LHC Group to Purchase Heart of Hospice from EPI Group

LHC Group (NASDAQ: LHCG) has agreed to acquire Heart of Hospice from the family-owned investment firm Evening Post Industries (EPI) Group for an undisclosed amount. Heart of Hospice has a 16-location footprint across five states.

Heart of Hospice will not rebrand following the acquisition. The hospice operates in Arkansas, Louisiana, Mississippi, Oklahoma and South Carolina. LHC Group expects to earn $92.5 million in annual revenue from the transaction, which will likely close during the third quarter of 2021.

Hospice expansion is a cornerstone of LHC Group’s growth strategy. Among the company’s goals is to increase the number of hospice locations in markets where they already have home health care operations. LHC Group has earmarked $502 million for acquisitions this year, with 71% of those dollars weighted toward hospice deals. The company announced the impending purchase of Heart ‘N Home Hospice in Idaho last week. Financial terms were undisclosed.


“Hospice is competitive, but we look at it a little bit differently. We’re building out a continuum of care,” LHC Group Chairman and CEO Keith Myers said in a recent earnings conference call. “We know that we have volume to bring to the table from our home health operations and from hospital partners. Multiples are high, and in some markets we can model out the combination and make it work nicely for us.”

Multiples in the hospice and home care space reached a record 26x in 2020, according to a report by PwC’s Health Research Institute. Anecdotal reports from hospice stakeholders have suggested that those numbers have gone even higher during 2021, though the price tags for many of these transactions are often kept confidential. 

Between the Heart ‘N Home deal and this new acquisition, LHC Group will accumulate a combined $135 million in annual revenue. In a research brief shared with Hospice News, Analyst Scott Fidel of Stephens raised the $269 million 2021 revenue forecast for LHC Group’s hospice segment by approximately 50%. 


“On a consolidated basis, these recent acquisitions should increase 2021 annualized [revenues] by ~5.5%,” Fidel wrote. “We expect [LHC Group] will continue to execute on its existing pipeline and have increasing confidence they will exceed their target for $150 million to $200 million in acquired revenues this year based on recent deal flow.”

Heart of Hospice last December launched two subsidiaries — Palliative Care at Heart and Supportive Care at Heart, organized under a new parent brand called Care at Heart. The company also was quick to respond to the COVID-19 pandemic last year. Heart of Hospice established a new temporary inpatient unit in New Orleans for COVID patients with only eight days to plan and execute the program. The company received approval from the State of Louisiana to make that unit permanent last July. 

Despite LHC Group’s current and anticipated growth, the company does face some headwinds, according to Fidel from Stephens. This includes reimbursement changes on the home health side as a result of the Patient Driven Groupings Model (PDGM) payment system. 

Another key consideration is ongoing industry-wide staffing shortages. Hospices nationwide have seen rising turnover during the pandemic, with exacerbated existing workforce recruitment problems. More than 35% of hospice leaders surveyed by Hospice News earlier this year cited staffing shortages as a top concern for their organizations, along with regaining access to patients in facilities.

A Colorado provider, Grand Ronde Hospital & Clinics, is closing down its hospice operations this month because they no longer have a sufficient number of staff to care for their patients.

In response to the shortage, LHC Group is undertaking a major recruitment and retention effort across its footprint. The company also recently invested $20 million in the University of Louisiana at Lafayette College of Nursing and Allied Health Professions to help rebuild the hospice workforce. 

“Shortages in qualified nurses and other health care professionals could increase [LHC Group’s] operating costs significantly or constrain the company’s ability to grow,” Fidel indicated in the Stephens report. “Notably, the availability of qualified nurses nationwide has declined in recent years and competition for these and other health care professionals has increased and, therefore, salary and benefit costs have risen accordingly.”

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