A rich mix of hospice merger and acquisition (M&A) activity at the end of 2023 is fueling trends into next year.
Hospice M&A activity has diverged from the frenzied pace set in recent years. The hospice space in the last five years has seen record-breaking multiples, a prevalence of private equity-backed platform transactions and large-scale assets up for grabs.
This year saw a slow but significant start, with mainly smaller and fewer hospice transactions taking place. As valuations have come down, asset sizes have varied and the scope of buyers has pivoted.
However, the hospice market also saw a number of multi-billion-dollar “mega-deals” involving payers that stand to reshape aspects of the industry.
Optum on the move
The forthcoming sale of Amedisys (NASDAQ: AMED) to Optum marks one of the most significant transactions in the hospice industry in terms of valuation and buyer trends. The company’s shareholders approved the sale, according to an August filing with the U.S. Securities and Exchange Commission (SEC).
The UnitedHealth Group (NYSE: UNH) subsidiary Optum agreed to acquired Amedisys in an all-cash transaction of $101 per share, or roughly $3.3 billion. UnitedHealth Group is the largest operator of Medicare Advantage plans in the country. The deal trumped a previous offer to purchase Amedisys by the home infusion company Option Care Health (NASDAQ: OPCH) for $3.6 billion.
This followed Optum’s $5.4 billion purchase of LHC Group in February. The Lafayette, Louisiana-based home health and hospice provider’s geographic reach spans 37 states and the District of Columbia and is now operating until Optum’s umbrella.
“As a result of our colleagues’ steadfast focus on helping people access and receive the care they need, we are well-positioned to help even more people and continue to generate strong, diversified growth in the coming years,” UnitedHealth Group CEO Andrew Witty said in the company’s third quarter earnings report.
These transactions are indicative of a growing interest in home-based care among payers and other investors.
On the horizon: Enhabit Inc.
The sales of Amedisys and LHC Group were among the forces pushing a minority investor of Enhabit Inc. (NYSE: EHAB) to consider a sale or other strategic alternative.
AREX Capital Management in June began urging the Dallas-based home health and hospice’s board of directors to explore strategic alternatives, in part driven by these two massive deals. AREX has been an Enhabit investor since it spun off from Encompass Health Corporation’s (NYSE: EHC) home health and hospice segments in July 2022.
Enhabit has been mum on the sale since launching a strategic review process in August.
“Our board is conducting a thorough process with the assistance of our advisors and discussions with interested parties are ongoing. We will not be commenting beyond that,” Enhabit President and CEO Barb Jacobsmeyer previously said in a recent earnings call.
Enhabit has 255 home health and 109 hospice locations in 34 states. The company is valued at $1.13 billion, according to a Stock Analysis report. Its Enhabit’s hospice segment brought in $47.4 million of the company’s $258.3 million in overall revenue during the third quarter.
Though no announcement of a specific transaction has been announced, this will be a company to watch in the coming year.
Gentiva picks up ProMedica’s hospice assets
Another significant deal in the hospice space this year came with Gentiva’s purchase of the nonprofit ProMedica’s Heartland Hospice and other assets, valued at $710 million.
Last month hospice, palliative and personal care provider Gentiva completed its acquisition of Promedica’s hospice, home health and palliative assets after inking the deal in March. Heartland Hospice is headquartered in Toledo, Ohio, with locations in 26 states.
This was likely the largest private equity-backed transaction of the year.
Gentiva is a portfolio company of the private equity firm Clayton, Dubilier & Rice (CDR). The Atlanta-based provider emerged from the former hospice and personal care segments of Kindred at Home. CDR last year purchased a 60% stake from the insurance mammoth Humana, Inc., (NYSE: HUM) for $2.8 billion.
The deal marked a “milestone” in Gentiva’s clinical capacity and ability to expand access to care, according to president and CEO David Causby.
“As a combined company, we plan to increase the number of caregivers and provide greater access to our care offering to more patients in the communities we serve,” Causby previously stated.
The ProMedica purchase brings Gentiva’s average daily census to 34,000, a rise from 24,000 prior to the deal.
Smaller transactions picking up the pace
Smaller deals have reigned in 2023, a trend that falls in line with industry projections after the bulk of large hospice assets were plucked in recent years.
The Pennant Group Inc. (NASDAQ: PNTG) has been among the most active companies in the hospice and home health space, picking up a number of smaller assets in the second half of this year. Idaho-headquartered Pennant is a holding company of independent operating subsidiaries that provide home health, hospice and senior living services. The company operates 102 hospice and home health locations and 51 senior living communities in 13 states.
Most recently, Pennant acquired Arizona-based Southwestern Palliative Care & Hospice for an undisclosed amount. The hospice and palliative care provider offers home-based end-of-life and serious illness care.
The purchase marked another notch in the home health, hospice and senior living company’s strategic growth plans, according to Pennant CEO Brent Guerisoli.
