59% of Health Care CFOs See Home Care as Key Investment Area

The majority of health care financial leaders view home care as a key area of investment.

That’s according to a recent survey from BDO, a Chicago-based accounting, tax, financial advisory and consulting organization. Released Monday, the survey includes the responses of 100 CFOs at U.S. health care organizations, including home health providers, with revenues ranging from $250 million to $3 billion.

Specifically, 12% of the CFOs surveyed were leaders at home health or hospice organizations.

The COVID-19 virus is among the drivers making home care a priority. One of the impacts of the public health emergency is that it forced many health care organizations to reevaluate their areas of focus and specialties in order to address patient needs.

When looking toward 2021, 59% of surveyed CFOs identified home care as a priority investment.

This finding further suggests that home-based care providers demonstrated their value in delivering care during the past several months. As the U.S. still faces ongoing COVID-19 surges, the demand for home-based care will likely continue to grow.

“The home health setting has seen many significant contributions to the value-based care supply chain,” Steven Shill, partner and national leader of the BDO Center for Healthcare Excellence & Innovation, told Home Health Care News in an email. “I think the pandemic has just served to confirm an already valuable process.”

Aside from home care, 56% of surveyed financial executives identified elder care as a priority investment.

Another 77% of CFOs said they’re looking to fund primary care.

“A significant number of in-home primary care users are the elder population,” Shill said. “As there is a transition to Medicare Advantage, you will see an acceleration of in-home primary care. The reason is that, when a physician, nurse or [physician’s assistant] visits higher-risk patients in their homes, patients are less likely to need emergency room visits, acute care hospitalizations or institutionalization in a [skilled nursing facility] for example. This will likely reduce the overall costs.”

In addition to identifying key investment areas, the survey also touched on emerging trends. From an M&A perspective, for example, 42% of surveyed CFOs said they believe the COVID-19 emergency will cause increased consolidation throughout health care.

In fact, many health care organizations went into the public health emergency with already weakened balance sheets, according to Shill.

Many have been able to stay afloat thanks to the Paycheck Protection Program (PPP) and CARES Act funding, but eventually, those wells will run dry.

“The focus on consumerism, the move towards value-based care and a major drive toward digitization in health care — trends that existed prior to the pandemic — all contributed to consolidation,” Shill said. “Many health care organizations pre-pandemic did not have the resources to address these trends, which in turn caused them to have weakened positions in the marketplace, increasingly inefficient operations and significant losses to patient volumes, all ultimately resulting in them becoming financially weakened and forcing them to either merge, be acquired or shut down.”

Additionally, BDO’s survey found that partnerships will likely take center stage in 2021.

About 31% of surveyed CFOs said they had plans to acquire physician practices. Another 28% said they planned on merging with another organization, with 24% planning to form a joint venture.

In the home-based care space, this move toward partnerships could be a business opportunity for providers.

“The home health sector has historically been heavily fragmented, often lacking professional leadership and appropriate levels of capital investment,” Shill said. “That is why, in the few years prior to the pandemic, it was getting a lot of attention from private equity. As institutional health care continues focusing on value-based care and overlaying it with the impact of the pandemic, it would seem that this type of partnership will likely see an acceleration.”

BDO’s survey was conducted by Rabin Research Company, an independent marketing research firm.

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New York Moves Up COVID-19 Vaccination Eligibility for Home Care, Hospice Workers

Home care and hospice workers are now part of the pool of New Yorkers eligible to receive the COVID-19 vaccine.

The New York State Department of Health originally announced that home care and hospice workers would be eligible to receive the first dose of the vaccine starting on Jan. 11. This placed these individuals in the Week 5 group of the state vaccination program.

The department updated that plan last Monday, moving home care and hospice workers to the Week 4 group receiving the vaccine starting on Jan. 4. 

This development didn’t just happen overnight. In fact, it was the result of a significant push from New York home-based care associations, Roger Noyes, director of communications at the Home Care Association of New York State (HCA-NYS), told Home Health Care News.

“I would say that is a huge development, and it’s something that we’ve been pushing for several weeks to ensure that there was a prioritization in Phase 1A for home care and hospice workers,” he said. “It took a lot of conversations with the state department of health and the city department of health.”

HCA-NYS is a state trade organization that represents nearly 400 home- and community-based care providers and organizations.

Noyes noted that — because of the infrastructure currently in place, which involves the 10 regional hubs of New York overseeing the vaccination system — the distribution-planning process involved multiple conversations with various agencies and players. 

Home Healthcare Workers of America was also part of the overall advocacy push. The organization, which represents over 26,000 in-home care workers, saw firsthand the need for urgency when it comes to vaccination.

“During this time, tragically, we have lost 12 aides from the start of this to the present,” Joe Pecora Jr., the organization’s vice president, told HHCN. “Our members were desperately asking for access to the vaccine. We’re happy that the governor’s office and the department of health have agreed to move up their eligibility. This is a lifeline.”

New York state employs more than 210,000 home care aides, labor statistics show.

Home Healthcare Workers of America is a part of the International Union of Journeymen and Allied Trades (IUJAT). The organization represents workers primarily located in the five boroughs of New York City.

Throughout the COVID-19 emergency, visibility has been a major challenge for home-based care organizations. At times, this resulted in these organizations being overlooked.

Being prioritized for vaccine eligibility represents a shift, according to Noyes.

“Whether it was [personal protective equipment] status or authorization to visit patients in their own homes when there were travel restrictions in place, this has been an issue,” he said. “To now have, at this pivotal stage of the vaccination rollout, home care and hospice workers in early, that is an important accomplishment.”

For now, HCA-NYS has been keeping its members updated on the logistics and procedures for actually getting the vaccine.

It’s a process that has run the gamut, according to Noyes.

“For instance, some agencies, I understand, have ordered the vaccine, and I don’t know whether they’ve received it yet, but they have plans to vaccinate their own staff — to actually have their own agency be the point of dispensing a vaccine for their workers,” he said.

Meanwhile, other agencies have opted to instruct their staff to essentially make their own appointments with the various dispensing hubs that are being set up across the state.

In these cases, HCA-NYS has provided instructions around what information workers need to bring to these appointments in order to prove they’re Phase 1A. Similarly, it has helped its members understand what documentation they need to retrieve from the vaccination site.

So far, New York City’s mass vaccination efforts have gotten off to a rough start.

Despite a surge of new COVID-19 cases, few people have been vaccinated. This has left public health experts concerned, according to reports from The New York Times.

Overall, only 167,949 of 489,325 doses of the vaccine — roughly 34% — have been administered as of Friday. The rate for New York state overall is over 40%, according to The New York Times.

The vaccination rollout potentially creating hiccups that would impact home care and hospice workers is a concern, according to Noyes.

“Home care and hospice workers are now in priority 1A,” he said. “But if there’s concern that the vaccine is not being administered to health care workers at the rate it should be because of hesitancy, … then there’s going to be a big impetus to push through to the other phases. Certainly, there are other priority groups that need the vaccine quickly, but my concern is whether or not this push could squeeze out access for home care and hospice workers.”

Elsewhere, early last week Los Angeles County’s home care companies received confirmation that non-medical caregivers are part of the first group eligible for vaccination.

Prior to this confirmation, home care companies weren’t clear on whether their employees were part of this group, which includes their home health counterparts.

Home health leaders and clinicians in various parts of the country have also begun to highlight their vaccine experiences on social media. That group includes Dr. Steve Landers, president and CEO of the Visiting Nurse Association Health Group Inc.

Senior living operators have ramped up their vaccination efforts as well.

On Dec. 21, for example, Brookdale Senior Living Inc. (NYSE: BKD) announced it had held its first community vaccine clinics, with plans to schedule more across the company’s 726 communities.

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$1.4 Trillion Spending Package Extends Sequestration Holiday, Grants Home Health OTs More Authority

As different health care stakeholders combed through the new $1.4 trillion spending package approved by Congress on Monday, many likely felt a mix of excitement and disappointment.

Included in the nearly 6,000-page spending package was a $900 billion COVID-19 relief bill, changes to home health therapy rules, certain hospice provisions and more. That’s really just the tip of the iceberg, too, as it’s unlikely that even the lawmakers who voted on the package read it in its entirety.

Home-based care insiders are in the process of doing so. So far, there’s reason to be happy about the relief package, which now awaits President Donald Trump’s signature.

“We are grateful that Congress recognized the need to support home care and hospice during the pandemic,” William A. Dombi, the president of the National Association for Home Care & Hospice (NAHC), told Home Health Care News in an email.

In addition to the previously noted items, Dombi called attention to the package extending the Medicare sequestration holiday, which was initially set to expire at the end of this month. More CARES Act grants, an extension of the Medicaid Follows the Person (MFP) program and extra spousal impoverishment relief are likewise victories for home health and hospice operators, NAHC’s president said.

“[There is also] the expanded SBA Paycheck Protection Program (PPP) and more that will help keep [home health] and hospice operational,” Dombi added.

Specifically, $284.5 billion more has been added for a second round of PPP loans for businesses with less than 300 employees and a demonstrated revenue loss greater than 25%.

