Regulatory changes and renewed interest from private equity firms has had a major impact on the home health market over the past few years. That impact is easily observed just by looking at the list of largest home health providers in 2019.
In order, Kindred at Home, Amedisys Inc. (Nasdaq: AMED) and LHC Group Inc. (Nasdaq: LHCG) were the three biggest home health providers in 2019, according to Atlanta-based data and technology firm LexisNexis Risk Solutions, a part of global analytics company RELX (NYSE: RELX).
Encompass Health (NYSE: EHC) and AccentCare rounded out the top five.
Released Thursday, the home health provider ranking is based on yearly medical claims and patient volume data from the LexisNexis MarketView database, which weighs more than 1.6 billion total claims.
While Kindred, Amedisys and LHC Group are the biggest of the big when it comes to home health care, they each still only captured between 4% and about 6% of the national market in 2019. Combined with Encompass Health and AccentCare, the group accounted for slightly more than 20% of overall market share.
“On the home health side, there are roughly 12,000 licenses out there,” Rich Tinsley, president of M&A advisory firm Stoneridge Partners, told Home Health Care News. “The market is extremely fragmented.”
In general, LexisNexis’s 2019 ranking looks noticeably different than its last from 2017.
LHC Group and Encompass Health’s positions were reversed two years ago, for example. The list also no longer includes Almost Family, due to the provider’s successful “merger of equals” with LHC Group in April 2018.
PE-backed AccentCare’s rapid rise is another noticeable difference. In 2017, Dallas-based AccentCare checked in as the 11th-largest home health provider in the U.S., according to LexisNexis.
Advent International unveiled plans to acquire AccentCare from Oak Hill Capital Partners in May for undisclosed financial terms. AccentCare’s post-acute care footprint spans more than 175 locations and 16 states.
“If you asked me to name the top-five largest providers, I would have guessed the first four,” Tinsley said. “But this makes me want to go back and look at how large AccentCare really is. I didn’t realize they were this large already.”
Another key difference between 2017 and 2019 is the inclusion of Elara Caring, formed last year followed the combination of Jordan Health Servies, National Home Health and Great Lakes Caring. Backed by Blue Wolf Capital Partners and Kelso & Company, Elara Caring serves more than 65,000 patients across 16 states, with annual revenue in excess of $1 billion.
Elara Caring is the ninth-largest home health provider in 2019, according to LexisNexis.
Apart from the previously mentioned companies, Brookdale Senior Living Inc. (NYSE: BKD), Bayada Home Health Care, Trinity Health at Home and Interim HealthCare also ranked among the top-10 largest home health providers.
More change coming
Similar to Tinsley, M&A expert Cory Mertz said there are no real surprises on this year’s list of the largest home health providers. Mertz is the managing partner at M&A advisory firm Mertz Taggart.
The top 20 or so on the list broadly make up a good portion of the buyer community, he told HHCN.
“If I had to guess by looking at the list, I’d say the top 20 have completed about 30% to 40% of the transactions out there,” Mertz estimated.
Amedisys, LHC Group and Encompass Health have been particularly acquisitive, each landing industry-shaping deals throughout 2019.
Although all three publicly traded companies have worked to diversify their businesses and expand throughout the continuum of care, Baton Rouge, Louisiana-based Amedisys is the only one to additionally make LexisNexis’s list of the largest hospice providers.
Largely a result of its $340 million acquisition of Compassionate Care Hospice, Amedisys is now the fourth-biggest hospice provider in the country, behind only Vitas Healthcare, Kindred and HCR ManorCare.
Thanks to the Patient-Driven Groupings Model (PDGM) and a phaseout of Requests for Anticipated Payment (RAPs), the industry’s largest providers are well-positioned to further grow their market share in the months and years ahead, Mertz said.
“I do think it’s safe to say the top five — and certainly the top 20 — will gain more than their share of the markets they are in,” he said. “We all expect attrition as a result of, primarily, the RAP phaseout. It’s going to be very difficult for smaller providers to absorb the hit to cash flow.”
As small and mid-size providers exit the market due to PDGM and cash flow issues, their patients will likely have to go to another provider.
Realistically, they’ll go to the ones with ample balance sheets and sufficient infrastructures to absorb more referrals, Mertz said.
Market density is key
Browsing a list of the largest home health providers may be fun, but sheer size isn’t everything, according to Tinsley. It’s often market density that is far more important.
“Size matters, but it matters within your particular [metroplitan service area],” Tinsley said. “So you know, if you’re big in Chicago, that’s important. But it maybe doesn’t matter that you have [a location] in Chicago and one in St. Louis.”
That wasn’t always the case. Years ago, the largest home health companies used to prioritize size, touting the tens of thousands of patients they served and all the states where they had operations.
“But then people realized, hey, that doesn’t mean they’re efficient or effective,” Tinsley said.
Lafayette, Louisiana-based LHC Group is methodically strengthing its market density, aiming to tri-locate home health, hospice and personal care services in one area. During that process, LHC Group typically solidifies home health first, then shifts to hospice and home- and community-based services.
April Anthony — CEO of Birmingham, Alabama-based Encompass Health’s home health and hospice segment — specifically cited market density as a driver in her company’s $217.5 million deal for Alacare Home Health & Hospice.
“We certainly had a presence in the state of Alabama, but we were not dominant in the state of Alabama,” Anthony told HHCN shortly after the deal was announced in April. “Now with the Alacare acquisition, this really gives us the opportunity to build a dominant presence there and to leverage those economies of scale and those reputational benefits that come with being a large player in the market.”
The full LexisNexis list of the 100 largest home health providers is available here.