Almost Family Deal Forms Largest Hospital, Home Health Joint Venture

One of the nation’s largest home health care providers has entered into an agreement to acquire a controlling interest in the home health and hospice assets of one the nation’s largest hospital companies. The result will be the biggest public hospital-home health joint venture in the nation, the companies announced Monday.

Almost Family (Nasdaq: AFAM) will acquire an 80% equity interest the home health business of Community Health Systems (NYSE: CHS) for $128 million, subject to a working capital adjustment. Together, the two companies care for an average of 50,000 patients daily, and the combination would make Almost Family the third-largest Medicare home health provider in the U.S., the company announced.

Upon completion of the transaction, Almost Family will operate 340 branches across 26 states, with an annual net revenue run rate of more than $800 million. The transaction will include “substantial additional scale” of approximately $200 million in annual revenues, including $170 million in home health and roughly $30 million in hospice revenues. Almost Family expects the transaction to be completed in the fourth quarter and accretive to EPS in 2017.

CHS Home Health operates 74 home heath and 15 hospice branch locations in 22 states and is based in Franklin, Tennessee, a suburb of Nashville. The transaction expands the Almost Family footprint substantially, and is perhaps the Louisville-based company’s “most strategic” partnership to date, CEO William Yarmouth said.

“Over the past few years, Almost Family has grown dramatically, both in size and scope,” Yarmouth said in a statement. “In addition to being one of the nation’s largest home health providers, our HealthCare Innovations investments have brought us new perspectives and enabled us to be much more active in the development of new care delivery models. This partnership with CHS may be the most strategic of all the investments we’ve made yet. We believe it will enable us to see the health care continuum and home care specifically through the eyes of not only one of America’s best hospital companies, but one of America’s best healthcare companies, leading us to an even better understanding of the needs of our patients and how to meet them.”

CHS is one of the largest publicly traded hospital companies in the country, and owns, leases or operates 158 affiliated hospitals in 22 states with an aggregate of nearly 27,000 beds. Most of CHS’ home health and hospice operations are affiliated with CHS acute care hospitals. The hospital company has recently began to reposition itself through divestitures in the wake of $7.3 billion acquisition of Health Management Associates, Inc. CHS has struggled to turn around Health Management’s 71 faltering hospitals, The Wall Street Journal reported. The company reportedly has more than $15 billion in debt, and is facing struggles within its rural communities, where small populations and ballooning labor expenses are dragging down earnings. CHS reported a second-quarter loss of $1.43 billion, WSJ reported.

“While we are reducing our ownership interest in our home health and hospice division, it is important to us to retain a meaningful interest to help ensure appropriate post-acute care coordination for the benefit of our patients,” Wayne Smith, CEO of CHS, stated. “We believe hospitals need strong strategic post-acute partners to provide the right care for patients and return them safely and securely home following a hospital stay. We selected a partner with proven capabilities and a successful track record.”

The joint venture will be managed by Almost Family and governed by a board with proportionate representation from Almost Family and CHS. The partnership will focus primarily on serving home health patients in current locations and on developing additional home health capabilities in communities with CHS hospitals but no affiliated home health care.

Almost Family has been very acquisitive in the last few years, and the company boasted record revenues in its most recent quarterly earnings reports. The home health provider created its Healthcare Innovations segment, which invests beyond home health to diversify the company’s reach, two years ago and hit positive earnings for the company this year.

The partnership is in line with the vision of Almost Family President Steve Guenther, who recently predicted more consolidation across the home health industry, with Almost Family leading the charge with a growth strategy dependent on strategic acquisitions.

The transaction was announced as the largest publicly traded home health care companies—Almost Family, Amedisys Inc. (Nasdaq: AMED) and LHC Group (Nasdaq: LHCG)—all saw their stock prices slump in September.

Written by Amy Baxter