The nation’s publicly traded hospice companies are primed for more acquisitions after a 2023 slump, fueled by census and growth.

Transaction volume declined in the hospice and home-based care space in 2023, following the two record-breaking prior years. Many expect a rebound in 2024, and stirrings in the public company space signal that may come to fruition.

Case in point, VITAS Healthcare, a subsidiary of Chemed Corp. (NYSE: CHE), made its first acquisition in several years with the $85 million acquisition of Covenant Health and Community Services’ hospice operations and one assisted living facility location.

Now, the company may be poised for more deals, Michael Witzeman, vice president, CFO and controller at Chemed said during the Bank of America Securities Health Care Conference.

“We certainly think that there’s a pipeline growing, and we have the resources on our balance sheet with cash and no debt to be able to really be a player in any of these,” Witzeman said. “We would like to be in states that have [certificate of need (CON)] restrictions much more than an unrestricted state, but we certainly have the interesting inability when things come available to be able to jump on them.”

VITAS’ net revenue reached $354 million in Q1, up 14% from the prior year’s period.

For acquisition targets, the company is eying organizations that have been straining under financial headwinds and staffing pressures that could lead them to sell. VITAS executives believe their company has the resources to turn those operations around.

In addition to an expanded footprint, VITAS has seen steady organic growth. The company in Q1 saw 4.5% year-over-year increase in admissions, which contributed to a 10.3% jump 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 Chairman and CEO Nick Westfall.

VITAS is not alone. Companies like The Pennant Group (NASDAQ: PNTG), Addus HomeCare (NASDAQ: ADUS) and BrightSpring Health Services Inc. (NASDAQ: BTSG) have indicated that they are on the hunt for transactions.

Pennant cutting 2024 deals

The Pennant Group has completed two acquisitions thus far in May, most recently the Corpus Christi, Texas-based hospice provider Nurses on Wheels Inc. for an undisclosed amount.

Earlier this month Pennant acquired Utah-based South Davis Home Health and South Davis Hospice. The company in December 2023 picked up Arizona-based Southwestern Palliative Care & Hospice after acquiring five Medicare hospice providers in multiple states the prior month. Financial terms were not disclosed in these deals.

Double-digit, year-over-year percentage increases in same-store home health admissions and hospice average daily census were a core part of the company’s strong start to 2024, Guerisoli said.

Pennant’s consolidated revenue reached $156.9 million during 2024’s first quarter, a 24.1% year-over-year increase. Its home health and hospice segments brought in a large portion of that revenue at $57.2 million and $54.6 million, respectively. These segments saw a combined 27.9% raise compared to Q1 in 2023.

The company’s average daily hospice census reached 2,962 patients in the first quarter, a 21.4% year-over-year climb. Meanwhile, home health admissions reached 14,649 patients, up 34.3% from last year’s first quarter.

“Q1 represented a culmination of the significant efforts we have made on both the organic and acquisition side, leading to a record quarter,” Pennant Group CEO Brent Guerisoli said in Tuesday’s earnings call. “While we are encouraged by the progress that we’ve made, we’re even more excited about the foundation that we’ve built in the future that lies ahead.”

Addus pursues deals amid rebound

Meanwhile, Addus is seeking acquisitions that would pair its home health and hospice services with its personal care business in its existing markets. This is a cornerstone of its acquisition strategy. But Addus Chairman and CEO Dirk Allison indicated in earnings calls that the company does not rule out the possibility of moving into new markets if circumstances are right.

When examining new markets, Addus focuses on regions where they can quickly become the largest or second-largest provider by market share, according to CFO Brian Poff. Fueling its acquisition aspirations is more than $77 million in dry powder as well as existing lines of credit.

“As we see potential acquisitions come to mark, it remains our primary focus to use our financial capacity to acquire strategic operations that align with our overall growth strategy of adding clinical services where we have strong personal care presence, enhancing our existing personal care markets and adding new personal care markets where we can enter at scale,” Allison said in a Q1 earnings call. “We also believe this acquisition strategy will continue to strengthen our ability to participate in value-based contracts with our payers and to adapt to potential reimbursement changes.”

The company saw 11.6% year-over-year revenue growth in Q1, reaching $280.7 million in net service revenue. The company’s hospice segment, which represents about 20% of the business, earned nearly $56 million in the first quarter. Hospice revenue per day was up 3.7% from the prior year’s quarter.

