Addus HomeCare Corp. (NASDAQ: ADUS) has reached an agreement to purchase the home health, hospice and private duty operator Tennessee Quality Care for $106 million.
Tennessee Quality Care operates 17 locations serving an average of 1,800 patients daily throughout 50 of the 95 counties in its home state. About 70% of its business is home health, including private duty, with hospice care comprising 30%.
Addus expects the transaction to further its goal of co-locating its clinical services in markets where it already has a personal care footprint. The deal is set to close in the third quarter of the year.
“We are pleased to expand our market presence in Tennessee with the addition of the Tennessee Quality Care operations. This acquisition fits squarely into our growth strategy to leverage our strong personal care presence and add clinical services in key markets,” Addus CEO Dirk Allison said in a statement. “Tennessee is a Certificate of Need state for both home health and hospice care, making entry into the market more difficult, particularly at scale.”
The acquired asset is expected to generate close to $40 million in annual revenue as well as foster further growth, Allison indicated.
Addus provides hospice, home health and personal care to an estimated 47,500 patients annually across 203 locations in 22 states.
The company’s net service revenue reached $251.6 million during the first quarter, up 11% year-over-year. Its hospice segment represented $49.08 million of that total, about 19.5%.
Acquisitions contributed about $65 million to Addus’ bottom line in 2022. The company purchased Illinois-based hospice provider JourneyCare Inc. for $85 million in October that year and picked up Chicago-based Apple Home Health Ltd. for an undisclosed sum the following month.
This year, the company has been weighting its deal pipeline more towards home health and personal care with less of a focus on standalone hospice companies, due to high valuations in the space.
“In M&A, I think there are opportunities to continue to be acquisitive,” CFO Brian Poff said at the Bank of America (BofA) Securities 2023 Healthcare Conference in Las Vegas. “So [for] hospice, we would not say ‘no’ to it, but it needs to be the right valuation if it was a future market — so probably less of a priority for us right now.”
Tennessee Quality Care is a portfolio company of American Health Partners, which operates companies in the home health and hospice; long term care, senior living and rehabilitation industries, as well as behavioral health care.
“We are pleased with the opportunity to have Tennessee Quality Care join Addus and continue to expand its important work providing quality home health services and premium end-of-life care in the home setting” Michael Bailey, CEO of American Health Partners, said in a press release. “This combination will benefit everyone associated with Tennessee Quality Care, especially the patients.”