The extended sequestration suspension is a major win for all Medicare-reimbursed health care providers, which have faced a 2% cut since 2014. Providers across the country continue to deal with new, previously unexpected expenses and erratic revenue patterns.

The new pause on sequestration runs through March 31.

Additionally, the spending package and COVID-19 relief includes nearly $70 billion to purchase and distribute vaccines, plus funds to help states conduct testing. About $20 billion of that funding will be dedicated to making the vaccine available at no cost for certain individuals.

Other COVID-19 specifics include $22.4 billion for testing, contact tracing and other prevention practices necessary for combatting the virus. Another $3 billion was included for additional grants for health care providers to be reimbursed for expenses or lost revenues tied to COVID-19.

For Medicare-funded home health businesses, $175 billion more has been put into the Provider Relief Fund, which could grant them a lifeline until the pandemic subsides.

Therapy changes

Similar to NAHC, the American Occupational Therapy Association (AOTA) celebrated certain provisions on the $1.4 trillion spending package.

In what AOTA called a “historic home health victory,” the package includes language from the Medicare Home Health Flexibility Act that enables occupational therapists (OTs) to open home health therapy cases. The U.S. Centers for Medicare & Medicaid Services (CMS) will have one year to implement a rule allowing for that change.

“Today we celebrate hard-fought victories for occupational therapy scope of practice and payment, following extensive AOTA-led advocacy initiatives,” the advocacy organization wrote in a statement.

OTs were granted the flexibility to open up home health cases during the public health emergency, but this bill will allow them to do so moving forward. AOTA said it has worked for “decades” on this measure.

The bill also made COVID-19-related telehealth flexibilities permanent.

Funding for hospice providers, small businesses

The “Rural Access to Hospice Act” and the “Helping our Senior Populations in Comfort Environments (HOSPICE) Act” were also included in the spending package.

Rural health clinics and federally qualified health centers cannot currently bill under Medicare Part B for hospice, which often becomes a barrier to caring for remote populations. With the Rural Access to Hospice Act in place, providers will be able to receive payment for services to patients in hospice, which will help those populations.

The National Hospice and Palliative Care Organization’s (NHPCO) was happy with the hospice provisions.

“NHPCO appreciates this bi-partisan, bi-cameral agreement,” NHPCO President and CEO Edo Banach said in a statement. “Hospice patients and families will benefit from improved access in rural and underserved communities as well as needed relief during this public health emergency. This legislation will enable hospice providers to continue providing uninterrupted care during this unprecedented time.”

Adult day providers weren’t as lucky. There were no specific provisions aimed at helping those operators during the public health emergency.

Katie Smith Sloan, the president and CEO of the aging-focused organization LeadingAge, previously discussed how Congress has fallen short in its efforts when it comes to helping adult day centers around the country.

What may help these providers, as well as other home care organizations, is the new round of PPP money that’s included in the package. If they are able to qualify, which most should be able to, that will at least ease some of the payroll burden that they’ve faced amid the public health emergency.

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AccentCare, Seasons Finalize Merger Aimed at Streamlining Patient Care

AccentCare and Seasons Hospice & Palliative Care have cleared all regulatory hurdles and officially merged, the post-acute care providers announced Tuesday.

The Dallas, Texas-based AccentCare is ranked as the fifth-largest home health provider in the nation in terms of overall market share, according to LexisNexis statistics. Similarly, the Rosemont, Illinois-based Seasons is listed as the fifth-largest hospice provider in the U.S.

The two providers — along with AccentCare’s private equity sponsor, Advent International — were able to finalize their merger agreement in a little over a month’s time. The companies initially unveiled their industry-shaping plans on Nov. 16, with AccentCare CEO Steve Rodgers digging into the strategy during the Home Health Care New Capital+Strategy event on Dec. 8.

“We’ve had a very successful hospice business internally at AccentCare,” Rodgers said at the event. “But it hasn’t necessarily been one at scale.”

Prior to the merger, those operations formed “about a $70 million hospice business,” the CEO noted. That number will grow substantially with Seasons, which offers compassionate care through 31 programs in 19 states.

AccentCare leadership began identifying areas to invest in last year. After deciding to “go big” on hospice, the company weighed tuck-in options while also reviewing some of the larger, high-quality providers up for grabs.

Seasons’ reputation, investment in its workforce and geographic footprint made it a natural fit, Rodgers said.

“From a culture standpoint, they’re very culturally aligned with AccentCare, which is one of the No. 1 things we always look for,” he said. “The second piece, though, really had to do with them being in big urban marketplaces, just like AccentCare tends to be in larger urban marketplaces.”

Together, the combined organization will operate more than 225 sites of care across 26 states, employing nearly 30,000 workers.

Additionally, the merged enterprise will maintain several dozen joint ventures and partnerships with health systems, physician practices and payers.

The combined AccentCare-Seasons will be headquartered in Dallas, with its hospice division still based out of Rosemont. It will care for more than 175,000 patients and families each year.

“Season gives us the whole continuum of care, kind of across the board, in addition to being able to supplement these partnerships we have out there in the marketplace,” Rodgers said. “We can bring new services into [those partnerships].”

Seasons subsidiaries included in the merger include Health Resource Solutions, a home health provider in Illinois, Nebraska and Indiana with a patient census of about 2,500. Gareda, a personal care business in Illinois that serves about 4,500 clients a year, is also included.

“The last piece, I’d say, that got us excited about [Seasons] is they have a very mature palliative care group,” Rodgers added. “And I think we all know that the complexity of the patients we are responsible for taking care of is increasing.”

Guggenheim Securities served as the exclusive financial advisor to Seasons Hospice & Palliative Care in the transaction.

“We’re thrilled to head into the New Year as one organization,” Seasons CEO Todd Stern said in a Tuesday press release. “The impact that we’re able to have together, with combined resources and new technologies, will only enhance the patient experience and quality of care for the individuals we serve and the partners who count on us.”

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The Care Team Expands Footprint with InTeliCare Purchase; CareFinders Buys Union Home Care

The Care Team acquires InTeliCare

Private equity-backed The Care Team has acquired InTeliCare Home Health & Hospice. The financial terms of the deal were not disclosed.

Farmington Hills, Michigan-based The Care Team is a home-based care provider that delivers a variety of services including nursing, therapy and hospice services across central and eastern Michigan. The Care Team is a portfolio company of the Denver-based PE firm Revelstoke Capital Partners.

InTeliCare Home Health & Hospice is a Michigan-based care provider that operates in Standish, Gaylord and Traverse City.

For The Care Team, the deal was an opportunity to join forces a company that closely aligns with its goals in terms of care delivery, Jason Laing, CEO and founder of The Care Team, said in a statement.

“The Care Team and InTeliCare share similar cultures and a strong commitment to patient care, clinical excellence and compliance,” Laing said. “We see a tremendous opportunity to combine the strengths and capabilities of both companies.”

The deal expands The Care Team’s footprint and places the company in a stronger position to negotiate with payers and referral partners moving forward.

“With the acquisition of InTeliCare, The Care Team will have the ability to treat patients across the entire lower peninsula of Michigan, which will allow us to be better partners to our payer and referral relationships,” Jonny Miller, vice president at Revelstoke, said in a statement.

CareFinders Total Care purchases Union Home Care

CareFinders Total Care has purchased Union Home Care, a Pennsylvania-based home care services provider.

Founded in 1995, Hackensack, New Jersey-based CareFinders provides in-home care services to more than 8,500 patients throughout New Jersey, Pennsylvania and Connecticut. It has 26 offices in total.

For CareFinders, the deal is another opportunity to expand its Pennsylvania footprint. Currently, the company has six offices in the state.

“Union Home Care is a high-growth, premier home health agency in the Philly market offering Medicaid personal care services,” CareFinders CEO Jim Robinson said in a press release. “This newest member of the CareFinders family of companies has an impeccable reputation for high-quality personalized care. With our expanded footprint in Philadelphia, this acquisition takes us one step closer to our goal of becoming the No. 1 home care services company in the Northeast.”

Both organizations align when it comes to values and an overall mission, Mila Mendel, the founder of Union Home Care, said in a statement.

“This is an exciting change that will benefit our clients, our caregivers and our health care partners, and I am excited to help lead this charge,” Mendel said.

Moving forward, Mendel will serve as the executive director of CareFinders’ Philadelphia division. She will also oversee growth plans in that market.

Home-focused health care organizations receive approval to merge

Florida health systems Empath Health and Stratum Health System have been granted formal approval to merge from their board of directors. The organizations’ originally announced plans to merge back in February.

Both organizations provide care in the home setting through their networks. Stratum Health System oversees and supports both Approved Home Health and Avidity Home Health, two agencies with multiple locations in southwest Florida.

Meanwhile, Empath Health offers home health care as a part of its wide-ranging services. The company also focuses on patients with advanced or chronic illnesses.

The merger will create the country’s largest not-for-profit health system, according to the two organizations. Combined, the enterprise will serve more than 6,000 patients daily.

In total, the organizations would have an estimated annual gross revenue of $300 million.

Empath Health and Stratum Health System will continue to operate under their current banners.

