completed three transactions to acquire operations in Dallas, Fort Worth and San Antonio for undisclosed sums. The three purchased organizations — Total Hospice & Palliative Care, ABS Palliative and Hospice Care and Fellowship Hospice — increased the Three Oak’s referral network to more than 200 sources.
In February, Three Oaks acquired Peace Hospice & Palliative Care in Naperville, Ill., near Chicago. Financial terms were undisclosed. The company completed additional acquisitions in March and in June, and has three more in its pipeline to close before the end of 2020, Bohannon said.
Bohannan sees the Hospice Partners of Kansas deal as a potential springboard for further expansion, she told Hospice News.
“This particular opportunity was more opportunistic for us. [Hospice Partners] certainly has great caregivers that really know the marketplace. They were compliant [with law and regulations]. We like the size, because we typically will enter into markets that are a little smaller so that we have the opportunity to grow,” Bohannan said. “The size of the markets themselves was a factor, and they have a very good care team.”
Private-equity backed middle-market hospices have been the most active in the M&A space during 2020. Private-equity investors have been increasing interested in the hospice space in recent years, attracted by rising demand, the robust M&A market and demographic tailwinds.
“The private equity groups are coming to the forefront a little more than they were. It feels like the private equity piece is becoming more and more dynamic,” said Mike Moran, principal with Team M&A at American Healthcare Capital. “It confirms health care investments are a place where these financial firms want to be. There’s no shortage of money out there, and these firms need to invest it somewhere that brings great returns. It just solidifies how healthy the overall health care market is as an investment for these types of financial sponsors.”
Companies featured in this article:
ABS Palliative and Hospice Care, American Healthcare Capital, Fellowship Hospice, Granite Growth Health Partners, Health Velocity Capital, Hospice Partners of Kansas, Peace Hospice & Palliative Care, Petra Capital Partners, Three Oaks Hospice, Total Hospice & Palliative Care