What’s Fueling the Hospice JV Furnace

More hospice and palliative care providers are pursuing joint ventures with hospitals and health systems.

Joint ventures offer unique advantages compared to traditional referral streams, according to Aaron Stein, COO of Contessa Health, a subsidiary of Amedisys (NASDAQ: AMED).

Joint ventures allow providers to develop integrated care models that build improved transitions of care, said Stein.

“There’s a lot of patients that fall through the cracks because there’s not that longitudinal model of care that’s really in place,” Stein said at the Hospice News Palliative Care Conference. “Care integration can be really hard when you have a bunch of disparate providers. We’ve got this incredible opportunity to be able to bring all of this [care] together for patients.”

Value-based risks and staffing opportunities

Hospice is an attractive market for joint ventures as value-based care payment models progress, according to Bruce Vanderlaan, managing director for health care mergers and acquisitions firm Mertz Taggart.

From a payer standpoint, hospices add value in their ability to help curb hospitalizations and emergency visits among patients, Vanderlaan stated. For providers, joint venture partners can share some of the financial risk involved in value-based reimbursement.

“If a hospice patient has to go to the hospital, that’s going to be a hit on a value-based measurement stick,” Vanderlaan recently told Hospice News at the VALUE Conference in Chicago. “It’s much more economical and much better for the families and patients who want to be able to be at home and not in a hospital. I don’t think they have a good handle on how to define what value-based care looks like for hospice yet, but we’re going to get there.”

Beyond payment, hospice and health system joint ventures can also ease staffing strains across the care continuum.

Staffing shortages have long-plagued the health care industry as more clinicians leave the workforce due to rising burnout, higher wages in other care sectors, or retirement.

Joint ventures allow providers to pool clinicians to work across a variety of settings, according to Freeman Smith, president of the north region of Traditions Health, a portfolio company of Dorilton Capital Advisors.

The company has seen rising interest in home health and hospice companies from various types of health care and hospital systems, said Smith.

“Hospitals try to divest of their home health and hospice companies because they only have a certain amount of resources they can dedicate to it,” Smith told Hospice News during VALUE. “We’ve been picking up a lot of business from hospitals because they can’t afford to pay nurses for hospice and can’t recruit them, but they need them inside the hospital system. It’s going both ways.”

Contessa has seen rising interest from providers looking to form JVs with an emphasis on high-acuity, home-based care, said Stein. The Tennessee-based company provides a continuum of home-based care, including high-acuity services such as hospital-at-home and skilled-nursing-at-home services.

These joint ventures allow Contessa to care for patients longer than if they were transitioning in and out of a single service, Stein continued.

Early this year the company formed a palliative care JV with New York’s Mount Sinai Health System.

“Working in a more value-based framework, we see this massive opportunity of being able to really integrate the spectrum of care — whether you’re working in ACOs, a managed care company or value-based arrangements,” Stein told Hospice News.

Contessa launched two Texas-based palliative care JVs in June, with Memorial Hermann Health System and Baylor Scott & White Health.

Hospice joint ventures proliferating

Joint ventures are becoming more common in the hospice space.

Bayada Home Health Care last year formed a joint venture with Jefferson Health, leveraging the hospital system’s current home-based care services with Bayada’s scale and care management systems.

Encompass Health Corp. (NYSE: EHC) in May announced a joint venture with Saint Alphonsus Health System in Idaho. The company’s home health and hospice segment as of July 1 spun off under the brand Enhabit Home Health and Hospice (NYSE: EHAB).

For years, LHC Group (NASDAQ: LHCG) has prioritized home health and hospice JVs. The Louisiana-based home health and hospice provider has 82 unique joint venture partnerships, collectively covering upwards of 435 hospitals.

UnitedHealth Group (NYSE: UNH) acquired the company in March for a reported $5.5 billion. The insurance company will integrate LHC Group with its existing home health asset, Optum Health.

The company’s JV strategy has been “impactful” in driving organic patient admission growth, according to LHC President and COO Joshua Proffitt. The company’s admission growth rate from new joint ventures has consistently been between 10% and 15%, Proffitt recently reported at the JP Morgan Healthcare Conference.

“We expect record-setting growth in joint ventures, acquisitions and organic growth ahead,” said Proffitt. “Quarter-over-quarter, our joint ventures outpaced our wholly-owned locations throughout the year of 2020, ending up in Q4 at 17.5% organic growth for all of our joint venture locations throughout our portfolio for hospice.”