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VITAS Healthcare Corporation has penned an agreement to acquire Covenant Health and Community Services’ hospice operations and one of its assisted living facility locations for $85 million.
The purchase mark’s the Chemed Corp (NYSE: CHE) subsidiary’s entrance into the Alabama market and expands its geographic footprint in Florida.
Florida-based VITAS anticipates that the transaction will close in the second quarter of this year, subject to customary approvals. The acquisition is structured as an asset purchase, which allows the buyer to assume liability for assets included in the purchase.
“Being a long-standing, mission-focused provider, we have always been exploring opportunities to partner with similar organizations that have a shared culture, mission and passion for impacting their communities,” VITAS CEO Nick Westfall told Hospice News in an email. “This opportunity is reflective of that alignment, and we are looking forward to welcoming those members of the Covenant Care team into our organization over the coming weeks to continue our commitment of providing high-quality, compassionate care to patients and families across the Florida panhandle and Alabama.”
Covenant Health and Community Services Inc., d/b/a/ Covenant Care, provides hospice across six cities in the panhandle and northwest region of Florida and in three markets across southeast Alabama.
Covenant Care has provided hospice, palliative care, home health and personal care for more than 36 years. The nonprofit provider operates a 32-bed assisted living facility in Pensacola, Florida.
“Today is a monumental day for Covenant Care because it allows the organization to broaden and deepen its focus on improving health care for the communities we serve by supporting new solutions and filling gaps in the care delivery system, while at the same time, keep our promise to the communities by continuing to deliver the world-class hospice and palliative care they deserve with the experts at VITAS Healthcare,” said Jeff Mislevy, president and CEO of Covenant Care, in a statement. “As a result of the growth, expansion and success over the past several years, it became clear that the organization was well positioned to join forces with a nationally renowned strategic partner.”
VITAS provides services in 15 states and in the District of Columbia. The company has provided hospice care for roughly 45 years, and also offers palliative care. VITAS’ staff of 10,537 care professionals provide care to an average daily census of 19,455 patients.
The company’s net revenue reached $350 million in the fourth quarter of 2023, a 13.6% increase from the prior-year’s period. VITAS’ revenue growth was in part fueled by increased staffing volumes and clinical capacity, with the company seeing an 11% increase in days-of-care in Q4 last year.
In recent years, VITAS has predominantly focused on growth through de novos and same-store admissions rather than acquisitions.
Recent record-high valuations in the hospice mergers and acquisitions market were among the factors shaping this growth strategy, Westfall indicated in a 2020 earnings call. Market valuations have since dampened, but remain relatively high.
The “very high” pricing of hospice assets was among the main reasons that the company saw de novos as “the best market entry strategy,” Westfall previously stated at the time.
VITAS did not comment on any potential future transactions.
“We’re very excited about the future potential of like-minded, mission-focused hospice and palliative care providers to continue exploring opportunities to expand the impact we collectively have across the country to patients and families,” Westfall said in the email. “In the meantime, we’ll continue to focus on delivering this commitment to each patient and family across the country, as well as within our new/expanding communities with our new Covenant team members over the coming weeks.”
Companies featured in this article:
Chemed Corp., Covenant Health and Community Services, VITAS Healthcare