This represents a partial rebound from the lingering COVID-19 headwinds that hit the company hard, Allison said during the Bank of America Securities Health Care Conference.

Addus’ hospice admissions reached 3,472 patients during the first quarter of the year, up from 3,324 in Q1 2023. The company’s average daily hospice census likewise grew to 3,359 from 3,195 year over year.

The company also saw improvement in length of stay, which rose to 89.6 days in Q1, up from 87.7 in the prior year’s period.

BrightSpring on the move

BrightSpring is also positioning itself for further growth, driven in part by acquisitions.

The company went public in January with a successful initial public offering (IPO). BrightSpring is a home- and community-based health care services platform that serves more than 400,000 patients daily. The company indicated its intent to go public in a Jan. 3 filing with the U.S. Securities and Exchange Commission, with a $1 billion IPO.

“Our ongoing strategic planning is aimed at meeting the needs of more patients, as we continue to dive deeper into our existing and adjacent markets, and focus on growing and above market rates,” BrightSpring CEO Jon Rousseau said during a Q1 earnings call. “We do this through the expansion of current operations, de novo projects, and acquisitions … We will look to acquire operations in the right geographies where we see increased value under the BrightSpring platform.”

During the first quarter of the year, BrightSpring saw net revenue rise 27% year-over-year to $2.5 billion. The Louisville, Kentucky-based provider achieved a gross profit of $369 million, up 10.4% compared to $335 million in Q1 2023, but experienced a net loss of $46 million, up from a $22 million loss in the first quarter of 2023.

The company’s health care provider services segment, which includes its hospice business, as well as home health and other services, accounted for $600 million in Q1 revenue, up 7% from $561 million year-over-year.

“Secular growth drivers underpinning performance across the company include continued robust market growth driven by demographics, the continued shift of services delivered closer to the patient in home and community settings, and specific customer setting growth factors,” Rousseau said.

The wild card

Despite these trends, the deck of publicly traded companies contains some wild cards, particularly Amedisys Inc. (NASDAQ: AMED).

With its own acquisition by the UnitedHealth Group (NYSE: UNH) in the wings, the company has been in a holding pattern when it comes to deals. Optum last June penned its agreement to acquire Amedisys in an all-cash transaction of $101 per share, or about $3.3 billion.

Amedisys also has not held earnings conference calls upon releasing its results for the past several quarters, and thus has not revealed an ongoing growth strategy.

Nevertheless, the company continues to grow.

The company’s hospice segment brought in $201 million in the first quarter of the year, up from $193.4 million year over year. Cost per day rose 2.3% during the quarter, however, largely due to wage inflation, according to an earnings release.

Amedisys saw only slight increases in hospice daily census, reaching 12,657 in Q1, up from 12,730 year-over-year.

The outlier

Enhabit Inc. (NYSE: EHAB) recently completed a strategic review in which the company mulled a potential sale, merger or other transformation. In the end however, Enhabit decided to remain a lone wolf as an independent, standalone company.

The company likewise has not spelled out plans for acquisitions, instead focusing on same-store growth and expansion through de novos.

During Q1, the company saw a decline in hospice revenue that was bolstered by gains in its home health segment.

Enhabit’s revenue reached $262.4 million in the first quarter, with its home health segment bringing in $213.2 million of that total. The company’s hospice services revenue reached $49.2 million, decreasing slightly by 0.2% year-over-year.

Enhabit’s hospice segment has seen mixed results in the past few years, experiencing sequential improvements alongside year-over-year declines, according to CFO Crissy Carlisle.

The company’s average daily hospice census volumes reached 3,391 patients in Q1 this year, a 3.7% drop from 3,523 patients during last year’s same period. Meanwhile, total hospice admissions saw a 2.9% year-over-year decline, but grew 5.6% sequentially in Q1 compared to Q4 2023.

“We saw a sequential decline in average daily census throughout the fourth quarter of 2023, followed by a sequential increase in average daily census each month of the first quarter of 2024 that persisted into April,” CFO Crissy Carlisle said in an earnings call. “As we continue to ramp up our business development team and balance our referral portfolio, we expect [hospice] average daily census to grow throughout the remainder of the year.”