Last September, ModivCare Inc. (NYSE: MODV) acquired the large personal care services provider Simplura Health Group for $575 million. Less than nine months later, ModivCare President and CEO Daniel Greenleaf shared a vision for growing his company to a $1 billion home-based care player with a true national footprint.
ModivCare has now taken a giant leap toward that goal.
The Denver-based health care services company announced Monday that it has reached an agreement to acquire CareFinders Total Care LLC, another large personal care business with strong density in the Northeast. Under terms of the transaction, expected to close in 2021’s third quarter, ModivCare will acquire 100% of the equity interest in CareFinders for a purchase price of $340 million.
“We’re excited to announce a meaningful addition to our business with the acquisition of CareFinders Total Care,” Greenleaf said during a Monday conference call to discuss the deal. “This transaction broadens access to in-home personal care solutions for patients, and it supports our strategy to be the partner of choice for caregivers, payers and states as we continue to advance our goal of creating the industry’s first truly national personal care platform.”
With the core of its legacy business in the non-emergency medical transportation (NEMT) space, ModivCare is unlike any other home-based care provider. The company delivers roughly 75 million rides in a normal year, operating across 49 states.
Among the many reasons, ModivCare decided to enter the personal care space to build a one-stop shop that could transport patients, then care for them, following a hospital discharge. In addition to its transportation and personal care lines, ModivCare also delivers nutrition support and other offerings focused on the social determinants of health.
“Creating healthier communities means providing connections and more reliable care,” Greenleaf continued. “And with the acquisition of CareFinders, we’re incredibly excited about advancing health equity for those who need it most.”
Once the acquisition of CareFinders is completed, ModivCare’s personal care segment will include nearly 16,000 caregivers working across seven states, providing about 30 million hours of care to 18,000 patients per year.
“CareFinders has been dedicated to improving the lives of our patients and creating a uniquely rewarding environment for caregivers throughout our history, so it is a natural fit for us to join the ModivCare family of integrated supportive care solutions,” CareFinders CEO Jim Robinson said in a press release announcing the news.
Robinson and other members of the CareFinders management team are expected to stay on with ModivCare moving forward.
The benefits of overlap
ModivCare and CareFinders are no strangers to each other, with ModivCare partnering with the personal care provider to arrange more than 85,000 rides for caregivers headed to patients’ homes during COVID-19 pandemic.
Geographically, CareFinders has a scaled presence in New Jersey, Pennsylvania and Connecticut. That matches up perfectly with ModivCare’s existing footprint, which includes those three states plus Florida, Massachusetts, New York and West Virginia.
“One of the beauties of this is the overlap,” Greenleaf said on the conference call. “We basically overlap in all three states we do business with, so we already have a working knowledge of the markets that CareFinders is in. I can’t underscore how important that is.”
About 88% of CareFinders’ service mix is tied to Medicaid, with a small portion linked to private pay and other sources. For the 12 months ended March 31, 2021, CareFinders’ pro forma revenue was about $202 million, according to supplemental information shared by ModivCare prior to the conference call.
Combined, ModivCare and CareFinders would have a pro forma revenue of about $654 million for that same period. ModivCare’s overall revenue for the 12 months ended March 31, 2021, was $1.74 billion.
ModivCare’s overarching goal for its personal care segment is to create a business that does $1 billion in revenue with $100 million of EBITDA, according to Greenleaf.
While CareFinders certainly helps ModivCare get closer to those figures in a big way, Greenleaf and his team are already evaluating follow-on opportunities.
In fact, ModivCare is targeting as many as 20 companies at any point in time, the CEO explained.
“We are constantly evaluating growth opportunities,” he said. “We believe the possibilities are limitless as we continue to expand our footprint, and we look forward to continuing to disrupt the way supportive care is delivered across the U.S. in order to improve health outcomes for vulnerable populations.”
The aforementioned purchase price is inclusive of estimated $34 million of net present value tax attributes generated by the transaction, implying a net purchase price of $306 million, according to ModivCare. The company intends to fund the transaction through a combination of cash on hand and its credit facility.
“The transaction is projected to deliver immediate earnings accretion to ModivCare,” CFO Heath Sampson said in the press release. “Furthermore, in addition to an exciting long-term trajectory, we expect near-term momentum from the business as COVID-19 pressures recede and recent rate increases are implemented.”
Beyond the bottom line
Beyond the immediate benefits around scale and density, the agreement to buy CareFinders also strengthens ModivCare’s partnerships with states and payers, Greenleaf said.
“Our strong regional presence will further bolster our partnerships with the state payers and managed care organizations we serve, as we become a one-stop shop for supportive care services that address the social determinants and health,” he said. “ModivCare has excellent long-standing relationships with its states and payer partners in the markets in which CareFinders operates, and we expect this transition to strengthen these bonds.”
On top of that, the deal helps on the recruitment and retention front, partly thanks to CareFinders’ reputation as a high-quality employer.
During some of the worst stretches of the pandemic, CareFinders was among the organizations that offered hazard pay for workers to show appreciation, for example.
“It’s one thing to be grateful and share during times of plenty,” Robinson previously told HHCN. “But it’s a whole other thing to actually share in times of need, and that’s when the most appreciation is [needed].”
Despite several near- and long-term tailwinds, home-based care providers often remain caged in by workforce shortages and their ability to handle new cases.
Taking on CareFinders’ thousands of caregivers will go a long way toward solidifying ModivCare’s future growth goals.
“Caregivers are a vital part of our organization,” Greenleaf said. “And being able to successfully increase our caregiver count will allow us to accelerate our organic growth and meet the strong demand that exists for personal care services.”
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