5 Game-Changing Hospice Deals from 2022

Though hospice deal volume dipped in 2022 compared to previous years, five particular transactions could paint a larger picture of where investors see value in the space.

These interesting, unusual or groundbreaking deals could signal what’s to come in 2023 and help shape the hospice market’s long-term future.

Optum to pick up LHC Group

Though the deal is still in the works, the expected acquisition of LHC Group (NASDAQ: LHC) by the UnitedHealth Group (NYSE: UNH) subsidiary Optum was among the most “highly-strategic acquisitions” of a publicly-traded company, according to the M&A advisory firm Mertz Taggart.


The transaction, now expected to close in the first quarter of 2023, also marked one of the most unexpected and expensive deals to take place in the hospice sector.

Optum in April announced its agreement to purchase the Lafayette, Louisiana-based home health and hospice provider for $5.5 billion.

UnitedHealth Group has been positioning Optum as a cornerstone of its growing home-based care infrastructure and value-based service delivery platform. The payer has deployed billions in capital towards high-profile acquisitions aimed at growing Optum’s capabilities, including the purchase of the health care tech firm Change Healthcare and the in-home medical group Landmark Health.


LHC Group delivers hospice, home health, home- and community-based services, and facility-based care to seniors in 37 states and the District of Columbia. Established in 1994 as a single agency in a small town, LHG now has roughly 29,000 employees who care for nearly 68% of the country’s 65 and older population, according to the company.

The home health and hospice provider has had a “dominating” presence in the hospice M&A market in recent years, Mark Kulik, senior director at The Braff Group, previously told Hospice News. In addition to acquisitions, LHC was involved in 30 out of the 69 joint ventures that completed in the hospice and home health space from 2014 to 2021, Kulik said.

The acquisition took many in the space by surprise. The sale of LHC Group “never would have crossed anyone’s mind five or 10 years ago, but here we are,” Kulik previously told Hospice News.

The agreement marked not only one of the largest deals in hospice, but also signaled increasing interest among payers to operate health care provider companies.

Humana sells bulk of Kindred hospice to private equity

Another big-ticket deal in 2022 also involved another payer. This was Humana Inc.’s (NYSE: HUM) $2.8 billion divestiture of a 60% stake in Kindred at Home’s hospice and personal care segments to the private equity firm Clayton, Dubilier & Rice.

Humana retained Kindred’s home health assets, as well as 40% of the hospice business. The insurance giant completed its $5.8 billion purchase of Kindred at Home in August 2021.

Humana’s two Kindred at Home transactions added notches to the company’s belt as it expands its value-based care portfolio as both a provider and payer. The divestiture fits into Humana’s stated goal of raising its enterprise value by $1 billion, while building out its health care services and Medicare Advantage business.

The home health business will allow the company to capitalize on the growing movement of care in the home and give it a better position to manage risk-based payment arrangements. Whereas the hospice sale allowed Humana to take advantage of the record-high valuations for hospice assets.

“Our belief is that if you bring a total cost of care mindset to home health, you can drive significant value to the health plan in terms of savings on total cost of care, while also driving additional penetration into Kindred and benefiting from that margin,” Humana CFO Susan Diamond said at the Bank of America Securities annual Healthcare Conference in Las Vegas earlier this year.

In 2023, Humana plans to continue expanding the company’s provider presence in its existing value-based markets through a mix of de novos and acquisitions, CEO Bruce Broussard said during a Q3 earnings call. These include a focus on smaller target acquisitions as valuations remain high across health care sectors, including within hospice, home health and personal care, according to Broussard.

“We’ve looked at some of the larger transactions that are out there and have been reviewing that,” Broussard said in an earnings call. “At this time, we’re not really convinced that’s the right direction for us, and we’ll continue to do in-market. That might change, but based on where the values are trading and what we can do inside our marketplace, we’ll probably do medium to smaller acquisitions at this time.”

In terms of private equity hospice investments, 2022 was something of an anomaly, with lower deal volume than prior years.

The Kindred hospice divestiture represented one of the largest private equity hospice deals in both financial and operational terms, according to a Q3 report by the M&A advisory firm Provident Healthcare Partners. Kindred operates 775 locations nationwide, and the reconstructed platform company is being renamed as Gentiva Health Services.

