[Updated] LHC Group to Acquire Home Health, Hospice Assets in 22 States from HCA-Brookdale Venture

LHC Group Inc. (Nasdaq: LHCG) has already hit a record year for M&A activity.

It added to its streak in a major way on Wednesday, announcing an agreement to purchase Brookdale Health Care Services agencies in 22 states from the recently formed venture between Brookdale Senior Living Inc. (NYSE: BKD) and HCA Healthcare (NYSE: HCA).

Overall, the Lafayette, Louisiana-based LHC Group will purchase 23 home health locations, 11 hospice agencies and 13 therapy businesses, with all acquired entities maintaining their existing brands.


Geographically, the 23 home health assets stretch from Brookdale Home Health in Lynwood, Washington, to Nurse On Call in Shrewsbury, Massachusetts, with several locations scattered in between.

“This just made sense for all three parties involved,” LHC Group Chairman and CEO Keith Myers told Home Health Care News. “That includes Brookdale. They wanted to have a high-quality home health provider serving their residents, so they can keep their residents healthy and [out of the hospital].”

LHC Group expects to close its deal with the HCA-Brookdale venture in the fourth quarter. Annualized revenue from the purchase is about $146 million, according to the company.


“We will see the full benefit of the revenue and earnings associated with this in 2022,” Myers added.

HCA completed its $400 million deal for Brookdale Health Care Services in July, gaining an 80% ownership stake in the senior living giant’s home health, hospice and outpatient therapy segment.

The Nashville, Tennessee-based HCA is a for-profit operator of health care facilities that has more than 2,000 sites of care nationwide, including 185 hospitals, surgery centers, freestanding ERs and more.

At the time of its deal with HCA, Brookdale — headquartered in nearby Brentwood — had 57 home health locations, 22 hospice agencies and 84 outpatient therapy offices across its footprint. 

Strategically, Brookdale leadership decided to sell 80% of its health care services segment to cash in on the strong demand for home health and hospice assets with scale. It also, however, sought a long-term partner that brought more clinical and higher-acuity services to the table for Brookdale residents.

Brookdale, which maintains its stake in the venture with HCA, now adds another national partner in LHC Group, according to President and CEO Cindy Baier.

“We are looking forward to working with LHC Group, another national provider of health care services,” Baier said in the release. “This transaction will further strengthen our liquidity, maintain our 20% interest in the venture with HCA Healthcare, and ensure that high-quality home health and hospice services continue to be available to our residents at communities in these markets. I’m pleased that Brookdale’s residents will benefit from a seamless offering of services across our broad care continuum.”

How it happened

Under terms of the deal announced Wednesday, Brookdale will not have a minority stake in the LHC Group-owned locations after closing.

In turn, the sale to LHC Group further enhances its liquidity position.

“They have balance-sheet challenges,” Myers said. “They maintain 20% ownership in the HCA deal. This allows [Brookdale] to gain liquidity for that 20%, which helps. And they still have a commitment from us to operate the agencies as they are, in the same place, continuing to serve their residents along with other referral sources.”

HCA and Brookdale aren’t offloading all of their home health, hospice and outpatient therapy assets to LHC Group. The only agencies changing hands are those located in areas that HCA Healthcare does not currently serve.

“In July, HCA Healthcare purchased a majority stake in Brookdale Health Care Services to expand access to health care services for our patients,” HCA CEO Sam Hazen noted. “We believe the sale to LHC Group of these sites of care, which were part of that transaction and are not in communities we currently serve, positions them for continued success.”

Currently, LHC Group and its roughly 30,000 employees deliver home health, hospice, home- and community-based services (HCBS), and facility-based care in nearly three dozen states, reaching 60% of the country’s 65-and-older population.

Florida is one of the key common markets for HCA and Brookdale’s home health and hospice branches. Outside of the Sunshine State, though, there are plenty of territories where HCA and Brookdale don’t overlap.

Knowing that, LHC Group had a feeling that there would be a potential opportunity to acquire parts of the HCA-Broookdale venture, Myers told HHCN.

“We had a very good feeling that there would be an opportunity coming to us,” he said. “We know HCA well enough to know that if they don’t have a hospital in a market, then they’re probably not interested in those assets. So that was what led us to start having a conversation with them.”

Timing wise, those conversations began shortly after the HCA-Brookdale venture was first announced.

In addition to familiarity with HCA, LHC Group is also extremely familiar with Brookdale’s health care services segment.

Before a sale was officially announced, rumors surfaced that the senior living operator wanted to sell its home health and hospice lines in December 2020. LHC Group was actually in on that process, too, Myers revealed. 

While they won’t be in a formal JV together, LHC Group will view Brookdale along the same lines as its hospital and health system partners moving forward.

“In Brookdale, we just think of it as seniors whose home happens to be a Brookdale facility,” Myers said. “We’ll be providing care in the home as we would anywhere else.”

A strong pipeline

Once finalized, the deal with the HCA-Brookdale venture will propel LHC Group into the new states of Minnesota and New Mexico while simultaneously expanding its service areas in states where it already operates.

On Aug. 4, LHC Group’s guidance for acquired annual revenue for 2021 was increased from $350 million to $500 million, compared to an original range of $150 million to $200 million. With its latest agreement, the company has now executed or announced plans to carry out $308 million in M&A activity on a year-to-date basis.

“We’re never focused on just one opportunity at a time,” Myers said. “I reviewed the pipeline this morning, and there were more than 20 [M&A opportunities] that were on our shortlist.”

Percentage wise, LHC Group has been able to close more deals in 2021 than even prior to the COVID-19 emergency in 2019. That’s partly because of the pandemic itself, as fewer buyers have been aggressive on the M&A front.

The $146 million of revenue being acquired by LHC Group represents about 40% of the Brookdale Health Care Services segment’s total revenue, a note from BofA Securities analyst Joanna Gajuk pointed out.

Brookdale’s health care services segment brought in $86.6 million during the first quarter of 2021, an 8.4% decline from $94.8 million during the prior year’s period. The segment had also struggled in 2020.

“When Brookdale owned 100% of these home health and hospice assets, it was a shrinking business over the last few years,” Jefferies analyst Brian Tanquilut told HHCN sister publication Hospice News. “There’s a lot of heavy lifting that will have to be done. I think it will take the remainder of this year, all the way up through next year before they can really get these to an LHC Group-level of performance.”

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