As the volume of mergers and acquisitions in the hospice space continues to skyrocket, St. Croix Hospice, a portfolio company of the private equity firm H.I.G. Capital, has been among the providers fueling a robust market.
St. Croix Hospice currently provides services to approximately 2,700 patients from more than 50 locations in Illinois, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska and Wisconsin. The purchase of three companies from LifeCare Collective further expanded St. Croix Hospice’s footprint into the Missouri market. Additionally, the hospice provider has been aggressive on expansion through de novos, opening seven new locations in 2020 and five this year thus far.
Poised for continued growth in the Midwest, St. Croix Hospice’s Founder and CEO Heath Bartness and President and Chief Financial Officer Stephen Phenneger recently sat down with Hospice News to discuss the pressures weighing heavily on future trajectory and focus in hospice, including the pandemic and attracting and retaining staff to provide end of life care.
St. Croix Hospice has been on a strong growth trajectory with acquisitions and establishing de novos in recent years. What are plans to continue this growth in the Midwest, and why is this a region of focus?
Bartness: Our growth has really been derived from both opportunistic and strategic opportunities. It’s our goal to bring St. Croix Hospice to as many of those that we can reach, and we’re doing so in a continuous manner, because that’s just what we’ve done in the past. We’re not an organization that is hopping around from coast to coast. We’re very focused on the Midwest — and the upper Midwest in particular — because of the ability for us to maintain consistent aims and the workforce that we’ve been able to develop and retain.
One of the more unique components of St. Croix Hospice is that we serve far more rural communities than we do urban communities. When we’re able to bring that care and have it be delivered by neighbors, friends, family members, former students and some of our grade school teachers who are taking care of these patients — that’s very unique and that promotes the culture that our hospice has as well in a very positive manner. That’s really important for our teams themselves. Some of these larger urban areas certainly have a number of qualified hospice programs, but very few are able to serve in some of these more rural communities at the level that we’ve been able to.
Phenneger: In the Midwest, these are our roots. This is a very underserved community from the hospice market perspective. We are intentionally strategic about being opportunistic — we’re not just looking to put dots on a map, we’re looking to be thoughtful about finding markets where there is a tremendous need for care and where the level of care that we provide can be ensured of the consistency and quality of that care in the markets that we choose to serve, which is why we are intentional about being clustered.
What does your acquisitions pipeline look like for the rest of the year and into 2022? What are your top considerations as you build out your hospice service regions further?
Phenneger: We would expect to see continued growth both through de novo launches and through acquisitions. You’ll see some more of those in 2021, and you’ll see a fair amount of those probably at or above the 2021 pace into 2022. The markets will look very similar to what we did in 2021, and we will continue to stay in our geographic footprint. We may add a contiguous state or two through that process, but our goal is to remain true to where we are. You’re not likely to see us move to the Southeast, the Southwest or the Northwest.
As we’re looking at our strategic planning for 2022 and beyond, it continues to be in these underserved communities in the upper Midwestern market where we can ensure the continuity of our brand and the service that we’re providing.
The pandemic has thrown a wrench in many companies’ expansion plans. How do you anticipate COVID-19 impacting growth next year? How is St. Croix Hospice taking lessons learned during the pandemic and applying them in strategic planning?
Phenneger: The pandemic taught us and required us to be even more nimble and flexible than we are in the contingency plan. You need to have a plan, but you need to understand how to adapt and overcome when life throws you a curveball, and make sure that you can continue on your mission and meet your objective. If anything, it’s probably given us a little more flexibility and taught us all how to work and behave in a different fashion and engage differently and more timely than we had before. We need to be able to assess our situations in real-time and make decisions and move forward. You need to make these plans in pencil, not in not an indelible ink.
What is St. Croix Hospice’s policy on staff vaccines? What are your thoughts on the possibility of a federal mandate and how that might affect your business?
