Hospice Continues to Trump Home Health Care on M&A Front

Frisco, Texas-based Addus HomeCare Corporation (Nasdaq: Adus) has signed a definitive agreement to purchase Hospice Partners of America LLC for $130 million cash, the multi-state home care services provider announced Monday.

The move is yet another example of how hospice is outpacing home health care on the M&A front.

Frisco, Texas-based Addus is primarily a personal care services company — with more than 33,000 employees — that currently provides home-based care services, including home health and hospice, to tens of thousands of consumers across two dozen states.


Hospice Partners of America is a Birmingham, Alabama-based provider that serves an average of 1,000 patients per day through 21 locations across Idaho, Texas, Virginia, Kansas, Missouri and Oregon. The company has an annual revenue of about $55 million.

As part of the deal, Hospice Partners of America’s management team and clinical staff will join Addus.

The acquisition, along with three others the company has closed in 2019, brings Addus’s total acquired annualized revenues to $130 million.


Besides Hospice Partners of America, Addus’s recent acquisitions include VIP Health Care Services in addition to Alliance Home Health Care and its affiliate, House Calls of New Mexico LLC.

In general, Addus’s play for Hospice Partners of America falls in line with the company’s growth strategy of adding hospice services in markets where Addus already has an established personal care presence, according to Dirk Allison, the company’s president and CEO.

In Addus’s Q2 2019 investor presentation, the company identified hospice as an emerging growth opportunity, calling it complementary to personal care while stating it provides additional revenue and payer diversity.

“Since the acquisition of Ambercare in 2018, we have been looking for additional opportunities to expand our hospice services, and we are delighted to have this opportunity to combine a well-regarded hospice operation like Hospice Partners of America with our existing operations,” Allison said in a press release announcing the deal. “Importantly, this will also provide a strategic initial entry for Addus into the Texas market, which will provide potential growth opportunities.”

Last year, Addus purchased Albuquerque, New Mexico-based Ambercare Corporation Inc. for $40 million. Ambercare was a provider of personal care, hospice and home health services that served 2,600 consumers across 15 locations in New Mexico.

Broadly, Q2 home health, home care and hospice M&A transaction activity has been largely driven by hospice demand, according to data from M&A advisory firm Mertz Taggart.

Overall, there were roughly 14 hospice related transactions in Q2 2019, an increase over the eight deals that took place in Q2 2018.

There are many reasons for the increased interest in hospice, but perhaps none bigger than the looming Patient-Driven Groupings Model (PDGM) — the biggest overhaul to the home health industry in roughly two decades.

While PDGM and its assumption-based behavioral adjustments bring uncertainty, the hospice reimbursement landscape is comparatively stable.

The U.S. Centers for Medicare & Medicaid Services (CMS) issued its final rule for hospice payments in Fiscal Year 2020 earlier in August, including a payment rebasing that raises rates 2.7% for three higher-acuity levels of care and cuts routine home care by a corresponding 2.7%.

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