LHC Group (NASDAQ: LHCG) has entered into a definitive agreement to acquire two locations from Tucson, Ariz.-based hospice provider Casa de la Luz. Financial terms of the transaction were not disclosed.
Hospice acquisitions are a top strategic focus for LHC Group. Their primary strategy is to build up their hospice footprint in markets where they already have a home health presence, as is the case with Tucson. The company is also pursuing some expansion into new markets.
“This is an outstanding opportunity to continue the Casa legacy by offering enhanced and much-needed hospice services for patients and families in the Tucson region,” said Keith Myers, LHC Group chairman and CEO. “We look forward to bringing compassion and comfort, as well the high-quality level of care LHC Group is known for, to patients and their families facing tough decisions about end-of-life care.”
Transactions in their current M&A pipeline total more than $300 million in exclusive discussions. LHC Group has earmarked $502.5 million for acquisitions this year, with 71% of those dollars weighted towards hospice, the company revealed in its first quarter earnings conference call.
LHC Group expects nearly $23 million in annual revenues from its new Casa de la Luz assets. The acquired locations will retain their current brand.
Hospice utilization runs high in Arizona, which had the third highest rate among Medicare decedents in 2018 at 58.8%, according to the National Hospice & Palliative Care Organization. The national average that year was 50.3%. Arizona had the third highest rate of hospice utilization in 2018.
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.
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.
“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,” LHC Group President Joshua Proffitt said in an earnings call. “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.”