AccentCare Inc. announced Thursday it had acquired Steward Home Care and Hospice, kicking off 2019 by continuing a hot M&A pace set over the past couple years.
The Steward acquisition — effective Dec. 31, 2018 — catapults Dallas-based AccentCare into the new states of Massachusetts and New Hampshire, expanding the company’s reach to 16 states overall. The deal also positions AccentCare as an exclusive preferred post-acute care provider with a well-known health system and lands the company a leading role in one of the nation’s largest accountable care organizations (ACOs).
“There were a number of things that made [this deal] attractive to us,” AccentCare CEO Steve Rodgers told Home Health Care News. “It’s the ability to establish a relationship with a large, very highly regarded health care system. And we really like the Massachusetts market.”
Financial terms of the deal were not disclosed.
AccentCare currently offers an array of post-acute care services — from non-medical personal care to rehabilitative therapy and hospice services — across more than 190 U.S. locations. Its regional brands include AccentCare, AccentCare of New York, Accolade, Alliance For Health, Doctors’ Choice, Guardian Home Health & Hospice, Nurses Unlimited, Sta-Home, Texas Home Health — and now Steward Home Care and Hospice.
Before being acquired by AccentCare, Steward Home Care and Hospice was previously owned by Steward Health Care, one of the biggest for-profit physician-led health care networks in the country. Also headquartered in Dallas, Steward Health Care operates 36 hospitals, plus multiple urgent care centers, skilled nursing facilities (SNFs) and behavioral health branches.
Its affiliated Next Generation ACO is one of 51 participating in the Centers for Medicare & Medicaid Services (CMS) model.
“One of the other most attractive things about the Steward deal is that they run one of the largest ACOs in the country,” Rodgers said. “As part of the deal with Steward, we’re actually contracted into their ACO in the Massachusetts marketplace — and will be moving into more shared-risk arrangements with them around their ACO within the first year.”
With Steward Home Care and Hospice on board, AccentCare will deliver care to more than 110,000 patients and clients annually.
AccentCare setting quick M&A pace
AccentCare has made several strategic acquisitions across the post-acute care continuum since the start of 2017, thanks largely to a strong M&A pipeline and its ability to source deals internally for competitive multiples, Rodgers said.
Just some of its recent acquisitions, for example, have included Accolade Home Care and Hospice, Padre Home Health, Royalty Personal Assistance Service and Quality Care Services, as well as Visiting Nurses and Nurses Unlimited. Sta-Home Home Health & Hospice also falls on that list.
AccentCare was only in 10 states as recently as April 2017.
While Rodgers declined to comment on financial terms around the Steward Home Care and Hospice deal specifically, he said AccentCare has generally been able to keep multiples fair.
Regional home care assets typically come with multiples between 7 and 9 times EBITDA, according to Rodgers. Meanwhile, hospice assets have often checked in around 10 times EBITDA or higher.
“We’ve been fairly lucky this year in most of the acquisitions that we’ve done,” Rodgers said. “We’ve been able to keep our multiples generally in those ranges. I think we’ve done that by self-sourcing most of the assets and not getting them through necessarily competitive bid processes.”
Steward Home Care and Hospice is roughly split 85% to 15% in terms of home health services versus hospice services, according to Rodgers. Its home health census is between 1,400 and 1,500, while its hospice census is about 65 to 70.
AccentCare acquisitions are normally fully integrated within six months, meaning Steward Home Care and Hospice will be fully up to speed around June or July. It takes about nine to 12 months to get AccentCare acquisitions up to its organic growth standards.
“We like to see double-digit growth rates within these assets,” Rodgers said. “Anything under 6% or 8% is subpar for our business.”
‘Running toward’ Medicare Advantage
Before taking the helm at AccentCare in 2012, Rodgers served as CEO of UnitedHealth Group’s OptumHealth Collaborative Care business unit. That experience has given Rodgers a unique perspective when it comes to forging relationships with health plans and the value that a health system partnership brings to the table.
AccentCare has more than 30 regional strategic partnerships with insurance companies, physician groups and major health systems, including joint ventures branded as AccentCare UCLA Health, AccentCare UC San Diego Health at Home and Texas Home Health Group, a home health care affiliation with Baylor Scott & White Health.
The acquisition of Steward Home Care and Hospice fits into that strategy, Rodgers said. While other home health providers may hesitate to embrace Medicare Advantage (MA), which tends to pay lower rates than fee-for-service Medicare, he has a different view.
“I actually believe running toward Medicare Advantage will make you a better business,” he said. “The reality is that the only way we’re going to be able to partner with health plans over time is to establish a margin share with them. When you establish a margin share with them, as their needs become more known within the marketplaces where you’re operating, they’ll turn to you [as a provider].”
At the moment, AccentCare has a care transition program with UnitedHealthcare in Colorado and a full-risk contract established with a health plan in Florida, Rodgers said. Home-based care providers shouldn’t expect to establish a large relationship with health plans or managed care entities unless they share the risk, he said.
A new and lucrative market
Steward Home Care and Hospice is the fourth-largest home health provider in the Massachusetts market, which includes the lucrative metropolitan statistical area (MSA) of Boston.
With a high percentage of utilization of home health services, the Massachusetts market is among the largest home health care markets in the United States, Rodgers said. There are about 1.1 million residents over the age of 65 in the state, accounting for about 16% of the state’s total population, he said. Markets like these make it easier for AccentCare to create smooth operations with robust connections to referral sources.
“We like to be in the big MSAs,” Rodgers said. “And in the MSAs we enter, we like to create size and density.”