“This acquisition further solidifies our commitment to these communities, and expands our ability to provide life-changing hospice services,” Guerisoli said in a recent statement.
Last month Pennant purchased Guardian Hospice and Guardian Hospice of Oklahoma, which provides hospice care in 10 counties in southern Oklahoma and across six counties in northern Texas. In September the company acquired Arizona-based Valor HospiceCare, which followed its purchase of Bluebird Home Health, Bluebird Hospice and Bluebird Home Care based in Idaho. Financial terms of all transactions were undisclosed.
Texas-based Choice Health at Home LLC is another provider fueling smaller deals in the latter part of 2023. The company is backed by the private equity firms Coltala Holdings and Trive Capital Management.
Choice Health at Home offers home health, hospice, private duty and skilled nursing rehabilitation services, operating in 60 locations across Arizona, Kansas, Louisiana, Nevada, Oklahoma and Texas and now Colorado.
The company entered Colorado in November with the acquisition of Lumicare Hospice for an undisclosed amount. The deal expanded its presence in Texas and Arizona while establishing services in the Colorado market.
“We are thrilled to be providing services in Colorado and excited to expand on our current footprint in Texas and Arizona,” Trina Lanier, chief growth officer at Choice previously said in a statement.
Significant nonprofit hospice deals
Hospice affiliations, mergers and acquisitions have gained speed among a range of nonprofit providers this year.
The nonprofit post-acute care providers Empath Health and Trustbridge in September signed a memorandum of understanding to begin an affiliation between the two organizations. Empath is the parent company of 17 affiliates and two philanthropic foundations.
For Trustbridge, the affiliation also represents an opportunity to build out their range of services, including palliative care, hospice care, grief support services, pharmacy and durable medical equipment. Empath’s business lines include hospice, home health care, primary care, palliative care, PACE, AIDS and sexual wellness care and adult day services to a combined total of more than 23,000 individuals.
The transaction is expected to yield some cost synergies as well an ability to leverage each legacy organization’s experience and expertise, according to Trustbridge COO Tarrah Lowry.
“We’re going to be able to save some money financially on health insurance and on bringing contracts together and that sort of thing,” Lowry previously told Hospice News.
Leveraging operational efficiencies and financial resources are two common threads fueling affiliations in hospice, in addition to business scalability and growth potential.
The ability to scale and grow its hospice business line was among the factors that spurred a triple merger among three nonprofits in California.
By the Bay Health, Mission Hospice & Home Care and Hope Hospice last month announced plans to merge, with the organizations indicating that joining forces would make them stronger competitors in the marketplace and improve access to care in the communities they serve.
The combined organizations will become among the largest nonprofit hospice networks in the state.
“In business, scalability is so critical. If we’re going to have operating costs that allow us to provide this level of incredible care, it is the side of business that we have to pay attention to,” By the Bay Health CEO Skelly Wingard previously told Hospice News. “We’re not-for-profit, so we’re not fighting for the deepest margin that we can get. However, we’re still a business, and so the ability to scale is really important as well.”
Other deals taking place have included Virginia-based Blue Ridge Hospice’s affiliation in October with Montgomery Hospice & Prince George’s Hospice, headquartered in Maryland. Combined, the two hospices would care for an average daily census of more than 900 patients in eight Virginia counties and the Washington D.C. area.
The hospices expect that, by combining, they will be better positioned to operate in today’s changing health care environment, including competition from larger, for-profit hospices and the shift towards value-based payment systems.
They further plan to create a “model of care with the potential to strengthen nonprofit hospices throughout the mid-Atlantic states,” according to Ann Mitchell, president and CEO of Montgomery Hospice & Prince George’s Hospice.
October also brought the affiliation of St. Francis Reflections Lifestage Care and Treasure Coast Hospice, two Florida nonprofit hospice providers. The ability to sustain and grow service reach was a large driver behind the deal, according to St. Francis Reflections CEO Joseph Killian.
The combined company will also bolster recruitment and retention efforts, a key to strengthening its clinical capacity, Killian indicated.
“By joining forces, St. Francis Reflections and Treasure Coast Hospice will strengthen our organizations’ ability to expand services and advance care innovation,” Killian previously stated. “We believe that this affiliation will support continuing education and training and create new opportunities for growth while preserving job security.”
Companies featured in this article:
Amedisys, Blue Ridge Hospice, Bluebird Home Care, Bluebird Home Health, Bluebird Hospice, By the Bay Health, Choice Health at Home, Empath Health, Encompass Health Corporation, Enhabit Inc., Gentiva, Guardian Hospice, Guardian Hospice of Oklahoma, Heartland Hospice, Hope Hospice, LHC Group, Lumicare Hospice, Mission Hospice & Home Care, Montgomery Hospice & Prince George’s Hospice, Optum, ProMedica, St. Francis Reflections Lifestage Care, The Pennant Group, Treasure Coast Hospice, Trustbridge, UnitedHealth Group