Joining Forces: 2024’s Hospice Investment, Consolidation Trends

Hospice investment trends took myriad routes this year, seeing a few common threads occurring among nonprofit and for-profit entities that hint at where the market may be heading.

You are viewing: Joining Forces: 2024’s Hospice Investment, Consolidation Trends

The scope of hospice deals in 2024 encompassed joint ventures and collaborative affiliations in addition to acquisitions. Some of these transactions were fueled by value-based reimbursement and unmet needs among underserved patients.

Rising demand, workforce growth and organizational culture are three significant pieces driving much of the recent hospice merger and acquisition (M&A) activity, according to Andrew Molosky, president and CEO of Chapters Health System, a large Florida-based nonprofit hospice provider.

“The universally binding commonality seems to be that consumer desire is on the rise, employee attraction and retention is more critical than ever, and the delicate balance between an organization’s competitive nature and internal culture is critical,” Molosky told Hospice News in an email. “If you can strike that balance, you can and should be competitive, no matter the unique makeup of your specific marketplace.”

Chapters Health provides hospice, home health, palliative care and other services in its home state, as well as in Georgia, Maryland, New York, New Jersey, Virginia and the District of Columbia. Affiliations with other hospice and senior service entities have been a cornerstone of Chapter’s growth. Its most recent deal took place in October when Chapters affiliated with four nonprofit hospices across three Western states.

Nonprofit affiliations and joint ventures have been an important part of strategic growth plans among some of the largest providers in the hospice landscape for several years running.

Hospice consolidation trends

Hospices have long-sought out hospital and health systems as key partners in JVs, a trend not anticipated to abate soon, according to Tom Lillis, partner at Stoneridge Partners Strategic Consulting. These types of partnerships allow home health and hospices to reach more patients during pivotal points in their illness trajectories from key referral sources such as hospital and health systems, Lillis stated.

Hospices have increasingly represented a larger piece of the valuation equation in JVs compared to home health assets, he said.

See more : Databricks nears 9.5 billion mega-investment

“We’re seeing more and more activity in joint ventures with health systems and that’s both in home health and hospice to capture those referral sources,” Lillis told Hospice News. “The valuations in these deals are tilted more towards hospice than in home health.”

Compassus is among the providers placing JV growth as a central part of its strategic focus. Joint ventures have been crucial to growing the reach of the company’s home health, home infusion, palliative and hospice care services, according to CEO Michael Asselta.

The home-based company provides care across 30 states and is a portfolio company of the private equity firm Towerbrook Capital Partners and the health system Ascension Health. Compassus’ most recent JV came in October when the company penned a deal with Providence Health’s home-based care business line. In February the company formed a JV with Ohio-headquartered Bon Secours Mercy Health (BSMH).

“Hospice is actually the biggest part of our business … and it’ll probably be among the largest in the future, because our future joint ventures that I see pretty close to what’s coming down the pipeline all involve hospice as well as home health,” Asselta previously told Hospice News. I think that hospice will continue to be a large, if not the largest, piece of Compassus’ business, if you were to look at it by business line.”

JVs have also been key to sustainable growth among nonprofit hospices and smaller entities, attracting the interest of investors in other health care settings such as senior living space.

In August two Ohio-based senior living operators created a joint venture branded as Hospice of Greater Cleveland. Judson Senior Living and McGregor Senior Living Communities had long-collaborated prior to the deal, with each company running their own hospice programs within their respective facilities, which they combined through the JV.

A large driver of the JV for the organizations was seeing strength in numbers when it came to meeting patient demand and balancing clinical capacity, according to Judson CEO Kendra Urdzik.

“We can do this better together with combining our two smaller entities and really forming a cohesive group and taking the best of what we both do, bringing our teams together to form truly a full service hospice program that could not only serve the residents on our campuses, but grow into the community,” Urdzik previously told Hospice News.

Hospices’ upstream interest fueling investments

Hospices are also fueling more strategic focus upstream, seeking partnerships and transactions that diversify their services beyond the end of life.

More hospices are forming some type of collaborative, strategic partnerships aimed at reaching patients earlier in their illness trajectories, taking varied approaches to shaping these deals, said Patrick Miller, president and CEO of NorthStar Care Community (NSCC). The organization is a network of nonprofit Michigan-based hospices with a combined footprint spanning 60 counties in the state.

See more : Federal investment brings internet access to rural areas

A number of factors are driving this upstream trend, including value-based payment trends, disease-specific reimbursement models, population needs and potential changes to end-of-life care delivery, Miller indicated.

“Many hospice leaders are saying, ‘We’ve got to go upstream,’ and really look at the overall aging population,” Miller told Hospice News. “We see growth of palliative care as one competitive arena, growth of special needs programs, PACE and dementia programs. It’s pretty wild west, but not a bad thing. Some of it is working, some of it is struggling, but overall hospice is ripe for opportunity. Hospice may not always exist as a benefit, but caring for people at the end of life will always be there. So it’s safeguarding what role we will play and ensuring care is compassionate and done with real accountability.”

Hospices have increasingly sought growth across the continuum, with some forming strategic partnerships with providers of various services such as primary care as well emergency and urgent care.

Partnering with other health care providers can play an important role in both geographic expansion and improved patient outcomes for hospices, according to VITAS Healthcare Chairman and CEO Nick Westfall. The Florida-based hospice provider is a subsidiary of Chemed Corp. (NYSE: CHE) and has locations across 15 states and in Washington, D.C.

These partnerships have been pivotal in VITAS’ ability to build an effective strategy toward sustainable census growth and improved lengths of stay, and will remain a sticking point in future investments, Westfall stated.

VITAS in October acquired Covenant Health and Community Services’ hospice business in an $85 million deal. The transaction has served as a key growth engine for the company while expanding its footprint in Florida and Alabama markets.

“We have demonstrated the ability and interest in partnering with other providers through acquisitions to ensure communities receive the best possible patient care,” Westfall said in a recent earnings call. “We are extremely optimistic in the ability of VITAS to maintain an above-average historical growth, both organically and through potential acquisitions over the next few years.”

Hospices seeking to move upstream in their strategic investments need the ability to bear risk in payer contracts, according to Miller. Hospices that can demonstrate financial stability alongside strong quality metrics have the greatest potential to diversify in other health care areas and compete in an expanding value-based reimbursement landscape, he stated.

The forthcoming end of the hospice component of the value-based insurance design (VBID) demonstrative takes effect Dec. 31. Despite its expiration, value-based reimbursement may fuel consideration of deals taking place in a post-Medicare Advantage hospice carve-in landscape, Miller indicated.

“The end of the carve-in might just be this moment in time, perhaps there will be different pilots and ways to test hospice in value-based models to come,” Miller said. “Underpinning that nontraditional hospice route is an ability to have really strong quality and demonstrate that ability to impact the total cost of care in a market and have financial stability. Those will continue to play a role in the market and grow as we move toward value-based care.”