In the wake of the planned LHC Group (Nasdaq: LHCG) and Almost Family (Nasdaq: AFAM) merger, executives are bullish on growth and expansion.
While leadership of both companies are calling their combination better, faster, stronger, the biggest opportunities for the merger may lie in continuing more deals between health systems and hospitals and post-acute care providers.
JV opportunities
Lafayette-based LHC Group, which has long conducted joint venture deals with health systems and hospitals, has hailed its merger with Almost Family as one “almost by design,” as the two companies have few overlapping markets. Almost Family has also stepped up its deals with health systems, striking a joint venture with a major Texas-based system last year. Looking ahead, the combined companies will seek more of these deals.
“A lot of it has to do with momentum and awareness,” LHC Group CEO Keith Myers told Home Health Care News on future joint venture opportunities. “At LHC, we’ve been doing hospital JVs for a long time. …Hospitals and health systems need someone to manage [post-acute care] services. It’s a great opportunity… it’s also risky, you have to do everything very well and they are not forgiving if you don’t. This merger takes that risk off the table.”
Almost Family has seen LHC Group’s success in joint ventures, and also sees more growth opportunities for joint venture deals, Almost Family CEO William Yarmuth told HHCN.
The combined company will also expand service lines on both sides, including adding more personal care to LHC Group. In addition, both companies are already converted to the same technology system—Homecare Homebase. However, all operational efficiencies cannot be predicted at this point in the transaction.
“That cross pollination between the two companies has been exceptional in their own right, and together it’s going to drive efficiencies and synergies for growth that are hard to measure right now.”
At the same time, the merger shifts some leaderships, including Yarmuth, who will shift to a special advisor role post merger.
“I’m committed to the company going forward,” Yarmuth told HHCN. “[This is] not an exit strategy. It’s very easy for me to say Keith is the right guy to be the CEO of the combined companies. I’m ready to support the energy and the effort any way I can.”
Industry influence
The merger comes at a time when the industry has been facing some tough regulatory proposals, including the recently defeat home health groupings model (HHGM), which would have cut roughly $950 million in payments in 2019. The model also proposed to switch the current 60-day episode of care to a 30-day payment period. The proposal was not finalized in the prospective payment system (PPS) 2018 update, which included a payment cut of $80 million, or 0.4% from the industry for 2018.
In the context of a once-major threat to the industry, the HHGM proposal may have actually helped bring the LHC Group and Almost Family together—though both Myers and Yarmuth are quick to point out HHGM had no bearing on the decision to merge the two companies.
“It was the catalyst of talking about the future and where things are going, but it nothing to do with the rationale of why this transaction made sense and why it has made sense for a long time,” Yarmuth told HHCN of the groupings model proposal.
Myers agreed.
“We both have a very long-term view of the industry, we’re very bullish on the industry,” Myers said. “We don’t spin out of control every time a new regulation comes out.”
Still, it may be worth noting that the industry is increasingly working together to form a more powerful voice in the hopes of having more policy influence. The inception of the association ElevatingHome had aims to bring industry voices together to help bring home health care into the spotlight and center of the health care system.
As the two companies come together—the transaction is expected to be completed during the first half of 2018—the industry could continue to face payment cuts and potential reform, but the consolidation could boost voices and influence.
Written by Amy Baxter
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