Additionally, Rafael Sciullo, president and CEO of Empath Health, will continue in this role. Jonathan Fleece, president and CEO of Stratum Health System, will serve as president.

“As the saying goes, bigger does not automatically make you better,” Sciullo said in a press release. “It is what we do with that opportunity that will allow us to create meaningful change while continuing to excel at doing what we do best, … providing compassionate care to our patients and their families.”

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Encompass Health Exploring ‘Strategic Alternatives’ for Home Health, Hospice Segment

There may soon be a major shakeup of the home health and hospice markets.

Encompass Health Corp. (NYSE: EHC) announced Tuesday it is “exploring strategic alternatives” for its home health and hospice business, which brought in total segment revenue of $274.5 million in the third quarter of 2020 and $1.09 billion in all of 2019, according to company financial filings.

The Birmingham, Alabama-based Encompass Health currently ranks as the fourth-largest home health provider in the nation, LexisNexis data suggests. Overall, its U.S. footprint includes 242 home health locations and 83 hospice locations.

“Since joining together with Encompass Home Health and Hospice in 2015, we have generated substantial growth in both our business segments, and we continue to deliver high-quality, cost-effective, integrated care to a growing number of our patients,” President and CEO Mark Tarr said in a statement.

The company is considering “a range of options” for its home health and hospice business, including a full or partial separation from Encompass Health through an initial public offering, spin-off, merger, sale or other transaction.

Tuesday’s news has apparently been in the works for a while, as Encompass Health’s board of directors has been evaluating an array of alternative strategies and structures for some time. The board has elected to make an official announcement as it proceeds with a more formalized process, the company noted.

No timetable has been established for the completion of the strategic review. Encompass Health does not intend to disclose further developments with respect to its strategic review process.

“Our primary focus this year has been to ensure Encompass Health’s best possible response to this unprecedented global pandemic,” Lee Higdon, chairman of the company’s board of directors, said. “This notwithstanding, the U.S. health care delivery system continues to change, and we believe the time is appropriate for us to further reassess the corporate structure that may optimize the strategic positioning and growth of our businesses.”

This is a developing story. Please check back later for further updates.

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Legislation Aimed at Expanding Advance Care Planning Introduced in Senate

On Wednesday, Sen. Richard Blumenthal (D-Conn.) introduced the Compassionate Care Act, a bill that would support advance care planning and end-of-life care.

For home health providers with existing hospice service lines or ambitions for expanding into palliative care, the news is encouraging. If passed, the Compassionate Care Act places more resources behind public awareness campaigns for these services.

Specifically, the legislation would throw federal support behind a public education campaign that promotes the importance of advance care planning, something that often goes overlooked. This would include grants and pilot initiatives aimed at educating medical, nursing and social work students.

Additionally, the Compassionate Care Act focuses on the development of end-of-life quality measures and expanding access to advance care planning through telehealth.

“This bill will help Americans have the difficult but necessary conversations about end-of-life care,” Blumenthal said in a statement. “The COVID-19 pandemic has reminded Americans of all ages of the importance to have a plan in place in case of severe illness or death. By promoting end-of-life care through public awareness, expanding telehealth services and working with physicians, we can ensure that not one more person is robbed of making critical life or death decisions for themselves during this pandemic and beyond.”

If enacted, the Compassionate Care Act would also, among other things, establish guidelines for advance care planning and develop continuing education criteria for health care providers in the arena. It would further allow physicians to recertify hospice stays through telehealth, which could reduce paperwork and administrative burdens.

It’s become increasingly common for home health providers — with hospice, palliative care and other services in place — to function as an almost one-stop-shop for aging services.

Companies such as LHC Group Inc. (Nasdaq: LHCG), Amedisys Inc. (Nasdaq: AMED), Addus HomeCare Corporation (Nasdaq: ADUS) and several others have viewed hospice care as part of a larger strategy to encompass multiple care capabilities.

On the palliative care front, reimbursement remains a challenge, however.

So far, the legislation has garnered support from a number of health care advocacy organizations including LeadingAge, the Coalition to Transform Advanced Care (C-TAC), National Partnership for Healthcare & Hospice Innovation (NPHI), the National Hospice and Palliative Care Organization (NHPCO) and the National Association for Home Care & Hospice (NAHC).

“Consumer awareness of the importance of advance care planning, as well as an understanding of the array of care options at the end of life, is critical, a truth we have only seen magnified by the COVID-19 pandemic,” Katie Smith Sloan, president and CEO of LeadingAge, said in a statement, “This important legislation provides much-needed resources to develop educational programs, initiatives and strategies for both consumers and providers that will ensure greater access to and understanding of advance care planning and end-of-life care.”

In addition to her role at LeadingAge, Sloan also serves as acting president and CEO of Visiting Nurse Associations of America and ElevatingHOME.

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States Starting to Prioritize Home Health, Hospice Workers in Vaccination Plans

Pfizer, Moderna and the University of Oxford are among the organizations to tout highly effective COVID-19 vaccines this month. With “the cavalry coming,” the focus is now shifting to how, when and where vaccines should be distributed.

In September, the American Health Care Association (AHCA) and National Center for Assisted Living (NCAL) urged state leaders to prioritize nursing homes and assisted living communities for vaccine distribution, pointing to the tragic deaths among both residents and staff. In-home care advocates and other aging services stakeholders have made similar overtures.

Early policies out of Texas suggest those outreach efforts are paying off.

Workers in long-term care settings serving high-risk, vulnerable populations should be part of the first group to receive COVID-19 vaccines, according to new recommendations from Texas’ COVID-19 Expert Vaccine Allocation Panel. That includes home health workers.

“These guiding principles established by the Expert Vaccine Allocation Panel will ensure that the State of Texas swiftly distributes the COVID-19 vaccine to Texans who voluntarily choose to be immunized,” Governor Greg Abbott, a Republican, said in a statement.

In addition to long-term care workers, hospital staff members and emergency medical responders directly caring for COVID-19 patients will likewise receive early access to a vaccine.

Specifically, home health workers are included in Texas’ “Tier 1” prioritization category, along with hospice staff. “Tier 2” includes outpatient settings where health care providers are treating patients exhibiting COVID-19 symptoms.

Nearly 3,700 health care providers and institutions in Texas have signed up to receive vaccine shipments, The Dallas Morning News reported, attributing the information to a spokesman from the Department of State Health Services.

“This foundation for the allocation process will help us mitigate the spread of COVID-19 in our communities, protect the most vulnerable Texans, and safeguard crucial state resources,” Abbott’s statement continued.

While Texas is one of the only states so far to directly call out home health workers, others have broadly identified “health care workers” as early vaccine recipients.

In California’s framework unveiled Monday, for example, state officials said the goal is to first vaccinate the state’s 2.4 million health care workers, including first responders and those who work in congregate care settings.

Full Phase 1 distribution recommendation will be ready by Dec. 1, according to Democratic Governor Gavin Newsom, who recently had to quarantine with his family after his children were exposed to the coronavirus.

“The first tranche of vaccinations will be extraordinarily limited,” Newsom clarified.

Considering the developments in Texas, it’s likely that even more states will focus on in-home care workers in days to come. Doing so certainly makes sense from a numbers standpoint, as home health and hospice agencies employ millions of workers who deliver care to even more high-risk individuals each year.

In 2018, the country’s network of roughly 11,500 home health agencies cared to 3.4 million Medicare beneficiaries, according to the Medicare Payment Advisory Commission (MedPAC). In doing so, they delivered roughly 6.3 million visits.

Most of those beneficiaries suffered from multiple chronic conditions and had trouble eating, bathing or dressing.

In 2019, home health agencies employed an estimated 1.5 million workers, according to the Alliance for Home Health Quality and Innovation’s 2020 Chartbook, produced in conjunction with Avalere Health.

While Texas is clearly prioritizing home health and hospice workers, it is unclear whether “health care workers” also includes front-line professionals in the non-medical home care field.

How government officials define “home care” has been an issue throughout the COVID-19 pandemic, especially in regard to paid-leave rules outlined in the Families First Coronavirus Relief Act (FFCRA).

Even if states prioritize home health and home care agencies for a COVID-19 vaccine, it’s not a guarantee that workers will opt for one, especially with all the unknowns and potentially unpleasant side effects.

Participants in Moderna and Pfizer’s coronavirus vaccine trials told CNBC in September, for instance, that they experienced “high fever, body aches, bad headaches, daylong exhaustion and other symptoms” after receiving the shots.

For the 2019-2020 flu, vaccination coverage among health care personnel was 80.6%, according to the U.S. Centers for Disease Control and Prevention (CDC). By occupation, flu vaccination coverage was highest among physicians, nurses, pharmacists, nurse practitioners and physician assistants.

Flu vaccination coverage was lowest among health care aides and non-clinical personnel, the CDC notes.

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‘They’re Calling Us Up, Asking for Help’: How Health System Struggles Factored into the AccentCare-Seasons Merger

The coronavirus didn’t directly lead to the recently announced merger between AccentCare Inc. and Seasons Hospice & Palliative Care, but it played a pretty prominent role.

