In-home care powerhouse LHC Group Inc. (Nasdaq: LHCG) has reached an agreement to acquire Heart of Hospice, an end-of-life care provider with locations in five states. Financial terms of the deal were not disclosed.
The transaction announcement comes a week after LHC Group unveiled similar plans to buy Idaho-based Heart ‘n Home Hospice for an undisclosed sum. Together, the two new deals further illustrate the Lafayette, Louisiana-based provider’s previously outlined M&A strategy and ongoing expansion into the hospice market.
As of this March, LHC Group had 537 home health locations, 120 hospice locations and 124 home- and community-based services (HCBS) locations, operating across roughly three dozen states overall. The company has historically been a home health-heavy organization, but it has increasingly turned its attention toward hospice while waiting for the dust to settle on the Patient-Driven Groupings Model (PDGM) and the COVID-19 pandemic.
“We’re very bullish on hospice. I hope you heard us say that clearly,” LHC Group CEO and Chairman Keith Myers recently said during the BofA Securities 2020 Virtual Health Care Conference. “I think in home health, we see a lot of opportunity for consolidation in markets where we already have a footprint.”
In 2016, LHC Group brought in a little over $900 million in consolidated net service revenue, with 73% of that coming from its home health service line and 15% — or $131.6 million — coming from its hospice business.
LHC Group’s consolidated net service revenue more than doubled to almost $2.1 billion in 2020, with less than 71% of that coming from its home health service line. Hospice, in comparison, accounted for nearly 12% — or $243.8 million — of the revenue total.
“The majority of our corporate [development] efforts — I mean, let’s call it two-thirds, one-third — I think now are being spent on hospice and growing that service line,” Myers continued. “We’ve said that, but we’ve said that for a lot of years.”
LHC Group is buying Heart of Hospice from EPI Group, a family-owned holding company based in Charleston, South Carolina. Expected to close sometime during the third quarter of 2021, the deal includes 16 hospice agencies in Arkansas, Louisiana, Mississippi, Oklahoma and South Caroline.
The acquisition is expected to produce $92.5 million in annualized revenue. LHC Group expects to generate nearly $20 million in yearly revenue following the separate Heart ‘n Home Hospice deal, plus another $23 million from a third hospice-related deal announced in May.
All in all, LHC Group has potentially acquired more than $135 million in hospice revenue since May 18.
“The conversion to PDGM and our need to focus operations on home health, then the disruption/opportunity resulting from COVID, really caused us to focus more on growing home health organically and perfecting the PDGM model,” Myers said at the BofA Securities event. “And for 2020 and probably early 2021, focus more intensely on hospice.”
During its Q1 2021 earnings call, LHC Group executives noted the company has an M&A pipeline of about $502.5 million, the bulk of which is for hospice.
The provider’s overarching M&A strategy has been to co- or tri-locate home health, hospice and HCBS in strategic markets, allowing LHC Group to care for patients on a longitudinal basis as their needs change.
“Hospice is competitive, but we look at it a little bit differently. We’re building out a continuum of care,” Myers said during the Q1 call. “We know that we have volume to bring to the table from our home health operations and from hospital partners. Multiples are high, and in some markets we can model out the combination and make it work nicely for us.”