Another large health system is breaking into home health care and hospice.
Dallas, Texas-based Cornerstone Healthcare Group made its first dive into the spaces earlier this month with the acquisition of Phoenix, Arizona-based Southland Home Health. Financial terms of the deal were not disclosed.
The acquisition is the first of many similar deals in the works, Cornerstone Healthcare Group President and CEO Steve Jakubcanin told Home Health Care. In line with the trend of hospitals and health systems turning to outside agencies to grow their home health offerings, Cornerstone Healthcare Group has plans to pursue a number of external home health targets going forward.
“We are certainly looking to acquire small to medium sized agencies outright and enter into the right JVs and partnerships in addition to that,” Jakubcanin said. “I foresee [in] the next few years having our home health and hospice size be 10 times what it is today, and it would be through a combination of acquisitions and partnerships.”
Cornerstone Healthcare Group — which is not affiliated with Ensign Group subsidiary Cornerstone Healthcare Inc. — is owned by funds managed by Highland Capital Management, an investment management firm.
Apart from the recent addition of home health, the organization has three main operating segments — long-term acute care, behavioral health and senior living — with 18 specialty hospitals, one behavioral health facility and eight senior living communities across the South.
Meanwhile, Southland Home Health provides skilled home health, palliative care and hospice care across the greater Phoenix area. It will continue to operate under its current brand.
The goal of the acquisition and Cornerstone Healthcare Group’s future growth in the sector is to embrace the progression of health care into the home and to better serve patient’s wishes, Jakubanin said.
“The drive [into home health] isn’t necessarily worrying about owning each part of the continuum,” the CEO said. “It’s more being focused on helping people age in place.”
Cornerstone Healthcare Group’s decision to pursue home-based services is a recent one, Jakubcanin explained.
“The way I think about it is there’s always going to be a need for in-patient care, for hospitals and for acute care,” Jakubcanin, who was formerly the COO for post-acute health care provider AccentCare, said. “But I think as technology continues to evolve, it’s really continuing to enable more and more care to happen in the home, and ultimately I think that’s where patients want to be.”
Also based in Dallas, AccentCare has likewise operated with a heavy home focus in recent years. In September 2018, for example, the company acquired Accolade Home Care and Hospice, a move that made AccentCare’s regional branch the largest home health, hospice and personal care provider in Texas.
Cornerstone Healthcare Group chose Southland Home Health as its first acquisition target because of its long-standing reputation in Phoenix, where its been serving clients since 2009 and where Cornerstone Healthcare Group does not currently have any other operations. Going forward, acquisitions will be equally intentional, Jakubcanin said.
“We’re being pretty selective,” he said. “It’s really important our partners match our values and are organizations that are well-known and well-respected.”
Most of all, home health targets must put patients first.
“[Joint ventures and partnerships] are really a core competency of ours,” Jakubcanin said. “The thing that makes our organization really good at those is we’re really good at aligning culture, values and goals. A big part of that is we really only partner with organizations that place the patients needs and wants first and foremost in everything they do.”
Due to financial and workforce challenges such as reimbursement lags, complex regulatory changes and caregiver shortages, an increasing number of hospitals and health systems are pursuing joint ventures, partnerships and M&A opportunities to offer home health services, rather home growing their own programs.
Cornerstone Healthcare Group is looking for opportunities on both sides of the aisle, with its eyes on home health agencies, hospitals and health systems. For example, the organization recently formed a joint venture with Louisiana-based Lake Charles Memorial Health System to operate its long-term acute care hospital.
Similar opportunities could also exist for Cornerstone Healthcare Group’s other operating units, Jakubcanin said.
“That’s an absolutely key part of what we are looking for,” said Jakubcanin, who took over as president and CEO in January 2017. “We’ve got several discussions in the works with a few key health systems that … are not quite ready for press yet. We’re absolutely looking for those and hoping to do more of them.”
Jakubcanin also sees a number of crossover opportunities between Cornerstone Healthcare Group’s various operating units, specifically senior living and home health — but not necessarily tied to referrals.
“The ability for the leaders in those different segments to collaborate is going to be higher here,” Jakubcanin said. “I think as we move down the road I expect to see some innovation in those areas that I think will be an interesting differentiator for us [compared to] straight senior living or straight home health.”
Highland Capital Management is an SEC-registered investment adviser that, together with its affiliates, has approximately $15.4 billion of assets under management.