Though the number of hospice M&A deals plummeted in 2023 compared to prior years, deals are still being made, and the industry may see a rebound in 2024.
Transaction volume declined in the hospice and home-based care space in 2023, following the two record-breaking prior years. Only three hospice deals took place in the third quarter of this year compared to 11 in Q3 2022 and 18 in the same period in 2021, according to data from the M&A advisory firm The Braff Group.
While any number of organizations can complete acquisitions this year, some providers and investors are more clearly poised for new opportunities. The following are some potential buyers to watch in 2024.
The appearance of Optum on this list is not a surprise as they’ve executed two of the largest hospice (and home health) deals in recent memory. The company is a subsidiary of the insurance and health care company UnitedHealth Group (NYSE: UNH).
Optum in June 2023 penned an agreement to acquire Amedisys in an all-cash transaction of $101 per share, or about $3.3 billion. This followed its $5.4 billion acquisition of LHC Group, which closed last February.
In addition to these home health and hospice deals, the company also acquired the health care tech company Change Healthcare last year for $13 billion.
Optum Health currently serves more than 4.1 million patients in value-based care arrangements across all of its clinical business lines. This reflects patient census growth of about 900,000 people during 2023. The company in Q4 of last year saw a 33.9% increase in revenue year-over-year, reaching in excess of $24.5 million.
Despite Optum’s already massive size, the company’s executives have indicated plans for further growth, with further investment in home-based care among its key strategies. UnitedHealth Group is positioning its subsidiary the linchpin home-based care infrastructure and expansion of value-based service delivery.
Given the breadth of Optum’s business lines, predicting their next move is a difficult task. But the company is almost certainly not done in the acquisition game, and further activity is likely in 2024.
Gentiva Health Services
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 in 2022 purchased a 60% stake from the insurance mammoth Humana, Inc., (NYSE: HUM) for $2.8 billion.
Last year, Gentiva was among the comparatively few companies that actively pursued large hospice deals. Not long ago, the company purchased the hospice, home health and palliative assets of the nonprofit health system ProMedica, including its Heartland Hospice brand.
Though Gentiva did not disclose the financial terms of the transaction, Bloomberg reported that ProMedica’s Heartland Hospice is valued at $710 million. Heartland Hospice is headquartered in Toledo, Ohio, with locations in 26 states.
Gentiva plans to bring most of ProMedica’s hospice locations under the Heartland brand. The acquired home health operations will rebrand to Heartland Home Health in early 2024. ProMedica’s former palliative care business will operate under Gentiva’s Empatia Palliative Care brand.
On the heels of its Heartland deal, Gentiva opened a de novo in Mississippi.
With CDR backing the company, and its stated intentions to pursue further growth, Gentiva is a provider to watch for observers of the acquisition market.
CDR’s portfolio is diverse, with assets in the consumer retail, health care, industrial, technology and business services sectors, primarily in North America and Europe. CDR also has “strategic relationships” with similar firms operating in India and China, according to the firm’s website. However, Gentiva was the firm’s first foray into the home-based care space.
The firm has become increasingly interested in value-based payment arrangements as well as the marriage between technology and health care delivery.
This is evidenced by the recent $370 million acquisition of the data-driven care navigation company Castlight Health by CDR’s primary care asset Vera Whole Health, in which Anthem Inc. and JPMorgan Chase also own a stake.
The Pennant Group
For The Pennant Group (NYSE: PNTG), 2024 will likely see a continuation of recent activity. The company was among the most prolific hospice buyers last year and has established growth through acquisitions as a key strategy.
The Pennant Group acquired five Medicare hospice provider numbers during the past six months, which accelerated growth for its home-based care segment. These deals expanded the company’s presence in California, Arizona, Oklahoma and Texas and included a mix of operating providers and license purchases. A number of these acquisitions serve rural areas.
The company’s 2023 transactions contributed to a 24.3% increase in hospice revenue during Q3, which reached $50.4 million. A nearly 18% rise in average daily census, for a total of 2,698, was another significant factor.
With a current 1.3x net debt to adjusted EBITDA ratio, the company is poised to pursue additional deals.
Agape Care Group
Agape Care Group historically has been an active buyer for several years running, and the company remained active during the 2023 M&A slump.
The company acquired at least two hospices last year — Birmingham, Alabama-based Hope Hospice and Assured Hospice in Cartersville, Georgia. Financial terms were undisclosed.
Agape is a portfolio company of Ridgemont Equity Partners. With the addition of Hope Hospice, the company’s footprint has expanded across 20 Alabama counties. Through the Assured Hospice deal —coupled with a recent de novo in the Gainesville community — Agape covers all 159 counties in the state. The company’s Georgia locations will rebrand as Georgia Hospice Care.
The two deals come on the heels of a series of transactions for Agape.
In October of 2022, the company expanded into Alabama and Louisiana with the acquisition of Journey Hospice. Agape in September 2022 acquired GHC Hospice for a confidential amount. GHC operated locations in South Carolina and Georgia, which are key growth markets for Agape.
Before that transaction, the hospice provider purchased Georgia-based Lanier Hospice in January and Hospice of the Carolina Foothills in May. Financial terms for each of these transactions are undisclosed.
Based on this track record, it seems likely that Agape will be on the hunt for further deals in the coming year.
Based on 2023 earnings trends,Addus HomeCare Cop. (NASDAQ: ADUS) are well-positioned to buy.
Addus, along with Pennant, has been among the few publicly traded companies that have remained active acquirers, and more deals are likely on the way in 2024. Though the company pulled back in late 2023 due to uncertainty around home health reimbursement, it will likely resume seeking deals in 2024.
Fueling the company’s acquisition engine are increases in net service revenue that continued into Q3, including its hospice segment. Addus’ overall net service revenue reached $270.07 million, up 12.6% year-over-year. Its hospice segment earned $53.1 million, up more than 3% from nearly $51.4 million in Q2 of last year.
Acquisitions have contributed to the company’s revenue growth, including its summer purchase of Tennessee Quality Care, a home health, hospice and private-duty company for $106 million. The deal made Tennessee the third state in which Addus offers all three of its core services, along with New Mexico and Illinois.
Throughout multiple quarters in 2023, the company reported strong cash flow from operations coupled with debt reductions. These factors and others give the company the flexibility to remain opportunistic in the market in the new year.