More Nonprofit Hospices Consolidating Amid Economic, Regulatory Pressures

As M&A in the for-profit space continues its two-year slump, nonprofits are consolidating in rising numbers.

Recent years have seen an uptick in consolidation activity among nonprofits in the hospice space. Increasingly, nonprofits are pursuing acquisitions and affiliations, as well as forming regional collaboratives. In addition, some nonprofits have also been acquired by for-profit companies.

Driving this trend are reimbursement and regulatory pressures, as well as a need to compete with larger, well-capitalized for-profit entities, according to Mark Kulik, senior managing director for the M&A advisory firm The Braff Group.

“Reimbursement rules and oversight rules and compliance rules, this is bringing to the forefront just the challenge of successfully operating in this marketplace on a sustained basis,” Kulik told Hospice News. “It’s manifesting in these nonprofits just having a hard time making the math work every month or every year. That’s what we’re seeing here — the desire to team up with another nonprofit in the effort of being bigger and more financially viable.”

Year-to-date in 2024, 12 hospice acquisitions have taken place, about 50% were among nonprofits, data from The Braff Group show. In 2023, 24 transactions occurred, with nonprofits representing about 54%.

Some major nonprofit deals this year include the merger of Empath Health with Trustbridge, both nonprofits. The affiliation includes Trustbridge’s hospice brands, Hospice of Palm Beach County and Hospice by the Sea. Empath offers hospice care through several brands, including Tidewell Hospice, Suncoast Hospice, Empath Hospice, Hospice of Marion County and Suncoast Hospice of Hillsborough.

California’s By the Bay Health earlier this year completed a triple merger with two other hospices — Mission Hospice & Home Care and Hope Hospice. The combined organization has become the largest nonprofit hospice network in northern California.

“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.”

Virginia-based Blue Ridge Hospice and Montgomery Hospice & Prince George’s Hospice are also affiliating. The organizations signed a memorandum of understanding last October. Combined, the two hospices will care for an average daily census of more than 900 patients in eight Virginia counties and the Washington, D.C., area. Montgomery Hospice & Prince George’s Hospice is headquartered in Maryland.

This week, two Maryland-based nonprofits, Hospice of Washington County and Gilchrist, announced their agreement to affiliate.

In addition to nonprofits joining forces, some are being bought out by for-profit companies. A recent example is Florida’s Haven Hospice, which BrightSpring Health Services (NASDAQ: BTSG) recently acquired for $60 million.

Perhaps the most prominent example is Addus HomeCare (NASDAQ: ADUS) $85 million acquisition of the nonprofit JourneyCare in 2022.

Looking ahead, more such transactions are likely, Kulik indicated.

“Going forward, we’ll see a continued interest on the for-profit side to pursue not-for-profits,” Kulik said. “Of course, the question mark there is, will a nonprofit allow a for-profit to be considered as a suitor? The foundations and the boards, of course, that’s their responsibility to weigh in on.”