Amedisys Inc. (Nasdaq: AMED) has an agreement in place to acquire Contessa Health, one of the biggest players in the hospital-at-home market, for $250 million.
The acquisition takes Amedisys’ total addressable market for in-home care services from $44 billion to $73 billion, according to the company. Strategically, Amedisys believes it can leverage its existing home-based care capabilities and national footprint to accelerate Contessa’s growth.
The transaction, which Amedisys will fund via cash on hand and through its credit facility, is expected to close later this summer.
“Today’s announcement is a strategic and promised milestone for Amedisys’ strategic growth and differentiation, as we expand our capabilities to reflect growing market demands and evolving patient preference for higher-acuity in-home settings,” Amedisys Chairman and CEO Paul Kusserow said in a statement.
The Nashville, Tennessee-based Contessa helps health systems provide hospital-level care in the home through its Home Recovery Care model. The need for such services has exploded during the COVID-19 crisis, as health systems have sought to free up bed space inside their facilities.
Founded in 2015, Contessa’s current health system and payer partnerships include Mount Sinai Health System, Marshfield Clinic Health System, Ascension Saint Thomas, CommonSpirit Health, Highmark Health and others.
Beyond in-home hospital care, Contessa has also been developing SNF-at-home programs, plus a home-based palliative care offering. Mount Sinai Health System is among the partners that have already turned to Contessa on the palliative care front.
Once the acquisition is finalized, Contessa will become a wholly owned division of Amedisys.
Shortly after the agreement was announced, Amedisys and Contessa held a joint conference call to go over their combined strengths. During that call, Kusserow said Contessa marked a “strategic milestone” in Amedisys’ history.
“With the signing of this deal, we are taking a material step in realizing our innovation strategy to provide more and better care in the home to all who want it,” he explained. “[We’re] further differentiating ourselves from the traditional home health and hospice industry.”
Amedisys is one of the largest providers of home health, hospice and personal care services in the U.S. It delivers its services to over 418,000 patients per year through 514 care centers in 39 states and the District of Columbia.
The Baton Rouge, Louisiana-based company has additionally partnered with 2,900 hospitals and 78,000 physicians nationwide to provide post-acute care.
With Contessa in tow, Amedisys will be able to treat higher-acuity patients in their homes, a point that has been a focus of the company in the past year.
“While Amedisys continues to be a national leader in quality home health and hospice services, we have always worked to innovate and provide even more types of care in the home, as patients increasingly seek to ‘age in place’ in environments that are familiar and safe,” Kusserow said. “Bringing the Contessa team into our family significantly advances this strategy.”
Since its launch, Contessa has raised at least $59.8 million, according to Crunchbase. Its previous investors include Blue Cross BlueShield Venture Partners, Deerfield Management, Health Velocity Capital, Martin Ventures, Noro-Mosely Partners and Optum Ventures.
As a part of the deal, Amedisys plans to not only invest in future growth for Contessa, but also its proprietary informatics platform, “CareConvergence.” CareConvergence is a data and analytics platform that helps with care management, revenue cycle and insurance claims.
“We launched Contessa with the ambitious vision of creating innovative models that would allow as many patients as possible to receive higher-acuity care in their preferred setting – the home,” Contessa CEO Travis Messina said in a statement. “In the years since, we have made great strides toward that goal and are proud to partner with some of the nation’s top health systems and payors to treat more patients in their homes.”
Recently, Contessa’s growth has been accelerated by industry tailwinds such as the Centers for Medicare & Medicaid Services’ (CMS) “Acute Hospital Care at Home” waiver.
Now that industry insiders are expecting some version of that waiver to continue, Contessa’s value proposition is even higher.
“To continue building on the momentum we’ve created and to take advantage of all the growth opportunities which currently exist, we wanted a partner with a national footprint, a reputation for outstanding clinical quality, and the scale and infrastructure available to accelerate our trajectory,” Messina continued. “Amedisys has all of that and more.”
The $250 million purchase price represents a multiple of 3.9 times 2022 revenue, according to Amedisys. For reference, other tech-enabled health care services companies are trading at about 6 times 2022 revenue.
Apart from its existing partners, Contessa is currently targeting 133 health systems across 28 states. In the past, one of the company’s biggest challenges has been staffing, as it takes a highly qualified clinician to support hospital-level care in the home.
Amedisys has a history of being a best-in-class employer, which reinforced its standing as an attractive partner, Messina said during the post-announcement conference call.
“This is not traditional home health,” he said. “Making sure that you have someone who’s willing to invest in high-quality nurses … is absolutely critical to success.”
During the call, Kusserow was careful to note that Amedisys will be investing heavily around Contessa and its continued growth, suggesting the asset won’t become an immediate revenue booster.
Even so, Amedisys believes it has plenty of firepower to still pull off traditional acquisitions in the home health, hospice and personal care spaces.
“We have some good deals in the pipeline,” Kusserow said.
Messina, along with his management team, will continue to lead Contessa. The business will maintain its brand and operate as a separate and unique segment within Amedisys.
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