Amedisys, Inc. (NASDAQ: AMED) is seeing its hospice and home health growth rates tripling based on rising patient census and a robust acquisitions pipeline. Hospice remains at the core of the company’s M&A strategy; Amedisys expects to see activity pick up in the home health sector as well this year.
Baton Rouge, La.-based Amedisys last week entered a definitive agreement to acquire the hospice and home health operations of the Nebraska-based nonprofit Visiting Nurse Association (VNA) for an undisclosed sum. Financial terms were undisclosed.
Despite rising costs of hospice assets as valuations hit an all-time high, hospice remains a strong focus of the Amedisys M&A pipeline, according to CEO Paul Kusserow, who spoke during the company’s presentation at the recent 2021 RBC Capital Markets Global Healthcare Conference.
“We were kind of surprised for the last couple of years when we were out buying hospice assets. We bought four assets for over $600 million and bought them at really good prices. The deals we’ve been seeing now are crazy — people are paying huge prices for just-okay assets,” said Kusserow. “We doubled our hospice business organically; and then we found that we could proprietarily go out and find assets and pay decent prices for them.”
Amedisys is benefitting from demographic tailwinds, owing a portion of its growth to a swelling baby boomer population, according to Kusserow.
About 10,000 people in the United States become Medicare eligible every day, a trend expected to continue through the next decade, according to the Kaiser Family Foundation. Close to 80% of that population will suffer from at least one chronic or serious illness.
Hospice utilization is also rising as awareness and understanding of those services improves among the general public. A record number of patients elected hospice in 2018, according to a report from Atlanta-based research firm Excel Health. Hospice utilization among Medicare beneficiaries topped 50.3% in 2018 and hit slightly more than 51% in 2019, according to the Medicare Payment Advisory Commission, the highest rate since the 1983 inception of the Medicare Hospice Benefit.
Amedisys earned more than $537 million in revenue during the first quarter of 2021, up from nearly $491.7 million in Q1 2020. The company’s hospice business accounted for $191.5 million in Q1, marking an increase from $169.4 million during the prior year’s quarter.
During 2020 and early 2021 the company has honed in on hospice acquisition targets rather than home health. This is largely due to greater complexity in integrating purchased assets on the home health side and anticipated disruption due to the Patient Driven Groupings Model (PDGM), according to Kusserow. While Amedisys has home health assets in its pipeline, the process to complete those deals can take a longer amount of time.
Medicare began reimbursing home health care providers through PDGM effective Jan. 1 that year. The model classifies patients into payment categories based on clinical characteristics and other information.
“Certainly hospice is attractive when we look at it from a strong economics and performance perspective. The reimbursement was fairly stable coming out of even in 2019 in a quasi-rebasing, but it was really stable,” said Scott Ginn, Amedisys’ executive vice president and chief financial officer. “Hospice from an integration and diligence perspective is less complicated, there’s fewer disciplines when you roll it in. That’s why you’re still seeing some strong interest out there.”