“You had one of the largest home health and hospice providers acquired by an insurance company,” Kulik told Hospice News. “The traditional demarcation lines of service are blurring, with insurance companies and hospital systems buying up providers. It’s a very disruptive time in the marketplace. It’s indicative that business is not as usual – at least as it was seen 10 years ago.”

Enhabit Inc. splits from Encompass Health

Not all deals are acquisitions, and the summertime spinoff of Enhabit, Inc. (NYSE: EHAB) from Encompass Health (NYSE: EHC) is a prime example.

The spinoff made Enhabit the newest publicly traded player in home-based case. The company began as the fourth largest provider of Medicare-certified home health services and the 12th largest provider of Medicare-certified hospice services nationally.

The new home health and hospice company expects to earn nearly $1.07 billion to $1.08 billion this year, with an adjusted EBITDA of $165 million to $185 million, according to the company’s 2022 full-year guidance. Enhabit has 10,000 employees at 351 locations in 34 states.

Enhabit has hospice growth in its crosshairs. The company plans to deploy $50 million to $100 million per year for acquisitions, with the goal of co-locating its home health and hospice operations. About 60% to 70% of those deals will involve hospices, CEO Barbara Jacobsmeyer previously told Hospice News.

Since the spinoff, Enhabit’s pipeline of M&A opportunities has opened up, according to CFO Chrissy Carlisle.

“When the spinoff happened, the pipeline really picked up. At this point, it’s a little bit more geared towards hospice, and it’s still fair to say the pipeline is skewed towards hospice,” Carlisle said at the Bank of America Home Care Conference. “We might be a little bit more biased towards those opportunities for a couple of reasons. One, there’s more reimbursement certainty around hospice than there is for home health, and then trying to do a little diversification of our total mix.”

Androscoggin buys into behavioral health care

One of the most atypical transactions came early this year when Maine-based Androscoggin Home Health Care + Hospice picked up the home and behavioral health care company Care & Comfort for an undisclosed sum in January.

Care & Comfort’s footprint included five locations with a service area that spanned 13 Maine counties.

Two factors made this deal particularly noteworthy. First, this was a rare instance in which a nonprofit provider acquired a for-profit company. Post-acquisition, Care & Comfort became an Androscoggin brand with nonprofit status.

The second unique aspect was the nature of the two businesses. Here, a home health and hospice organization made a substantial investment in behavioral health services. The behavioral health component represented a new business line for Androscoggin, a move fueled by a demonstrated need for those services in its home state.

Androscogginpreviously offered these services in the past, bringing them into their current portfolio following a community health needs assessment that the Internal Revenue Service requires hospitals to perform every two years, according to Androscoggin CEO Ken Albert.

A community needs assessment by Maine hospitals placed behavioral health among the top 10 most pressing needs in each of the state’s counties during the last three two-year cycles. That need has only grown. For all counties, the 2021 assessment identified behavioral health as the No. 1 or No. 2 community health need, particularly in rural areas.

This is reflective of a wider trend as demand for behavioral health services continues to grow.

Globally, depression and anxiety disorders in particular have proliferated during the pandemic, reaching 53.2 million and 76.2 million respectively in 2020 alone, according to a study published in The Lancet.

This includes the senior population, who represent the largest age demographic that home and hospice providers serve. An estimated 5 million to 8 million older adults in the United States have one or more mental health conditions, according to research from 2018 supplement to the Journal of the American Geriatrics Society (JAGS), with projections that this number will triple over the next three decades.

“Mental health services for older adults are extremely limited in most countries of the Americas” according to a report from the World Health Organization (WHO). Mental health problems most common among seniors include dementia, cognitive deterioration, psychosis, and other behavioral, affective and anxiety disorders, the WHO report indicated.

In addition to rising demand, reimbursement systems around behavioral health make it an attractive market, according to Albert.

“The behavioral home model for reimbursement is very appealing to us,” Albert previously told Hospice News. “We are clearly looking to expand into [licensed clinical social workers and licensed clinical professional counselors] and other behavioral health services as a means of being a partner to our other referral sources for a full-range of home based services, including behavioral health.”

Addus acquires the large nonprofit JourneyCare

Addus HomeCare Corporation’s (NASDAQ: ADUS) in February completed its $85 million acquisition of Illinois-based nonprofit hospice provider JourneyCare Inc. With the transaction’s close, JourneyCare transitioned to for-profit status.

