Encompass Health Corp. (NYSE: EHC) has agreed to acquire Frontier Home Health & Hospice for an undisclosed sum. The transaction will bring 11 hospice and nine home health locations into the Encompass footprint.
Frontier was founded in Montana in 2008 and has since expanded to Alaska, Colorado, Washington and Wyoming. The company earned nearly $36 million during 2020 and employs 375 staff members. The purchase, expected to close during the second quarter of this year, comes at a time when Encompass is considering a repositioning of its home health and hospice business, including a potential spin off or sale.
“Since our founding in 2008, employees of Frontier Home Health and Hospice have provided compassionate, quality care in the markets we serve,” said George Mandes, Frontier’s founder and president. “We know we have found the best organization in Encompass Health to build on our legacy as they are widely known as the industry leader in home health and hospice.”
Hospice utilization in the states that comprise Frontier’s footprint tends to run below 2018’s national average of 50.3%, with the exception of Colorado where 53.2% of Medicare decedents elected hospice that year. Alaska has the lowest utilization in the nation at 22.8%.
Encompass is making the purchase with cash on hand and a draw on its revolving credit facility. The company cited Frontier’s growth trajectory and track record on patient outcomes as factors in their decision to buy.
“The main factors that attracted Encompass Health to Frontier Home Health and Hospice were the increase of scale and density in mountain west states,” Hillary Carnel, associate director of public relations at Encompass, told Hospice News. “As an added convenience, the Frontier team was already a user of Homecare Homebase, which will allow for an easier integration for the employees.”
Encompass is moving forward with its established growth targets, despite the forthcoming repositioning. The company is seeking to boost admissions as the pandemic drives more care into the home and away from institutional settings. Both hospice and home health acquisitions remain on the company’s radar, CEO Mark Tarr indicated earlier this year in a talk at the Barclay’s Global Healthcare Conference.
The 2019 acquisition of privately owned Alacare Home Health & Hospice for $217.5 million made Encompass Health the 10th largest hospice provider in the United States. Encompass provides both facility-based and home-based patient care through inpatient rehabilitation hospitals, home health agencies and hospice. The company operates 137 hospitals, 242 home health locations, and 83 hospice locations in 39 states and Puerto Rico.
“This will be another active year for home health and hospice as well. This is a year where we would say that the reimbursement landscape has greater visibility in recent history,” Tarr said at Barclay’s. “We’ll continue to focus on capturing market share, both organically and through industry consolidation.”
The Encompass hospice segment brought in $53.6 million in the fourth quarter of 2020, up from $50.8 million in the prior year’s quarter. Adjusted EBITDA rose 11% to $55.5 million, exceeding Q4 2019’s $49.6 million. April Anthony, CEO of Home Health and Hospice at Encompass will be stepping down in mid-June of this year. She has not yet indicated what she will do following her departure.