On Monday, Dallas-based AccentCare and Rosemont, Illinois-based Seasons revealed they’ll soon join forces to create a new post-acute care powerhouse. While the decision to merge made sense due to the companies’ similar geographic footprints, their complimentary services and a variety of other reasons, it was also a strategic response to the changing needs of the U.S. health care system.

“I think there are a few overlying trends that are taking place in the marketplace that we’ll … be better positioned to take advantage of,” AccentCare CEO Steve Rodgers told Home Health Care News.

Since the start of November, the United States has had more than 2 million new coronavirus infections, bringing the nation’s grand total to more than 11 million cases since spring. Health systems and hospitals are once again nearing a breaking point, with many already at max capacity or stretched dangerously thin on the staffing front.

In fact, just a day before AccentCare and Seasons unveiled their merger plans, Rodgers was on the phone with the COO of a major health system in the Upper Midwest. During the call, the health system executive noted how one of its hospitals had dozens of incoming COVID-19 patients at a time when 35 ICU nurses were out because of community-related coronavirus exposure.

“They’ve got about 35 to 40 patients they need to get out of the hospital that they’re asking for help with,” Rodgers said.

To extend capacity and redirect patients, more and more health systems are turning to in-home care providers like AccentCare, Seasons and others. Their pursuit of innovative home-based care models started to pick up in 2019, but it has since intensified due to the coronavirus.

For proof, one need only look at the several hospital-at-home programs that have popped up over the past eight months, with the latest example being Quincy Medical Group in Illinois, which has its own program in the works. “A number of” health systems have specifically asked AccentCare to accelerate their hospital-at-home activities, Rodgers confirmed.

“[COVID] has elevated the complexity of the patients coming out of the health systems,” he said. “And what you need is a greater and a wider breadth of capability to be able to take care of those patients.”

Alone, AccentCare and Seasons were already two of the biggest post-acute care players in the home health and hospice spaces, with each delivering a wide range of services. Together, though, they’ll be better able to care for those high-acuity patients coming from their health system partners.

The two companies expect to finalize their merger before the end of 2020, pending regulatory approval. Once they do, the combined enterprise will offer home health, hospice and personal care services across 225 sites of care in 26 states, employing nearly 30,000 workers.

Overall, the AccentCare-Seasons combination will have more than 60 partnerships with health systems and physician practices, collectively providing care to more than 175,000 patients and families annually.

“Health systems are beginning to feel it,” Rodgers said. “And they’re calling us up, asking for help.”

Moving forward, in-home care providers with a breadth and depth of services will be best positioned for hospital-at-home models and similar opportunities related to shifting care away from acute settings. In all likelihood, the merger between AccentCare and Seasons will be followed by even more industry-shaping deals to come, with technology also factoring into the equation.

“The other thing that you’re going to continue to see is just an acceleration of technology into the home,” Rodgers said. “If you’re a larger organization, you’re more able to make the investments in the technology and the services that you can use to support your strategic partners out there.”

In addition to strengthening its ability to take on complex patients from acute settings, AccentCare’s merger with Seasons gives it newfound access to physician services, another advantage in today’s health care ecosystem.

“One of the more difficult areas for us to coordinate is physician services,” Rodgers said. “Seasons brings a very advanced medical group practice in each state they do business in. Although that practice is very hospice-focused now, we see it as an opportunity to be able to expand our capabilities into more complex populations, to supplement the community-based physician services that are available.”

Internally, AccentCare is beginning to once again feel the impact of the COVID-19 virus across some of its markets, particularly around staffing. The company — backed by private equity firm Advent International — currently operates across more than 179 locations in 17 states.

It was among the very first home health providers to speak publicly about the coronavirus and its response strategy.

“We’re beginning to see pickup in a number of marketplaces, especially with those that have positive diagnoses above 50 per 100,000, or 100 per 100,000,” Rodgers said. “You’re seeing an increase in employee absenteeism associated with positive cases out there.”

Seasons Hospice & Palliative Care is also feeling the effects of the current surge, CEO Todd Stern told HHCN. Continued access to patients in facility-based settings has been one specific challenge, he noted.

“We’re seeing a little bit more of the restricted access,” Stern said. “But the demand continues to be there.”

Seasons offers end-of-life care services to more than 30,000 patients a year, with operations spanning 19 states and 31 Medicare-certified programs.

“There’s no shortage of need for our services,” Stern said. “It’s quite the opposite.”

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How TRU Community Care Used Telehealth to Revamp Its Palliative Care Program

Despite a vital need for palliative care in community settings, home-based care providers have been slow to invest in such services. Providers have often cited financial concerns as a roadblock.

Yet those providers that have turned their attention to palliative care frequently see positive returns. TRU Community Care, for example, saw its palliative care segment grow by 103% over the course of nine months, partly due to the implementation of new telehealth tools.

Founded in 1976, Lafayette, Colorado-based TRU Community Care is a Medicare- and Medicaid-certified, nonprofit health care organization. The company’s service lines include home health, hospice, assisted living and palliative care.

At the end of 2019, TRU Community Care began its process of revamping its palliative care program. This meant expanding the programs to include physicians, NPs, RNs, social workers, chaplains and care navigators.

It also meant forming a partnership with Boulder Community Health, which created a strong referral pipeline.

But the secret sauce was adopting remote patient monitoring technology, enabling TRU Community Care to transition from in-person to virtual visits in December, according to Michael McHale, the company’s president and CEO.

“More and more people are living with advanced illness. And now because of COVID-19, people are feeling so isolated from their health care resources,” McHale told Home Health Care News. “I think that our expansion into telemedicine enabled them to have a connection back to the health care community.”

Currently, TRU Community Care serves roughly 820 patients across Boulder, Broomfield, Adams, Jefferson, Denver and Weld counties in Colorado.

Typically, palliative care services provide specialized treatment focused on relieving symptoms, often for patients with serious illnesses.

“When you look at traditional palliative care, obviously providers and social workers going out and making visits, we do it based on acuity, whether that be weekly, monthly or bi-monthly,” Chad Hartmann, director of palliative care at TRU Community Care, told HHCN. “With the remote patient monitoring, it gives us the opportunity to oversee those patients and what’s going on with those patients every single day.”

Since providing palliative care through telehealth, TRU Community Care has completed over 15,000 minutes of virtual visits.

Prior to adding virtual visits, nurses entering patients’ homes were able to complete a maximum of five visits per daily. This number jumped to nine patients daily after adding virtual visits.

The new process allowed TRU Community Care to more easily track and trend patients’ disease progression over time, but it also was an added benefit in responding to the COVID-19 emergency.

“It’s really a mutual desire to limit folks coming into the home and then limiting exposure to COVID-19,” McHale said. “Right now, as in most of the country, Colorado is seeing an uptick in COVID diagnoses. We’re finding that more and more people don’t want someone coming into their home.”

Last year, TRU Community Care participated in a mHealth Impact Lab, University of Colorado study. The study found that TRU Community Care was able to save $40,000 through the use of virtual visits.

Historically, palliative care has not been associated with strong reimbursement, however.

Last month, the National Association for Home Care & Hospice (NAHC) publicly stated the organization’s plans to push for the recognition of palliative care as one of the services provided under the Medicare home health benefit.

TRU Community Care went the telehealth route because of the Centers for Medicare & Medicaid Services (CMS) “Patient Care First (PCF) – Seriously Ill Population (SIP)” demonstration. The payment model, part of the Primary Care First initiative, has yet to publicly announce which providers have been accepted to participate.

Still, the organization saw the program — and use of telehealth — as a way to achieve cost-effectiveness.

“The only way that we could see it make sense is if the majority of our visits were done telephonically,” McHale said. “Once you start putting in travel time, your visit cost increases. You have to pay that nurse or social worker that hourly rate for the time that they’ve traveled to the patient’s home and the cost of care that’s delivered while they’re in the home.”

Looking ahead, TRU Community Care is reaching out to other nonprofits in hopes of forming potential partnerships.

“The infrastructure that we’ve set up potentially could benefit them at a much lower cost and enable them to do more of this supportive service out in the community,” McHale said.

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AccentCare, Seasons Hospice to Merge

AccentCare Inc. and Seasons Hospice & Palliative Care are merging.

Dallas-based AccentCare — owned by global private equity firm Advent International — is among the five largest home health providers in the country, according to industry data. The Rosemont, Illinois-based Seasons holds the same distinction in the U.S. hospice market.

“Accentcare is doing very, very well,” Todd Stern, CEO of Seasons, told Home Health Care News. “Seasons was not out, determined to find a partner. This is a marriage of opportunity.”

Once finalized, the merger between AccentCare and Seasons will reshape the post-acute care market, with the combined entity being one of the deepest around in terms of geographic footprint and portfolio of services. The companies are expected to publicly announce their agreement late Monday, with financial terms of the deal not disclosed.

There are several advantages to the merger, AccentCare CEO Steve Rodgers told HHCN.

By teaming up, AccentCare and Seasons will be better equipped to serve patients and referral sources as individuals’ needs change, for example. The move is likewise “extremely complimentary,” with AccentCare’s home health footprint closely matching Seasons’ hospice footprint, especially in major metropolitan areas.

