Health System Investment in Hospice Unlikely to Become A Trend

Despite recent hospice and home-based care acquisitions involving health systems, such transactions are unlikely to become a common practice during 2021 and 2022. However, health systems are taking a closer look at companies that provide non-medical assistance to help seniors age in place. 

Firms that guide providers through the mergers and acquisitions processes are not seeing rising interest in hospice among health systems, which have historically avoided investments in home-based care.

“Hospitals traditionally haven’t done well running home health or hospice,” said Mark Kulik, managing director of M&A advisory firm The Braff Group. “It takes an operator dedicated to the space to know the nuances and have the efficiencies.”


According to Kulik, recent deals like HCA Healthcare’s (NYSE: HCA) purchase of an 80% stake in Brookdale Senior Living’s (NYSE: BKD) home health and hospice business aare unlikely to start a trend. Brookdale sold the stake to HCA for $400 million and will retain 20% ownership. 

When hospitals do pursue home health and hospice, they tend to do so through partnerships. A key example is LHC Group (NASDAQ: LHCG). The company has nearly 400 joint venture partnerships with hospitals, which have been a vehicle for growth. LHC Group has been very active in the M&A market in recent years, and many of those transactions were made in collaboration with their JV partners.

JV partnerships open doorways for LHC Group to continue leveraging its separate business lines and create a health care ecosystem focused on developing longitudinal relationships with patients and their families. Though the JV M&A strategy is not unique among hospice businesses, their approach is rare among publicly traded hospice and home health providers.


“We can look at LHC Group as proof,” Kulik told Hospice News. “That is evidence that hospital systems realize that they are not running [home-based care] efficiently, which is why they’re in the partnerships.”

The home care space may see greater health system investment among companies that provide non-medical services, according to Jim Moskal, a partner at the M&A advisory group Livingstone. This includes the recent acquisition of Senior Helpers by Advocate Aurora Enterprises for an undisclosed amount. 

Advocate Aurora Enterprises is a subsidiary of Advocate Aurora Health, one of the nation’s largest health systems. The company purchased Senior Helpers from Altaris Capital, a private equity firm which acquired the company for $125 million in 2016. Livingstone advised Advocate Aurora Enterprises during the transaction.

“Whether it’s health systems, skilled home health or hospice providers, people realize now that non-medical home care can absolutely be critical in managing patient populations with chronic diseases and improving outcomes,” Moskal told Hospice News. “The non-medical care piece is where you’re going to potentially see more health systems or other strategic buyers get into this space.” 

Among the factors driving this is the transition away from fee-for-service payment models toward value-based care, according to Moskal. Key considerations in value-based payment modes include improved patient outcomes, reducing costs and cutting the number of hospital readmissions. More players in the health care space are realizing that addressing non-medical needs such as social determinants of health can contribute to those goals and help seniors age in place. 

While health system hospice deals may not become the norm, the overall market continues to thrive. Among the various segments of the health care industry, hospice continues to be the most active, even as valuations soar and multiples continue to hit record highs.

The hospice, home health and home care sector saw a significant uptick in merger and acquisition transactions during the fourth quarter of 2020. About 51 deals took place in Q4 among those industries, according to a quarterly report by M&A advisory firm Mertz Taggart.

Data from Mertz Taggart indicated that at least 25 hospice transactions occurred in Q4 2020, exceeding the 19 reported for the third quarter. At least 15 hospice deals have occurred per quarter since the end of 2019, the firm reported.

“The demand is there, and society’s attitudes about hospice are becoming more accepting,” Moskal said. “From an M&A perspective, it feels like a little bit of a land grab now. There’s only so many hospice assets, and there’s been a ton of interest from private equity firms and strategic buyers.”

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