Empath Health, Stratum Health Merger Moving Forward

Post-acute care providers Empath Health and Stratum Health have received approval to merge from their boards of directors, clearing the way for the deal to close. Regulatory approval is pending and is expected to come through in Jan. 2021.

Empath and Stratum are parent companies of Suncoast Hospice and Tidewell hospice, respectively. Their merged enterprise will provide hospice, and private duty and skilled home health care, physician services, palliative care, primary care, a PACE program and an HIV medical clinic. The combined company will include approximately 2,000 employees and as many as 4,000 volunteers with an estimated gross revenue of $300 million annually.

“It’s absolutely critical for hospices and palliative care organizations to really re-examine their mission and their vision to make sure that they are prepared for the environment that the future holds,” Rafael Sciullo, president and CEO of Empath Health, told Hospice News. “[Stratum Health President and CEO Jonathan Fleece] and I began that discussion over two years ago, when we were really beginning to see signs in the environment that would pose challenges for our organizations if we remained the same. That really was the driving force [behind the merger].”


Among the challenges Empath and Stratum leaders perceived was the forthcoming value-based insurance design model demonstration to test hospice within Medicare Advantage, Fleece told Hospice News. Often called the Medicare Advantage hospice carve-in, the demonstration will begin in January of next year. Building company-wide efficiencies will be critical to success in that program, particularly in light of payments that may be less than what providers currently receive through the Medicare Hospice Benefit.

While the Medicare benefit pays a per diem rate for each patient, providers must negotiate rates with payers in the Advantage program. Health plans tend to push for the lowest rates they can, positing that they will make up the difference through increased volume.

In preparation for the merger, the two companies established a joint Mission Services Organization that combined their resources for administrative support services, such as finance, human resources, IT, marketing and other functions, thus building greater efficiency into their system.


Combining the companies’ workforces was also an impetus to pursue the merger amid ongoing industry-wide staff shortages. 

Hospice leaders identified staffing shortages as their top concern moving into 2020 on a Hospice News survey earlier this year. More than 26% of 300 respondents anticipated staffing as their greatest challenge, outweighing concerns about increased competition in the hospice space and new payment models. (The survey took place prior to the onset of the COVID-19 pandemic.)

Shortages are expected to worsen during the next 25 years, with research indicating that supply of a hospice and palliative care specialized workforce will be exceeded by demand of a growing patient population.

“We felt like coming together for best practices and greater efficiencies certainly would prepare us to be a strong participant in the Medicare Advantage,” Fleece said. “Especially because of our geographic territorial alignment, we’ll be able to definitely look at developing some programs to not only recruit additional staff, but focus on retention and workforce engagement.” 

Empath and Stratum serve adjacent regions in the state of Florida.

Empath Health’s Sciullo will be the first CEO of the combined company, with Fleece as president of the new entity. Fleece is expected to succeed Sciullo as CEO after he retires in 2023, post-integration.

Major priorities as the companies join forces will include geographic expansion as well as development of new service lines in addition to growing their existing programs. Their agenda for 2021 and beyond will include expanding their PACE programs, home health and palliative care operations, as well as services to address social determinants of health, among other initiatives. The ultimate goal is to create an integrated continuum of chronic care management.

“In meeting with managed care organizations and other stakeholders, what’s coming is a real strong focus on chronic care management, and we want to be sure that we’re prepared to do that,” Sciullo said. “With our integrated network of care — the strong focus on home health, on private duty and on HIV care  — all of those are really providing elements for us to be prepared to do chronic care management in the way that we feel that it should be provided.”

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