“This is incredibly complimentary to our own approach toward strategic markets and being very focused on working with large health systems,” Rodgers said. “Todd and I both have a focus on being in large urban marketplaces. If you just go down the list of cities where we have a very significant presence now, we’re in the top cities in the United States. We’re in Boston, Chicago, Dallas, Houston, San Francisco, Los Angeles, Denver — and the list goes on.”

AccentCare delivers home health, hospice, personal care and care management services to more than 145,000 patients and clients annually, doing so across more than 179 locations in 17 states. In addition to growing organically, the company has landed several strategic partnerships with payers and health systems over the past few years, with its latest being a sizable joint venture with Fairview Health Services in Minnesota.

Advent International acquired AccentCare in May 2019 from its former PE backer, Oak Hill Capital Partners.

“Advent is a world-class private equity organization,” Rodgers said. “They’ve been incredible partners of ours, both in continuing to shore up the base infrastructure in the organization over the last 16 months as well as in preparing us to faze into a very significant opportunity like this.”

Seasons Hospice & Palliative Care offers end-of-life care services to upwards of 30,000 patients a year. Its current operations span 19 states and 31 Medicare-certified programs, inclusive of 22 facility-based and freestanding in-patient centers.

“Together, we can deliver a superior patient and family experience, ultimately serving our continuum of care partners even better, many of which want multiple service lines and multiple forms of care,” Stern said. “Our ability to take multiple service lines in common markets and innovate with the collective expertise made this a marriage worth doing.”

The combined AccentCare-Seasons enterprise will operate over 225 sites of care across 26 states, employing nearly 30,000 workers. It will have over 60 total partnerships with health systems and physician practices, collectively providing care to more than 175,000 patients and families each year.

AccentCare and Seasons expect to finalize the merger before the end of 2020, pending regulatory approvals. While they wait for that to happen, leaders from both organizations have started to execute upon their integration strategy, which will likely require ample time and resources considering the transaction’s sheer size.

Rodgers will serve as CEO of the new AccentCare-Seasons enterprise, which will keep AccentCare’s current headquarters of Dallas.

Stern will lead the hospice department — operating out of Rosemont — once AccentCare’s hospice services are combined with Seasons’ existing operations. He will also serve as executive vice chair of the combined organization.

On a broader level, Monday’s news adds to what has been a red-hot stretch for post-acute care dealmaking, particularly for hospice assets, which have typically come with hefty price tags. Last week, for instance, Addus HomeCare Corporation (Nasdaq: ADUS) announced a $192 million acquisition of Queen City Hospice and its affiliate, Miracle City Hospice.

AccentCare looked at many of the hospice businesses that came on the market, Rodgers said. Its leadership team started talking with Seasons toward the end of last year, however, and a merger seemed to make perfect sense.

“Todd and I got to know each other over the course of the year,” he added. “I think we had a mutual respect for each other and our organizations. I think we started getting excited about what we could do together. As we got into the late summer and early fall, things started taking off for us.”

While both CEOs declined to comment on financial details, Rodgers noted that the combined company should have annual revenues somewhere in the range of Encompass Health Corporation (NYSE: EHC) and LHC Group Inc. (Nasdaq: LHCG), which were ranked as fourth- and third-largest home health providers in 2019 by LexisNexis Risk Solutions.

“Let’s just say we’ll be fast approaching that general size and breadth,” Rodgers said.

For context, Encompass Health’s home health and hospice segment reported $1.09 billion in net services revenues in 2019. LHC Group, meanwhile, recorded $2.08 billion in net services revenues last year.

Until the merger is completed, all patients will continue to have access to their same care routines and will continue to use their current insurance plans. Each organization will share updates with patients and partners before any changes taking place, Rodgers and Stern noted.

In addition to Fairview, AccentCare’s existing joint ventures include partnerships with Asante, a large health system based in Oregon. That list also includes relationships with Baylor Scott & White Health, UCLA Health and several others.

With more than 30 strategic partnerships, Seasons has similarly made a name for itself with health systems, hospitals and payers. Moving forward, the merger should only benefit those partnerships, according to Stern.

“The hope that this is only positive,” he added. “There are some customers in the continuum of care that want all services, right? And there are some that just want parts. For those that want parts, nothing will change. For those that want more, I think we have a lot of opportunity to offer more to existing customers and care partners on both sides of the care aisle.”

Subsidiaries covered in the agreement include Health Resource Solutions, home health provider in Illinois, Nebraska and Indiana with a patient census of about 2,500. Gareda, a personal care business in Illinois that serves about 4,500 clients a year, is also covered.

This is a developing story. Please check back shortly for additional updates.

The post AccentCare, Seasons Hospice to Merge appeared first on Home Health Care News.

Pennant ‘Encouraged’ by Vaccine News, But Not Assuming Near-Term Changes to Home Health Operating Environment

Home health providers across the board are slowly starting to bounce back from COVID-19-related disruption. One thing that now provides further hope is a potential vaccine, especially as the U.S. continues to break daily records around new infections.

The Pennant Group Inc. (Nasdaq: PNTG) is among the providers rallying around this week’s positive vaccine news, which is centered on Pfizer’s announcement that one of its experimental vaccines is more than 90% effective.

The company’s leadership team expressed cautious optimism during a Wednesday conference call to discuss its third-quarter financial results.

“While we haven’t assumed a change in the operating environment stemming from the widespread adoption of a vaccine, we are encouraged by the initial reports on the efficacy and availability of potential vaccines,” Pennant CEO Daniel Walker said.

The Eagle, Idaho-based Pennant is a holding company of independent operating subsidiaries that provide health care services through 75 home health and hospice agencies, in addition to 54 senior living communities.

Pfizer’s progress is certainly promising, but home health providers and other long-term care operators will likely still have to deliver care without a widely available COVID-19 vaccine for months. The drug company still needs to explore how the trial vaccine works in different populations, and many health care organizations lack the freezers needed to actually store an effective vaccine.

For now, Pennant is taking a wait-and-see approach, Walker noted. But the company believes it could reap the benefits of the vaccine during the second half of 2021.

“The key there is the actual execution, finalizing it, making sure that communities are comfortable with it,” Walker said. “I think once it’s fully baked and available, distribution won’t be that big of a difficulty.”

Aside from keeping an eye out for COVID-19 vaccine updates, Pennant reported a continued successful transition to the Patient-Driven Groupings Model (PDGM), the Medicare payment overhaul that has been somewhat overshadowed by the pandemic. Pennant has benefitted from PDGM’s relatively favorable reimbursement rates for higher-nursing-acuity patients, according to Walker.

“Our strong performance is driven by the ability of our local leaders to adapt to the changing reimbursement and operating environment, and appropriate reimbursement for care provided to higher-nursing-acuity patients,” he said. “Since our inception, we have been committed to caring for patients based on individual patient and community needs. Often, this has resulted in serving underserved, higher-nursing-acuity patients, … now more appropriately reimbursed under PDGM.”

The third quarter also saw ample dealmaking opportunities. Between August and September, for example, Pennant announced the acquisitions of four home health agencies and two hospice agencies. Most recently, the company announced the purchase of Grants Pass, Oregon-based Riverside Home Health Care.

These transactions bring the total number of operations acquired or started since 2019 to 227.

During Q3, the company also closed on its home health joint venture with Scripps Health, a San Diego, California-based nonprofit integrated health system. The deal was first announced in March.

“Each transaction represents a unique opportunity for local leaders to drive outside multi-year growth, as they respond to local market conditions and take advantage of additional acquisition opportunities,” Derek Bunker, Pennant’s chief investment officer, said during the call. “As evidenced by the different structures of these transactions, our disciplined growth strategy takes many forms.”

As an organization, Pennant’s focus is on the “opportunistic” acquisition of existing operations, but startups and joint ventures are additional tools available to drive similar long term-results, according to Bunker.

In Q3, Pennant’s total revenue checked in at $98.4 million, an increase of $10 million, or 11.3%, compared to the prior year’s quarter. The company’s home health and hospice services segment revenue was $64.4 million, an increase of $9.2 million, or 16.7%, compared to Q3 2019.

Total home health admissions for Pennant in Q3 were 6,771, an increase of 21.9% over the prior year’s quarter.

The company’s quarterly results don’t include any funds from the Provider Relief Fund.

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M&A Experts ‘Can’t Recall a Time When Demand Has Been Higher’ in Sizzling In-Home Care Market

M&A activity across home health, hospice and in-home care appeared to be “business as usual” at the start of 2020. COVID-19 froze the market in March, however, causing both buyers and sellers to bide their time.

But dealmaking action is finally starting to heat up again, multiple M&A experts confirmed to Home Health Care News.

In the past few weeks alone, for example, Charter Health Care Group announced its purchases of Vitality Home Healthcare and Heartwood Home Health & Hospice. Meanwhile, Bridges Health Services announced a series of mergers with various home health and hospice providers. Most recently, Chicago-based private equity firm the Vistria Group agreed to sell St. Croix Hospice to an affiliate of investment company HIG Capital.

To get a better understanding of the developing M&A market, HHCN asked several experts to provide insight into what they are currently seeing in the final months of 2020. They also touched on 2021 expectations.