Bartness: In terms of the number of team members we have that are vaccinated or that are not, it’s something that we track and monitor on a daily basis. We, like other providers, are anxiously awaiting what the federal mandate will entail. As an organization, we have certainly taken the stand that we absolutely support the vaccine. We encourage all of our team members to get the vaccine, but until the [U.S. Centers for Medicare & Medicaid Services (CMS)] and the feds come out with the plan in its totality we’re in a wait-and-see position. We don’t know if there are going to be exemptions or what they’re going to look like.
Phenneger: We’re also looking and planning for what those exemption scenarios might look like, how exemptions are going to occur, and how we make sure that we have the right data and information to make decisions when these rules finally get promulgated. We have a strong team of advisors that are around the company that we can rely on and engage with to get that data, as well as alternatives for how to how to move forward
Was raising the minimum wage for St. Croix Hospice employees a move to attract the workforce needed to support growth? How will the organization offset increased staffing costs associated with higher wages?
Bartness: We don’t think it will hurt in terms of supporting growth, and also the attraction and the retention of our valuable team members. The folks who care for patients that are most impacted by the wage rate increase we had, they work extremely hard and they are absolutely deserving of that type of pay increase. Every October, we have new rates that CMS comes out with and establishes what the rates are going to be, and a very significant portion of that is related to the wage index. We as an organization are simply going to be absorbing those wages based on not only the changes in the rate in terms of reimbursement, but also just overall. It’s something that we felt was necessary in terms of providing and ensuring that those who are so deserving are able to get the pay that we feel that they’ve earned.
Phenneger: There is no cost offset to this wage increase. We’re at a capitated reimbursement, and we’re merely absorbing this cost to our bottom line, because as Heath said — it’s the right thing to do for these people that are caring for others in the most fragile part of their lives.
What are some of your strategies for integrating new employees who come in through acquisitions?
Phenneger: We have a pretty comprehensive rewards package we developed with our team for all of our disciplines, with career ladders and career progression that will allow folks to obtain additional certifications and acquire additional skills throughout their time with us. We offer tuition reimbursement to encourage people to help elevate their level of licensure throughout the process or throughout their careers with us. Cash compensation is certainly an integral part of the total compensation that somebody gets, but there’s a lot of other things we’re doing to make sure that people feel the inclusion with their teammates that they need to, that they have the opportunity to grow with our organization, and that they grow themselves personally and professionally — and ultimately financially — through their time with us.
Every market and every employee is different, and the reality is our care needs to be given 24 hours a day, seven days a week. We want to work with our staff to ensure that we’re appropriately staffed, and that they have the flexibility to live their lives. We want to make sure that the care is delivered when it can and when it needs to be delivered appropriately.
Bartness: What makes St. Croix Hospice unique is our culture and our immense talent. The team members that we have are here because they have a burning desire to be with a patient during their last breath of life. The impact that can have is not just on the patient, not just on the family members that may be present, but it can be generational and empowering. It’s something that our team members want to be a part of.
It’s the team and the community that rallies and impacts a patient and family member’s lives. There is a high utility that members who work for a hospice organization have based on the goodwill and the outcome of what’s delivered and what you don’t see in many other careers. We have one chance in hospice care to give someone a positive end of life experience, we just simply cannot fail, we have to be present in the moment. When we do that and do that well, it really is an amazing thing to witness.
What is a concern that is top of mind for St. Croix Hospice as you look ahead?
Bartness: A fear that keeps me up at night is that hospice still is not being utilized at the level that it should be. It’s the patients and those family members that are not able to access this benefit — that’s what keeps me up at night. We know that there are more and more patients that we can help. We know there are more families we can assist, and so we need to find them. We need them to accept what hospice is, and that it’s not a scary term and shouldn’t be.
Every community is different in terms of thoughts about hospice, but by and large it is the best value in health care. We are taking clinicians, medical supplies and medications, equipment and care directly to wherever the patient calls home, whether it be in their traditional home, a senior living or assisted living facility, a nursing home, or even under a bridge. We can do hospice anywhere. That is something that is so remarkable about hospice, just in terms of a deliberate delivery of health care. It can really completely influence and change all health care, because of how we’re able to do this in a competitive and widespread manner.
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