LHC Group (NASDAQ: LHCG) is determined to expand the scale of its hospice services with heavy emphasis on acquisitions. The company has earmarked $421.5 million for acquisitions during 2021 with 84% of those dollars designated for hospice transactions.
LHC Group’s acquisition strategy is focused on co-locating new hospice operations with their existing home health locations, though the company is also poise to expand into new markets. This is a top strategic focus for the home health and hospice provider.
“We’ve intentionally executed on a hospice differentiation strategy for several years by putting in place the co-location strategy and making operational and leadership changes to improve the business,”said LHC Group President Joshua Proffitt in an earnings conference call. “This strategy created a solid foundation that we can now layer on additional growth and pursue new hospice opportunities as a major priority.”
Currently 77 of LHC Group’s 120 hospice operations are co-located with home health, or 64%. This is up from 63 locations in 2019 and 58 in 2018. On average, about 15% of LHC Group’s home health census gets discharged to hospice annually.
Financial strain on smaller providers as they cope with COVID-19 and contend with potentially complex transitions to value-based payment models could lead to more acquisition opportunities for larger players like LHC Group, Proffitt indicated.
The company has a number of hospice deals in its active pipeline, meaning discussions of a purchase have begun or are in the due diligence stage, including some potentially large transactions.
LHC Group is no stranger to the hospice M&A market. During the second half of 2020 alone the company acquired five hospice organization, including Santa Rita Hospice in Colorado, Grace Hospice in Oklahoma, and East Valley Hospice and East Valley Palliative Care in Arizona. The company also acquired Santa Rosa Hospice in Texas with its joint venture partner CHRISTUS Health.
LHC Group’s hospice segment brought in $62.4 million during the fourth quarter of 2020, up from $58.1 million in the prior year’s quarter. For the full-year 2020, the segment earned $243.8 million, up from nearly $227 million in 2019.
In addition to acquisitions, the company foresees about 8% growth in hospice same-store admissions during 2021, continuing a trend of steady organic growth. Hospice admissions rose 10.9% during the fourth quarter of 2020 compared to the prior year’s quarter and rose 4.6% sequentially from Q3 of last year.
“We have the ability to bring all of our core services to bear to provide the access to the right level of care and to do so across the national footprint,” Proffitt said. “If there ever was a time to look ahead and see more room to grow and a wealth of organic, inorganic and strategic growth opportunities, it’s today.”