* * *

I’ve been selling home health agencies since 2006, and can’t recall a time when demand has been higher. Since July, we have received more calls from both strategic and financial buyers looking for home health than I can ever recall in a three- or four-month period.

While hospice M&A has dominated the spotlight these past couple years, home health M&A has cooled off. The uncertainty of the Patient-Driven Groupings Model (PDGM) caused both the strategic and financial buyers to hold off on any significant home health investments until after dust settled on the overhaul. We expected buyers would be ready to engage in the second quarter of 2020, but COVID-19 delayed that by a couple months in April and May.

With the public companies, which are the ultimate consolidators, the long-term strategy remains the same. They want to have all three legs of the stool: home health, hospice and personal care. And they want that in each of the markets they serve. As a practical matter, most of these companies are really focused on filling out the skilled side first. As recently as three years ago, most of these strategic buyers had a significantly larger home health presence than hospice. That has changed.

As a result of the aforementioned hospice M&A activity and a lot of denovos, many of these strategic buyers are now shifting their attention back to penetrating new markets via home health acquisition, which they will then complement with hospice and at some point, plus personal care.

My crystal ball is clouded somewhat with an election less than a month away and a threat of another significant COVID outbreak, but I’m going to go out on a limb and speculate we will see near-record — if not record — home health M&A activity between Q4 2020 and Q1 2021.

— Cory Mertz, managing partner at Mertz Taggart

* * *

In order to provide an appropriate context to understand how 2021 is setting up, we must first look back to this time last year. There was a mixed level of excitement regarding the forecasted 2020 home health merger and hospice acquisition marketplace.

Home health owners were facing PDGM implementation with certain uncertainty. Hospice owners were enjoying uncounted unsolicited calls and emails from buyers asking for “just a few minutes of their time.” A tale of two cities!

Since mid-March, the COVID pandemic “tripped the breaker” on scheduled and intended home health and hospice deals — or did it? Data researched and compiled exclusively by The Braff Group may come as a surprise to some.

Home Health’s expectation for a “down” year appears to be on track as expected; 42 projected deals vs. 60 transactions in 2019. Similarly, during the past five years, we’ve documented 296 completed deals; averaging just under 60 per year.

Looking ahead to 2021, home health will start off slow but pick up greater deal activity as the year unfolds, especially for mid- and larger-size agencies.

There are several reasons for this. Sellers, as well as buyers, will be well past the initial shock of dealing with COVID-19 and have settled into new daily norms and routines. While we have not completely recovered, many agencies have returned to pre-COVID levels of activity. Once preoccupied within their own portfolio companies, private equity firms now are back aggressively looking to build up their pipelines and line-up deals to get done. By many indicators, home health, and especially hospice valuations remain at all-time highs.

— Mark Kulik, managing director at The Braff Group

* * *

I do believe we will continue to see in-home care M&A acquisitions pick up. I believe that dual-service-line providers will continue to get more traction in the market. Hospice continues to be a valuable target for both strategic and sponsor buyers. We believe that home health-only agencies will continue to be challenged with admissions and the PDGM RAP reductions in cash flow.

According to a survey by the National Association for Home Care & Hospice (NAHC), almost 80% of home health agencies have experienced a decline in admissions due to the pandemic, with a majority of agencies reporting a decline of greater than 15%. Although elective procedures and routine visits are beginning to open up across the U.S., we are still seeing agencies struggle with therapy-heavy episodes and facility-based patient admissions. With the decrease in admissions, timing for presenting the company to buyers may cause them some reservations until the agency has proven stabilization related to admissions and Low Utilization Payment Adjustments (LUPAs).

In regard to the future of dealmaking in this space, agencies with both home health care, private duty and hospice service lines will be more eye-catching to potential buyers. Diversification of service lines will remain attractive.

— Tom Maxwell, co-CEO at Maxwell Healthcare Associates

* * *

With the onslaught of the COVID-19 pandemic in early March, it quickly became pretty clear that M&A activity generally, as well as with in-home care, was going to slow down significantly through the balance of Q1 and likely until the middle part of Q2. We thought we would begin to see an uptick in deal activity around mid-June and after, and that assessment has more or less turned out to be accurate.

While business travel and group meetings have continued to be on-hold for many, sourcing deals, discussions among transactional parties, diligence and other deal-related activity has adapted to the new “normal” through virtual meetings, conference calls and increased use of outside support such as law firms like ourselves and other industry transactional advisors and consultants.

Since mid-June, we have seen a marked increase in “deal talk” among sellers, buyers, bankers, investors and lenders both in home care and hospice, and we are currently working on a number of home care and hospice transactions across the country.

As transaction parties have begun to understand better some of the COVID-19 related factors and issues and their impact on deals, valuations have stabilized and in some cases increased. We expect to see a continuing surge of deals as both PE and strategic players seek to add bolt-on transactions in their markets and additional platforms where available.

Capital remains generally available to acquirors, and both home care and hospice are being seen as more stable health care verticals with the ability to give patients an alternative environment to group settings like hospitals and nursing homes. That is an additional important consideration to patients and payers in this COVID-19 era.

In sum, all indications are that absent a systemic disruption, home care and hospice deal activity should continue to be active through 2020 and well into 2021.

— Les Levinson, co-chair of the national health care transactions practice at Robinson & Cole LLP

* * *

At the onset of the coronavirus pandemic, there was uncertainty of the impact of the virus across all sectors of the health care industry. The practicalities of country-wide lockdowns, coupled with high-risk patients who were reluctant to allow providers into their homes, led to weaker performance for in-home health care companies. For companies that qualified, government stimulus in the form of Paycheck Protection Program (PPP) loans alleviated cash flow concerns and allowed many providers to weather the storm. As a result, M&A activity slowed and deal activity was put on hold.

We are eight months into the pandemic, and M&A activity has accelerated. Transactions that were on hold are ramping up. Valuations are strong. Buyers are becoming more active as additional investment opportunities arise, and the upcoming U.S. presidential election seems to be motivating dealmakers to close deals before the end of the year.

In-home health as a “buy-and-build” strategy is attractive to investors as the sub-segment is highly fragmented. Buyers executing a consolidation strategy backed by a scalable platform for growth and supported by strong processes and systems, along with a well thought-out integration plan for acquisitions to achieve synergies, should experience robust investment returns.

— Claudine Cohen, managing principal, transactions and turnaround advisory at CohnReznick

* * *

It is a sobering truth that if you follow the money, you usually find the answer, or at least the motivation. Currently, investors are deploying massive amounts of capital to acquire home care agencies. The interest is at record levels. The money is telling us that we’re on the threshold of a golden age for home-based care. The growth of home care will be of great benefit to the patients. Let’s hope this growth trend continues.

— Andre Ulloa, principal at American Healthcare Capital

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LHC Group, Christus Health Expand Joint Venture Partnership

LHC Group Inc. (Nasdaq: LHCG) has inked another joint venture agreement.

On Thursday, the Lafayette, Louisiana-based home health, hospice and personal care services provider announced plans to expand its existing JV partnership with Christus Health, a nonprofit health system out of Irving, Texas.

LHC Group and Christus have been JV partners since 2017.

“Our experience working with [LHC Group] in other communities has proven that they work hard to invest and grow services that are vital to the community, like home care and hospice,” Christus Health Chief Strategy and Network Officer Paul Generale said in a press release announcing the news.

Specifically, the JV expansion adds a hospice provider in San Marcos, Texas, to the LHC Group-Christus partnership. The expansion agreement is expected to be finalized on Nov. 1, according to the organizations.

Once it is completed, LHC Group’s JV with Christus will include 22 home health, hospice and palliative care locations across three states. It also includes a number of community-based and long-term acute care locations.

In total, LHC Group is the preferred joint venture partner for almost 400 U.S. hospitals and health systems. The company signed its first JV in 1998 with Opelousas General Hospital.

While LHC Group operates across 35 states and Washington, D.C., it has been a hyper-local focus that has made its JV strategy so successful, according to Chairman and CEO Keith Myers.

“The real key to success is being able to realize that all health care is local and creating a model that works for that [particular] community,” Myers said last month at the Home Health Care News FUTURE conference. “Rather than thinking that you’re such an expert in everything and trying to deploy a one-size-fits all model.”

On its end, Christus Health operates more than 600 services and facilities, including more than 60 hospitals and long-term care facilities. It also oversees more than 400 clinics and outpatient centers, with dozens of other health ministries and related ventures.

The health system’s relationship with LHC Group has been one of its strengths while navigating the COVID-19 pandemic over the past several months, it noted in the press release.

Prior to the Christus expansion, LHC Group’s most recent JV moves included two new agreements in Georgia.

At FUTURE, Myers said he remains bullish on the JV strategy for the rest of 2020 and beyond. The company’s strong JV outlook is partly due to home health’s increasingly important role in managing complex patient populations and succeeding in emerging payment models.

“We’re taking more acute patients with each passing year,” Myers said. “We’ve moved from cost reimbursement to prospective payment, now to being not just a participant but, in many cases, the manager of bundles and value-base models. I think bringing all of that expertise to the table is important to our joint venture partners.”

