VITAS Bullish on Hospice, Palliative Care Acquisitions Following Covenant Deal

Chemed Corp. (NYSE: CHE) subsidiary VITAS Healthcare is ramping up its strategic growth plans in both hospice and palliative care amid rising demand for these services.

VITAS earlier this month completed its $85 million acquisition of Covenant Health and Community Services’ hospice operations and one assisted living facility location. Announced in March, the deal marked the company’s first purchase in several years.

More transactions are on the horizon amid changes in the marketplace and increased clinical capacity, according to VITAS Chairman and CEO Nick Westfall. The company is gearing up for increased acquisition activity as the year unfolds, Westfall indicated in today’s Q1 2024 earnings call.


“We have other opportunities as we think about the existing markets that we overlap with Covenant, as well as the new markets,” Westfall said. “[We] feel very encouraged about the outlook for those markets and the acquisition of being immediately accretive, and what it will mean for the remainder of 2024 and into 2025 and beyond. Opportunities are absolutely out there.”

The purchase of the nonprofit provider Covenant expanded Florida-based VITAS’ geographic footprint in its home state. 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.

VITAS has plans to pursue other assets with similar alignment in patient-centered care and organizational cultures and values, according to Westfall.


“This transaction illustrates what is possible when two long-standing, mission-focused organizations collaborate, irrespective of tax status, to ensure we collectively serve the evolving needs of communities,” Westfall said. “I believe these types of opportunities should continue, as the hospice and palliative care industry carries on its 45+ year mission across the country of focusing on the patients and families in the communities we serve without allowing for items like tax status to impede progress.”

VITAS has set its growth sights largely in its home state of Florida, according to Chemed CFO Mike Wickman.

The hospice and palliative provider offers care across 15 states and in the District of Columbia. The company began providing care in 1978 and now employs 10,763 care professionals.

“We’re very bullish on the pipeline [and] the potential to be able to do these kinds of deals over the next couple of years,” Wickman said. “We would be interested in many opportunities … particularly in restricted states. Particularly in Florida we would be even more interested.”

New census milestone

In addition to an expanded footprint, VITAS has seen steady growth in both staffing and patient volumes.

The company in Q1 saw 4.5% year-over-year admission growth, which contributed to a 10.3% rise in average daily census reaching 19,665 patients. The last day of the first quarter VITAS saw that number climb to 20,000 patients, a new “milestone” exceeding pre-pandemic levels, according to Westfall.

VITAS’ net revenue reached $354 million in Q1, up 14% from the prior year’s period. A contributing factor to patient volume swells has been added clinical capacity, according to Westfall.

The first quarter of 2024 marked VITAS’ seventh sequential quarter of expanding its clinical workforce capacity. A bonus program implemented last year has accelerated hiring, aimed at relieving capacity constraints exacerbated by lingering impacts of the pandemic. The initiative included a one-time retention payment that ranges from $2,000 to $15,000 per employee for nurses, nurse managers, home health aides and social workers.

The program served as a “catalyst” for increased clinical capacity alongside organizational culture enhancements the company made, Westfall indicated. VITAS’ staffing efforts have positioned the company well in its ability to recruit and retain clinical teams, he added.

The staffing gains are an important part of the company’s strategic growth plans, but other factors fold into VITAS’ equation, according to Westfall.

Valuation ranges in the hospice market have come down from record highs in recent years. Declining hospice multiples have made assets more attractive to buyers in the market. More hospices are finding alignment in operations and company culture as well, Westfall indicated.

“We’re looking amongst one another around that mission and cultural alignment to find the right partnerships,” Westfall said. “It’s less about multiple components as it is about what’s the right partner to continue to fulfill that mission and service the community. We believe we are really well-positioned, which will lead us to continue to look at those opportunities.”

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