LHC Group, Inc. (NASDAQ: LHCG) has entered an agreement to acquire three home health, hospice, and palliative care companies. These include MSA Hospice in Indiana, Ashley County Medical Center Home Health in Arkansas, and Virginia-based Cavalier Healthcare Services. The purchase prices for each of these transactions were undisclosed.
LHC Group expects the deals to close Aug. 1. The company anticipates these assets to boost their bottom line by $8 million per year. These transactions will not materially affect LHC Groups 2021 diluted earnings per share, the company indicated.
“Hospice is competitive, but we look at it a little bit differently. We’re building out a continuum of care,” said LHC Group Chairman and CEO Keith Myers in an earnings 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.”
During the 12-month period ending May 15 of this year, hospice and home health multiples reached 26.2x compared to 16.1x for the overall health care sector, according to a report from PricewaterhouseCoopers (PwC).
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.
Out of LHC Group’s 120 hospice operations, 81 are co-located with home health, or 68%, up from 77 locations in 2020 and 63 in 2019. The company provides home health and hospice care in 35 states and the District of Columbia, serving roughly 60% of the nation’s 65 and older population.
Post-transaction, MSA Hospice will rebrand as OMNI Hospice to align with LHC Group’s home health asset with the same name. The two newly acquired home health companies, Ashley County Medical Center Home Health and Cavalier Healthcare Services, will retain their current brands.
LHC Group shows no signs of slowing down on acquisitions. The company announced in June that it would 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.
Earlier that month, LHC Group agreed to acquire Fruitland, Idaho-based Heart ’n Home Hospice. The acquired company operates six locations in its home state of Idaho as well as four in central and eastern Oregon under two brands: Heart ’n Home Hospice and Treasure Valley Hospice. The transaction marked LHC Group’s entry into the Oregon market and is expected to yield $20 million in annualized revenue. This transaction closed this morning, July 1.
“Heart N’ Home is a leading provider of hospice services in the Idaho and Oregon market,” Kevin Palamara, managing director and Jake Vesely, associate, with Provident Healthcare Partners, told Hospice News in an email. “Not only do they hold significant market share, HnH also developed a unique and thoughtful training system for their employees that allows them to provide best-in-class care in these hard to reach rural communities.”
Provident Healthcare Partners is the M&A firm that advised Heart ‘n Home on the deal.
LHC Group’s acquisition of Tucson, Ariz.-hospice provider Casa de la Luz also closed today. The company expects annualized revenue of $23 million from the transaction.
During the second half of 2020, LHC Group acquired five hospice organizations, 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.
LHC Group’s activity is indicative of a burgeoning hospice M&A market, which has seen several deals occur per week for most of 2021.
“It’s impossible to ignore the record-high valuations we are witnessing in the hospice space. Many groups are exploring transaction processes in order to maximize the valuation for their organizations today,” Palamara and Vesely said in an email. “Strategic consolidators will continue to heavily leverage add-on M&A activity as it tends to be one of the most accretive and quickest ways to expand market share within new and existing geographies.”
Companies featured in this article:
Ashley County Medical Center Home Health, Casa de la Luz, Cavalier Healthcare Services, East Valley Hospice, East Valley Palliative Care, Evening Post Industries Group, Grace Hospice, Heart 'N Home Hospice, Heart of Hospice, LHC Group, MSA Hospice, OMNI Hospice, Provident Healthcare Partners, Santa Rita Hospice, Treasure Valley Hospice