VITAS Eyeing Expansion in 12 States

Historically, VITAS Healthcare has relied heavily on organic growth, a strategy the company is not turning away from. However, it may add more acquisitions to the mix.

VITAS is a subsidiary of Chemed Corp. (NYSE: CHE). The company this year made its return to the M&A market after a hiatus of several years. In April, VITAS acquired Covenant Health and Community Services’ hospice operations as well as one assisted living facility in an $85 million deal.

Now, the company is seeking out other targets, with an emphasis on Certificate of Need states.

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“There are at a minimum 12 states we don’t operate in that we think are very attractive to us, and we are out actively sourcing deals, and we expect some of that deal flow to continue to come through here in 2025 and beyond …” VITAS CEO and Chairman Nick Westfall said during the JP Morgan Healthcare conference. “We think we’re in the early roads of really an ongoing consolidation inside of the space.”

The Covenant transaction has become a locomotive for VITAS in terms of growth. Covenant provided hospice across six cities in the panhandle and northwest region of Florida and in three markets across southeast Alabama. The former nonprofit also operates a 32-bed assisted living facility in Pensacola, Florida.

Covenant contributed close to $11 million to VITAS’ $391.4 million third quarter 2024 revenue, which was up 17.3% year over year.

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“We’ve executed on [Covenant],” Westfall said. “It’s fully integrated. It’s outperforming our internal expectations, but equally and more importantly, the community response, the cultural response, the integration components that are so key to hospice and palliative care have gone fantastic.”

In addition to the acquisition, the company in Q3 saw a 15.5% increase in average daily census (ADC) reaching 21,785. Admissions also rose 6.3% to 16,775.

Admissions and ADC growth is spurred by increased clinical capacity, according to Westfall. After implementing a temporary bonus program coupled with a community awareness initiative, VITAS has been successfully reinforcing its clinical ranks, meaning it can take on more patients. To date, the company has seen nine sequential quarters of census growth.

“The [bonus] program has acted as a catalyst, leaning into and focusing on the cultural component and the sustainability of that cultural component and continuing to drive retention,” Westfall said. “Our performance since the expiration of that program has outpaced our performance during that program. The trailing 12-month window since the expiration of that program is well north of 1,000 clinicians [hired].”

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