‘The Clock Is Ticking’: What Addus’ $192M Hospice Deal Means for Home Health M&A

On last week’s Q3 earnings call, Addus HomeCare Corporation (Nasdaq: ADUS) effectively declared that its “short pause” on M&A activity was officially over. On Wednesday, the company put its money where its mouth is.

The Frisco, Texas-based provider announced it has signed an agreement to acquire Queen City Hospice and its affiliate, Miracle City Hospice, for a cash purchase price of $192 million.

Paired with the company’s executives’ comments on last week’s call, the acquisition is an early sign of Addus building out what it calls “a three-legged stool” in markets where it is already present. That stool is made up of personal care, home health and hospice services.


“We want to continue to look at the clinical side of our business, adding home health and hospice in markets,” Addus CEO Dirk Allison said on the earnings call. “Because we find that as we have all three legs of the stool, so to speak, that is something that our managed care providers and Medicaid providers … are very interested in.”

In Ohio, Addus already has eight home care locations. This massive deal will go a long way in completing that three-legged stool in the state.

Currently, Addus provides home care services to about 44,000 consumers through 214 locations across 25 states, as well as home health and hospice.


On its end, Queen City Hospice is a portfolio company of the private equity firm Stonehenge Partners. It operates in the major Ohio markets of Columbus, Dayton and Cincinnati — where it is based — and has annualized revenues of about $56 million. It serves an average daily census of about 900 patients across the state, and its 600 employees will also be added to Addus’ network.

The $192 million number represents $162.8 million of value, net of the present value of $29.2 million in estimated tax benefits, according to Addus. The Queen City Hospice acquisition, along with two other closed acquisitions in 2020, brings Addus’ total acquired annualized revenues to about $82 million.

Addus expects the transaction to be immediately accretive to its financial results. It will also likely be a stepping stone to more home health transactions in months to come.

“This proposed acquisition is aligned with our strategy of providing hospice and home health care in markets where we already have a significant personal care presence,” Allison said in a press release. “With this acquisition, Ohio becomes the second state where we have the capability to provide all three levels of home care.”

That other state is North Dakota. While Addus believes it’s unrealistic to have all three service lines bolstered in every state it operates in, it is looking at “four or five states” to complete that three-legged stool.

What’s next

Addus is already one of the leading providers of home care in the U.S., which makes its ambition to create three levels of care in its biggest markets all that more significant. In other words, one of the behemoths in home care is looking to become a comprehensive leader of home-based care.

“We have strategically maintained a strong capital structure, which allows us to pursue acquisition opportunities as they occur,” Allison said in a press release announcing yesterday’s news. “We are now fully engaged in the process of identifying and pursuing acquisition opportunities in each of our three operating segments.”

The company wants to get its clinical side up to about 25% of its business, Allison told Home Health Care News sister site Hospice News, meaning more acquisitions are on the way.

In Q3, for context, personal care services represented just over 85% of the company’s net service revenue, while hospice and home health represented around 12% and 2%, respectively.

“Down the road, we will look at other opportunities on the clinical side,” Allison said. “I would say in 2021, we’ll be really looking at home health opportunities. We’re thinking that after we get through some of the COVID environment, some of the smaller agencies may be looking to see what they want to do in the future — and we’ll certainly be looking at that. But I would say all three levels of care would both stay in our framework, as far as acquisitions.”

In 2021, other companies are likely to be pursuing similar strategies in a year that could be “record breaking” when it comes to M&A, Mark Kulik, the managing director of M&A advisory firm The Braff Group, told HHCN.

“Addus is certainly executing on its strategy very well … I think they’ve done a great job,” Kulik said. “And I believe other national companies are going after the same thing — being able to provide that total patient care on the continuum.”

The valuation for Queen City Hospice is “staggering” at $192 million, as Kulik put it, but that is likely a sign of a trend — particularly in hospice — moving forward.

“That’s all part of the synergies that they’re going to seek to attain once they get those three business lines working together,” Kulik said. “I think there’s a clock that’s ticking on the hospice side. Everyone on the health home health services spectrum is seeking hospice agencies right now.”

There are a finite amount of opportunities out there, and that’s why while Allison said Addus will be diligent and careful in its M&A searches. It will be opportunistic above all else.

“I think there’s an exercise here of being able to walk and chew gum at the same time,” Kulik said. “You’ve got to be opportunistic to find the quality home health providers of scale, while not not turning your attention 100% away from finding quality hospice providers of scale. … Once they’re gone, they’re gone.”

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