This was among the biggest deals in which a for-profit provider purchased a nonprofit. Among nonprofits, JourneyCare was one of the nation’s largest, having served 750 patients daily in 13 Illinois counties.

Addus financed the deal with cash on hand and the company’s revolving credit facility. The company in 2021 opened a $600 million revolving line of credit with Capital One Financial Corp. (NYSE: COF) as the lead arranger and administrative agent.

Acquiring JourneyCare’s hospice operations marked an “exciting step” for Addus’ growth plans, according to CEO Dirk Allison. The company seeks to build hospice density in markets where they have a home health or personal care presence.

“This acquisition enables us to provide all three levels of home care in Illinois, consistent with our broader growth strategy,” Allison said in an announcement when the deal closed. “Addus will continue its strategic focus on acquisitions that meet our strategic criteria and complement our strong organic growth opportunities.”

To date, New Mexico is the only other state in which Addus operates all three of its home-based business lines.

Addus provides hospice, home health and personal care services to nearly 44,000 patients through 215 locations in 25 states. The company’s net service revenues rose 11.7% to $216.7 million in the third quarter of 2021, up from $194.0 million for the prior year’s period.

Though much of the company’s M&A strategy was weighted in home health and personal care during 2022, hospice will remain a consideration going forward. The company has completed four home health and hospice deals since 2019, including the JourneyCare purchase.

Interest rates cloud 2023 outlook

After several years of running hot, the hospice market showed signs of cooling down in 2022. Investor interest remained high, including among private equity buyers, but the pace of transactions slowed.

Around 11 hospice transactions took place in Q3 2022, compared to 24 during the same period last year, Mertz Taggart indicated in a recent report.

Hospice valuations also started to shake relative to the last two years. Multiples in the hospice market reached upwards of 29x in 2020, which beat 2019’s record of 26x, reported PwC’s Health Research Institute.

Larger home health and hospice companies that would typically command “mid- to high-teen” multiples in 2020 and 2021 did not “draw that level of interest” this year, the Mertz Taggart report indicated.

Despite the slowdown, hospice and home health sectors continue to outpace others. Home health and hospice transactions represented nearly 12% (19) of the total 221 health care deals during the third quarter alone, according to the Provident report.

Though in recent history private equity investors were a propelling force behind hospice valuations and transaction volumes, their activity in 2022 took on a different shape, according to Dexter Braff, president of The Braff Group.

No large private equity platform deals took place in 2022 — all transactions involved smaller assets, Braff told Hospice News during the ELEVATE conference in Chicago. A “platform” acquisition would include the purchase of a hospice provider with a significant infrastructure that allows the buyer to restructure and layer on with more de novos, startups and subsequent acquisitions, Braff explained.

This lull is likely temporary. Given the number of those deals that occurred in prior years, few of those large assets were ripe for a sale during the past 12 months. This could change in 2023, he said.

“It is so anomalistic that we haven’t seen much activity on the market entry platform deals in home health that we have got to see some coming,” Braff told Hospice News during a recent webinar. “The reality of it is, if you had a $20, $30 or $40 million hospice agency over the last three years and you wanted to sell, then you probably already sold because the valuations were so compelling. So we probably have quite a few platform providers that are still out there, but they haven’t sold because they were not ready to sell. But that will happen. It’s an anomaly, but it can’t last for long.”

Other economic considerations could impact 2023 trends, including Inflation, higher interest rates and other market forces that are contributing to the “cash burn rate” among buyers, Provident indicated in its Q3 report. This is particularly evident among smaller private-equity backed companies.

Private equity buyers are likely paying close attention to interest rates, as they tend to finance many of their deals by taking on debt, according to Cory Mertz, managing partner of Mertz Taggart.

They may see less potential for returns on their hospice investments as borrowing gets more expensive, a trend that could mold the 2023 M&A landscape, Mertz said.

The rising interest rates are likely to have a more significant impact on larger deals, which could lead to a second year favoring smaller transactions if current trends continue, according to Mertz.

“It will certainly have some impact, but more for the larger deals, say $100 million or more. The impact goes down as you move down market,” Mertz previously told Hospice News in an email. “Smaller agencies are still very attractive, as they still have the mandate to grow by acquisition. And as rates rise, we will be more impacted in the lower middle market. We will start to see valuation gaps arise as values soften over time.”

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