Private Equity Investment in Hospice Hits All-Time High, Valuations Rising

Private equity interest in the hospice sector has been gaining momentum in recent years, raising the stakes in hospice deals and stepping up competition for acquisition targets. Private equity transactions and an influx of new deals during 2021 could drive up hospice valuations that have already reached record highs.

The hospice market remained extremely active throughout 2020 and early 2021, despite some transaction delays brought on by COVID-19 headwinds. Private equity hospice transactions rose nearly 25% between 2011 to 2020, according to a recent industry transaction report that M&A advisory firm The Braff Group shared with Hospice News. Multiples have also reached all-time highs across all home health care sectors, including hospice, according to Mark Kulik, managing director at The Braff Group.

“Hospice did the highest number of transactions on record, even during a pandemic, relative to prior years. This isn’t just a one-year phenomenon,” Kulik told Hospice News. “This demand has been growing for many years back-to-back. The value to the marketplace is significant when you see more and more buyers stepping up to pay enhanced value or valuations for businesses, and that’s causing more transactions to occur.”


The past year has seen some high-profile transactions. Last year the Chicago-based private equity firm The Vistria Group completed the sale of St. Croix Hospice to affiliate investment company H.I.G. Capital for an undisclosed amount. H.I.G. Capital’s portfolio includes more than 100 companies with combined sales in excess of $30 billion.

Headquartered in Minnesota, St. Croix Hospice has a substantial Midwestern footprint across six states. The company is on a strong growth trajectory through a number of its own acquisitions during 2019 and 2020, as well as several de novos.

The market has also been hot during the early months of 2021, as evidenced by the acquisition of Brookdale Senior Living’s (NYSE: BKD) home health and hospices operations by HCA Healthcare (NYSE: HCA), a transaction expected to spur speedy growth for that business segment. Brookdale entered into a definitive agreement to sell an 80% stake in its health care services segment to HCA for $400 million.


These large-scale transactions indicate important industry-wide trends in hospice that have been accelerating in recent years, and they could have a ripple effect on valuations.

“Any dollar of profit that a hospice can generate under their ownership becomes that much more valuable, because you’re getting a higher valuation for the same of profitability,” Kulik told Hospice News. “Hospice is at the highest end of the valuation spectrum.”

Valuations for similar-size organizations in sectors like home health care would not reach the same levels that industry observers are seeing for hospices, according to Kulik.

Other firms are seeing similar trends. Husch Blackwell’s Hospice & Palliative Care team indicated that they had participated in transactions totaling several hundreds of millions of dollars in 2020..

Factors driving up price tags include increasing hospice utilization, a growing desire among the public to receive care in the home, the boom in telehealth resulting from the pandemic and increasing recognition of the cost-savings generated by hospices for the health care system, according to Kulik.

Rising hospice utilization rates are also whetting the appetites of private equity investors. About 51% of all Medicare decedents in 2019 were enrolled in hospice at the time of their death, according to the Medicare Payment Advisory Commission. This reflects a slow but steady rise from 50.1% in 2018 and 48.2% in 2017.

“Throughout the pandemic, the hospice space has seen continued interest in the deal markets, particularly from financial buyers and the private equity industry,” said Meg Pekarske, health care and hospice law attorney at Husch Blackwell and chair of its hospice and palliative care practice group. “Some of these buyers are new to the hospice space and are looking to diversify their holdings.”

Patient demographics represent one of the largest factors driving private equity hospice activity. The U.S. Census Bureau reported in 2018 that the population of adults 65 and older will make up roughly 12% of the projected total world population by 2030, roughly 1 billion people. The bureau projected those numbers to grow to 17%, or 1.6 billion people, by 2050.

“The reasons relative to the demand for the hospice service are compelling,” Kulik told Hospice News. “You’ve got some real drivers to the demand and to the size of the marketplace going forward, and that’s interesting to investors, because very few times can you guarantee that there’s going to be a given demand for something.”

Companies featured in this article:

, , , , , , ,