The home health dealmaking train keeps on rolling, with the latest transactions coming from Amedisys Inc. (Nasdaq: AMED) and Charter Health Care Group, a private equity-backed post-acute care provider.
On Wednesday, the Baton Rouge, Louisiana-based Amedisys announced it signed a definitive agreement to acquire the regulatory assets of a home health provider operating in Randolph County, North Carolina. The transaction, expected to close on April 30, will allow the home health, hospice and personal care powerhouse to set up shop in and around the Randolph area, offering its services to upwards of 31,000 Medicare and Medicare Advantage enrollees.
Overall, Amedisys cares for more than 418,000 patients per year, doing so across 514 care centers in 39 states and the District of Columbia.
“We’re honored to be able to offer our compassionate, clinically distinct care to more patients in more places,” Amedisys Home Health President Teonie Aurelio said in a statement. “Expanding our footprint into this key market further establishes Amedisys as America’s solution for aging in place.”
Meanwhile, the Southern California-based Charter announced Tuesday it has acquired The Providence Hospice Inc. and The Providence Home Health Services Inc., affiliated post-acute care entities located in the Houston market. The Providence deal marks the sixth acquisition for the Pharos Capital Group-owned Charter since early 2020.
Founded in 2006, Charter provides care to more than 4,500 patients across 17 locations in seven states, with a particularly strong footprint in the SoCal region. The integrated health care organization offers hospice, home health and complex care management services under its model.
“We are pleased to add Providence to our growing portfolio and expand our high-quality, post-acute care services to the Houston area,”Charter CEO Steve J. Larkin said in a statement. “Like the other companies we have brought under our umbrella, Providence shares our culture of providing compassionate, comprehensive care solutions for patients and families navigating the final years of life.”
After a persistent pause in the action due to the Patient-Driven Groupings Model (PDGM) and the COVID-19 pandemic, home health M&A activity has inched closer to an all-time high.
After a handful of home health-related transactions in the second quarter of 2020, buyers and sellers connected on 11 deals in Q3, according to data from M&A advisory firm Mertz Taggart. The fourth quarter of last year climbed to 17 home health-related transactions, with Q1 of 2021 seeing at least 12 deals in total.
“Demand is at an all-time high,” Mertz Taggart Managing Partner Cory Mertz told Home Health Care News. “I’ve been selling in-home care companies for 15 years and have never seen a market quite like this one. Like everything, this too will cycle.”
No signs of slowing down
Home health dealmaking activity in Q1 2021 was likely down slightly compared to the end of last year because potential buyers were working to close their recently executed deals, Mertz said.
If the Amedisys and Charter deals are signs of things to come, the second quarter will likely pick up a bit, though the market “can change on a dime” due to unforeseen policies, regulations or health emergencies, he added.
“Honestly, I can’t think of many real challenges with getting deals done other than what we may see any other time — some sort of failure during diligence,” Mertz said. “Otherwise, all systems are ‘go.’ Money is accessible. Because valuations are so high, we don’t have as many gaps between expectations and where the market is.”
Additionally, the public companies and strategic buyers continue to do well, which also helps drive up deal activity. On top of that, there is no bad news lurking regarding reimbursement changes in the near future.
In fact, the winds of policy are blowing in the home health industry’s favor, as the Biden administration has already taken or proposed steps to reinforce the nation’s home- and community-based services infrastructure.
“The investment community and the analysts that cover the public stocks are anticipating long-term structural changes in the way care is delivered post-COVID,” Mertz said.
Amedisys is one of those public companies gearing up for a big 2021, with its executives fully expecting a restart of the inbound dealmaking phone calls taking place in early 2020, just before the pandemic began.
When Amedisys closes on the Randolph County acquisition, it plans to open a startup care center to serve patients in the newly acquired service area. The company had previously discussed a strategy of acquiring the right to operate in a certain market from an existing
provider, then opening up a de novo location.
CEO Paul Kusserow has specifically highlighted its hospice de novo success in the past.
“We had one [de novo] last year to test it out, and it went well. So we are back in the business of building, mostly hospices but also some home health. The cost for that is quite low,” Kusserow said at the William Blair 2019 Growth Stock Conference in Chicago. “It takes us about 10 months and half a million dollars to build a hospice, but we believe that is something we should be continually focused on.”