In most of its JVs, LHC Group has at least two, though often three, of its service lines active with a single partner. 

“I think what we provide is more up to date, cutting-edge support for them, because this industry is changing so fast,” Myers said at FUTURE.

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Home Health Buyers, Sellers Headed Toward Frenzied Finish to M&A in 2020

Charter Health Care Group — a PE-backed post-acute care platform company with multiple locations across five states — announced Tuesday the acquisitions of both Vitality Home Healthcare and Heartwood Home Health & Hospice.

The news comes less than two weeks after Bridges Health Services similarly announced a series of transactions at the start of October. It likewise comes after The Pennant Group Inc. (Nasdaq: PNTG) closing on a new joint venture and making its own hospice acquisition.

While none of these deals are directly related, they signal a recent rekindling of the M&A fire across the home health and hospice spaces. Dealmaking experts are starting to notice, too, with some expecting a frenzied final few months of 2020.

“I was discussing this with my partner,” Rich Tinsley, president of M&A advisory firm Stoneridge Partners, said during last month’s Home Health Care News FUTURE event. “I’m expecting the end of this quarter and Q4 maybe being one of our strongest second halves of the year in the last decade. Volume is definitely picking back up and, speed is picking back up in transactions on deal flow.”

Originally, many home health and hospice insiders believed 2020 would be a record-setting year for dealmaking, partly due to the transition of the Patient-Driven Groupings Model (PDGM) and a handful of other major regulatory changes. But that historic M&A action hasn’t played out for a variety of reasons.

On one hand, many of the small- to mid-sized home health and hospice agencies that were likely going to come on the market this year haven’t due to the ongoing COVID-19 pandemic. Operators once interested in selling are now too focused on delivering care during a crisis, while formerly distressed businesses have been able to stay afloat through Paycheck Protection Program (PPP) money, Medicare loans and Provider Relief Fund grants.

At the same time, buyers looking to conduct traditional due diligence or “kick the tires” on acquisition targets haven’t always been able to because of travel restrictions, Tinsley noted.

“Everybody was expecting to have a lot of volume to the home health side, with lots of those smaller to medium-sized [deals],” he said at FUTURE. “Then as we kept going into the transition to the new payment system, COVID hit. Everything kind of went into quicksand from a deal perspective.”

Buyers and sellers of all shapes and sizes have clearly started to rise out of the muck in recent weeks, however.

In addition to the previously mentioned deals, for example, Cypress at Home announced its acquisition of All About Home Care Inc. on Oct. 5., while Nova Leap Health Corp. made home care acquisitions in the New England and South Central U.S. markets. Kindred Healthcare also announced the pending sale of its RehabCare business line to Select Rehabilitation this month.

Perhaps the largest of all the home health and hospice deals to take place this fall: The Providence Service Corporation’s (Nasdaq: PRSC) $575 million play for Simplura Health Group, a company that oversees a home health and personal care network spanning seven states.

“There was a four- to six-, maybe seven-week period of time when everything got frozen,” Tinsley said. “We’re just now getting out of that and things are moving.”

‘Not exactly the same deal’

It’s not just the confirmed deals that suggest the M&A landscape has started to heat up again. There have been rumors swirling around at least two noteworthy deals in the home-based care space.

Toward the end of September, reports surfaced that Centerbridge Partners and Vistria Group were joining forces on a $1.4 billion deal for Wellspring Capital Management’s Help at Home. Days later, sources familiar with talks said Anthem Inc. (NYSE: ANTM) was in “late stage” talks to acquire PE-backed CareCentrix.

“The COVID crisis has underscored how important home health is to the future of health care,” Kenneth Baer, a CareCentrix spokesperson, told HHCN at the time. “Based on that and the strength of our business, we have received many interesting inquiries, but we are focused on delivering better health for the thousands of patients who rely on us for care.”

Apart from direct acquisitions, general investment in proven home-based care businesses is picking up as well. Also in September, Liberty Lake, Washington-based Family Resource Home Care announced a new investment partnership with Great Point Partners, a health care-focused private equity group out of Connecticut.

Tinsley isn’t the only one to notice all of the action. Philip Feigan, managing partner of Polsinelli’s Washington, D.C., office, has also seen a clear uptick in transactions — with an important caveat.

“Over the last four weeks, they’re really picking up,” Feigan said at FUTURE. “They’re as strong as they’ve ever been. A lot of the deals that have stopped are looking a little different. When they come back, they’re not exactly the same deal.”

M&A legal hurdles

Although deals are starting to pick back up, negotiations and agreements likely look very different compared to years past, according to Feigan. In fact, some yet-to-be-finalized deals that took shape in late 2019 for 2020 may even see substantial changes.

“Prior to COVID, I think the legal, regulatory and even the tax [factors], were not necessarily driving the deals,” Feigan said. “They were just following the deals, making sure there is nothing that stopped the deal from happening. Now, there’s a lot more involved on the legal side because of the things that have happened over the last few months.”

PPP money, in particular, becomes a significant legal consideration in any deal.

Since the Small Business Administration (SBA) initiated the program, thousands of home-based care organizations have received PPP loans, which could range from less than $150,000 to millions of dollars.

Unlike other loan programs, PPP money is open to full forgiveness. Yet that forgiveness process hasn’t begun, so prospective buyers need to be aware of any PPP risk their acquisition target currently bears.

“The key that made it different from any other type of loan is if you used the money properly and followed the rules, you could get up to the entire amount of the loan forgiven,” Feigan said. “When you’re talking about doing an acquisition or selling your business, if either party has received a PPP loan, that can be a lot of money you’re talking about that’s at risk of forgiveness from the government.”

When PPP money is involved, Feigan recommends that sellers first seek SBA consent for a change of ownership. Along those lines, sellers should additionally secure the consent of the bank that handled the PPP loan and related paperwork.

From a buyer’s perspective, it may even be worth revisiting the timing of a deal so it can take place after loan forgiveness has been reached. Alternatively, a buyer should consider adding language to any deal clarifying who bears risk if a loan isn’t forgiven.

“There’s a whole new playbook for the PPP part of doing a deal that didn’t exist before,” Feigan said. “You don’t want to rely on what you’ve normally done in a transaction.”

Tax considerations

How common are PPP considerations in today’s home health and hospice deals? Stoneridge had just closed on eight transactions in the 60 days prior to Tinsley’s appearance at FUTURE — and all eight of those deals had some sort of PPP component.

Besides the immediate consideration, buyers and sellers in PPP-related deals also need to think about future tax implications, according to William Sanders, who chairs Polsinelli’s tax practice group.

Under U.S. tax law, loans that are forgiven typically fall into taxable-income territory. With PPP specifically, if a loan is forgiven, expenses that are usually deductible won’t be deductible, which has the same basic impact as making the receipt of the forgiveness taxable.

“What this means from an M&A-transaction perspective is that a seller needs to be aware of the fact that those expenses won’t be deductible by them in the pre-M&A closing period,” Sanders said at FUTURE. “And a buyer, on the other end, has to make sure that the documents will require the seller to exclude those expenses as deductions in the period prior to the transaction.”

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Recently Launched Alivia Care Plans to Enter ‘Saturated’ Home Health Market

Alivia Care Inc., a new operator in the senior care space, has plans to enter the home health market.

Launched at the end of September, Alivia currently provides hospice and palliative care throughout the Jacksonville, Florida, area. The company’s history is tied to Community Hospice & Palliative Care, which now provides care as Alivia’s subsidiary, serving 8,000 hospice patients and 9,000 palliative care patients annually.

Community Hospice & Palliative Care’s CEO, Susan Ponder Stansel, has joined Alivia as its president and CEO.

Aside from Alivia’s hospice and palliative care service lines, the company will provide home health care, private-duty nursing and personal care services moving forward. Alivia will additionally offer PACE programs and advanced care management in the future.

PACE — or Programs of All-Inclusive Care for the Elderly — is a comprehensive care model that often uses a combination of in-home care and center-based care to keep older individuals out of institutional settings.

“The goal was to create a care continuum as a whole, while paying attention to the individual products and give them the attention that they need to make sure that our quality and network keeps up with our goal to be innovative,” Ponder Stansel recently told Home Health Care New.

In creating a sort of one-stop-shop for aging services, Alivia has its eye on the future of how care will be delivered, according to Ponder Stansel. Increasingly, health system partners and payers are looking to team up with providers capable of caring for patients on a longitudinal basis.

“Part of it was to make sure that we are not just at the end of the waterfall, waiting for the fish to come over,” Ponder Stansel said, referring to Alivia’s roots in end-of-life care.

As far as home health care, Alivia’s interest was piqued when the company saw how more hospitals were beginning to move toward risk-based payments.

“We really want to be in the home health business, as well as have the home health capacities to allow us to do more of that advanced illness care, because we do see … a lot more interest in them moving to that risk-based payment,” Ponder Stansel said.

One of the biggest challenges Alivia has experienced in the home health space is figuring where its market opportunities are in an already saturated landscape.

