Hospice Moves: Add-ons and Outsourcing

With Medicare spend for hospice care growing substantially in recent years and palliative care becoming an increasingly attractive precursor to hospice in the emerging value-based ecosystem, the hospice market is changing.

Recent developments of note include the October 10, 2018, announcement from Amedisys that it has signed a definitive agreement to acquire Compassionate Care Hospice, a national hospice care provider headquartered in Parsippany, New Jersey.

Amedisys is interested in hospice assets as part of its M&A strategy, focusing on tuck-ins and deals of size. The company is evaluating opportunities as more clarity around 2020 payment reform emerges and settles into final form, said Amedisys President, CEO and Director Paul Kusserow during a recent earnings call.

Compassionate Care Hospice, a community-based organization founded in 1993, cares for approximately 3,300 patients daily and employs more than 2,300 hospice professionals in 53 locations across 24 states. The company generates approximately $188 million in annual revenues, with an adjusted EBITDA of $27 million, according to the Amedisys news statement.

Under the terms of the agreement, expected to close by February 1, 2019, Amedisys will acquire 100 percent of the ownership interests in CCH for a fixed price of $340 million, which is inclusive of $50 million in payments related to a tax asset and working capital. Amedisys, currently caring for more than 7,500 hospice patients per day in 22 states, will become the third largest hospice provider in America, according to Amedisys.

The transaction adds significant new access to Amedisys’ nationwide network of 83 hospice care centers, according to the company. Post-closing, the combined hospice operations will include 136 care centers in 34 states, with an ADC of approximately 11,000 patients and approximately 5,700 hospice employees.

Amedisys delivers home-based personal care; recovery and rehabilitation after an operation or injury; care focused on empowering people to manage a chronic disease; or hospice care at the end of life. More than 3,000 hospitals and 59,000 physicians nationwide use Amedisys as a post-acute care partner, according to the company. Founded in 1982, headquartered in Baton Rouge, Louisiana, with an executive office in Nashville, Amedisys is a publicly held company with 18,400 employees in 421 care centers in 34 states and the District of Columbia.

On a separate note, VITAS, the U.S.’s largest provider of palliative care services, has been steadily increasing the number of hospitals in the East Coast that it’s forging outsourcing partnerships with. The latest alliance was confirmed last week when Greenwich Hospital revealed that VITAS Healthcare would take over its hospice program. For the hospitals, the new relationships with VITAS allows them to exit from a very specialized type of clinical work—end-of-life care services—that requires resources that may be prohibitively expensive to keep up.

Moreover, the decision to outsource can be particularly appealing for smaller and mid-size hospitals that lack the patient scale to make the economics of hospice services work. The appeal factor may increase further for hospitals operating in markets with multiple existing hospice providers.

In the case of Greenwich Hospital, the health care center is dealing with low patient volume, the Greenwich Time reports. Further, the hospital is impacted by insurance laws that make it hard for the Connecticut facility to provide hospice care to New York State patients from nearby Westchester County, N.Y., the publication notes. This is a significant issue given how several of the most densely populated towns within 10 miles of Greenwich are located in Westchester County. However, Greenwich Hospital President Norman Roth told the local newspaper that declining patient levels was the primary reason for the transfer of the hospice program to VITAS.

The partnership with Greenwich Hospital follows a string of recent partnership agreements between VITAS and hospitals on the East Coast. Over the summer VITAS announced a pact with St. Joseph’s Wayne Hospital in New Jersey, which is hosting a new free-standing inpatient hospice unit, or IHU.

The alliance with Wayne Hospital represented the 28^th time VITAS has opened a free-standing IHU facility.

“There is a growing demand for quality, compassionate care in this community, and we are honored to fulfill that need,” said Nick Westfall, CEO of VITAS Healthcare in a statement. “We look forward to providing patients and their families with the highest quality of end-of-life care and playing an integral role in the continuum of care.”

VITAS has also made strides in the past 18 months in the Florida market, where it has invested in facilities in the Panhandle and greater Orlando metropolitan regions, according to the company.

—Greg Shulas contributed to this report.