From 2018 to 2019, the number of home health agencies dropped by about 3.6%, a decrease of 427 individual providers, according to the Medicare Payment Advisory Commission (MedPAC) 2020 data book. Since 2015, the home health subsector has contracted by more than 8%, with nearly 1,000 agencies exiting the market.

In light of this, Alivia has opted for acquisitions of existing entities over starting de novo locations, Ponder Stansel said.

“We figured that for us, the better way would be to go ahead and buy an existing book of business,” she said. “We weren’t starting cold.”

Looking ahead, Alivia is also paying close attention to how the Patient-Driven Groupings Model (PDGM) and other payment changes will shake out for the company’s home health business.

“It’s not just PDGM. There’s the pre-claim authorization,” Ponder Stansel said. “There’s a lot of pressure on home health care agencies. They have sort of a ‘death by 1000 cuts.’ For what we want to do with home health, PDGM is actually a good change because it incentivizes you to take those higher-acuity patients and not be so therapy-heavy, and that really that aligns with our serious-illness strategy very well.”

Additional reporting by Jim Parker, editor of Hospice News.

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Caring People Acquires Acappella In Home Care, Aging Care and AMR Care Group

Caring People is staying busy on the acquisition front.

In fact, the New York City-based Caring People has completed a handful of strategic deals — with a focus on care management organizations — in the last few months alone. The acquisitions consist of Acappella In Home Care, Aging Care LLC and AMR Care Group, all of which were purchased in separate transactions.

Financial terms of the deals were not disclosed.

Caring People is a portfolio company of private equity firm Silver Oaks Services Partners. The private-duty home care provider operates in New York, New Jersey, Connecticut, Florida and Texas, the latter state recently added to its geographic mix. Across its operations, Caring People serves an average of 1,700 clients per day.

Although Caring People CEO Steven East declined to disclose the financial terms of the deals, he told Home Health Care News that the transactions fell in-line with the current pricing parameters for private-duty home care assets.

“We feel very confident in the investment in those businesses,” East said.

Acappella In Home Care provides home health, hospice, private-duty home care and companionship services throughout 13 Texas counties.

“Texas is a terrific senior care market. It has very strong private-pay demographics,” East said. “At the beginning of 2020, I can’t say I could have predicted we’d be in Texas, but we’re not limited geographically.”

Meanwhile, Aging Care is a care management and non-medical home care company that operates throughout central Connecticut.

New York-based AMR Care Group is a care services company that enables seniors to age in place. The company is partly known for its Cultured Companions program — a service that connects older artists, musicians, professors and others with younger counterparts in their respective fields.

On its end, AMR Care Group had grown at a 97% clip from 2017 through last year. In 2018, the company’s annual revenue checked in at about $2.2 million.

“I don’t think there’s been a magic bullet to our growth,” the company’s founder and CEO Anne Markowitz Recht told HHCN last September. “There’s obviously a huge need for home care services, which everybody knows about. Beyond that, it’s just doing the right thing, expanding our business and giving clients what they want.”

Along with being a great cultural fit, all three companies were attractive acquisition targets because of their owners and infrastructure, according to East.

“We have a back-office support team that can scale and support new offices all over the country,” he said. “With these three acquisitions, what was attractive to us was that they had very like-minded owners, who all stayed on with the organization in different roles. We felt that we could continue working with them and growing what they built.”

Acappella In Home Care founder Jo Alch, for example, has moved into the role of ambassador of brand development for Caring People.

The acquisitions also allowed Caring People to expand the company’s service lines.

“[Aging Care and AMR Care Group] had a core competency in providing care management services,” East said. “That’s a revenue vertical and a service line that we’re very interested in adding to our existing platform. Those acquisitions were strategic in terms of getting that talent.”

In addition to the three acquisitions, Caring People recently opened a new branch in New Haven, Connecticut, last month.

“We set up that branch because we knew there was a great caregiver population in that area,” East said. “We felt that having an office in that location would give us some better positioning for recruitment.”

Looking ahead, East says Caring People will continue to take a multi-pronged approach to growth.

“Acquisitions are definitely part of [our growth strategy], especially as we look at new and existing markets,” he said. “Adding new service lines to our existing business is also part of it, as well as de novo branches to service clients. We see it as a mix, but acquisitions are definitely an important component [of our growth strategy] — at least 50% or 60%.”

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Mission Healthcare Keeps Patients Out of ‘No Man’s Land’ with New Palliative Care Program

Today, just a fraction of community-based palliative care programs are operated by home health providers. But the Patient-Driven Groupings Model (PDGM) and a shift away from fee-for-service Medicare will likely change that moving forward.

Throughout the health care world, the term “palliative care” often carries a different meaning from one organization to the next. In its broadest sense, however, palliative care — or “comfort care” — is specialized care for individuals with serious illness.

San Diego, California-based Mission Healthcare is one of the latest home health providers to launch a palliative care offering. It did so after months of careful PDGM education and planning, CEO Paul VerHoeve told Home Health Care News.

“We’ve definitely put more energy into a lot of our acute care-related efforts,” VerHoeve said. “That partially led to why we’ve started our palliative care program. It was an offshoot of how we looked at trying to take care of our hospital-based referral sources and the needs of their patients.”

With 11 locations, Mission Healthcare is one of the biggest home health and hospice companies in Southern California. Across those two main service lines, the company cares for about 2,000 patients a day.

It launched its palliative care program about four months ago in one of its core markets with strong home health and hospice overlap. So far, a few dozen patients have gone through the program — people with complex care needs who may have otherwise been overlooked.

“We were seeing a lot of patients who were falling in between home health and hospice, but still had significant needs in the home,” VerHoeve said. “We wanted to figure out solutions to be able to make sure we could be good partners for our referral sources and that we could care for this population of patients falling into ‘no man’s land.’”

Strategically, the value of a palliative care program under PDGM comes from referrals via hospitals and other acute care facilities. 

Generally, referrals from such settings — or “institutional sources” — are reimbursed at higher rates under home health care’s new Medicare payment model. That’s why many home health providers looked at ways to serve higher-acuity patients going into 2020, though the COVID-19 emergency has since changed many of those plans.

In January, 47.8% of home health referrals came from institutional sources, according to data from Strategic Healthcare Programs. In March, that figure plummeted to just 30.8%, largely due to the decline in elective surgeries.

“We spent the better part of nine months preparing for PDGM,” VerHoeve said. “Obviously, in the beginning, it’s very much trying to get yourself educated, your team educated, trying to figure out who has the good information. From there, it’s about ultimately trying to build a plan.”

Branching out

On top of its palliative care program, Mission Healthcare has leaned heavily on its EMR partner during the transition to PDGM, VerHoeve said. The provider also worked hard to ensure accurate coding across its departments.

As a result of that legwork and other innovative efforts, Mission Healthcare has fared well in the new payment environment. Still, the coronavirus has made gauging true success somewhat difficult, as the company’s census and referral patterns fluctuated greatly in spring.

Mission Healthcare’s home health volumes were down 10% to 15% in March, then down about 25% compared to historical averages in April. Volume began trending upward in May, and it has continued to stabilize since.

“It’s kind of been difficult for most providers to get a clean three- or four-month period of time without a lot of disruption or noise to understand how well they’ve managed under [PDGM],” VerHoeve said.

But launching a palliative care program wasn’t just about PDGM.

It was also a way to attract the attention of managed care organizations and independent physician associations (IPAs), according to VerHoeve, who spent time at Kindred, Vitas and other post-acute care powerhouses before joining Mission Healthcare.

Typically, payers are interested in provider partners with gap-filler programs that ensure smooth transitions of care.

Mission Healthcare’s palliative care program additionally has the appeal of managing patients over time, as many program participants eventually transfer to hospice services.

“We’ve had some pretty early successes in being able to take patients that historically we wouldn’t have been able to take,” VerHoeve said. “And there are patients who have evolved into accessing other service lines within the organization. We have an opportunity to stay in touch with this patient population longer.”

Palliative care as ‘loss leader’

Mission Healthcare’s palliative care program is relatively new, but the company is pleased with early results.

“I think all the indicators are pointing in the direction that we see this as being something that we as a company are going to put some more energy behind,” VerHoeve said.

Across the industry, More home health providers would likely get into palliative care if there was a federal palliative care benefit. Currently, the simple reality is it’s tough to run a profitable palliative care line as a secondary or tertiary service.

“Palliative care is … a loss leader,” VerHoeve. “I think in most organizations, you’ve got to find creative ways to build partnerships with payers and hopefully have other business lines that can help support these programs.”

Apart from refining the budding program, Mission Healthcare has been caring for COVID-19 patients in the home. It currently cares for between 20 to 30 patients per day, mostly through in-person visits.

“We didn’t make massive investments into telehealth during this period of time,” VerHoeve said. “I think we were just trying to stay really true to our core model.”

VerHoeve expects the coronavirus to remain a challenge for the remainder of 2020.

“We made a decision very early on as a company to say yes to taking care of these patients, which we found a lot of providers were not doing,” he said. “Caring for one of these patients in the hospital setting is very, very difficult. But caring for a patient in the home environment, where there are other people and you don’t have all of the sterile techniques or equipment, is extremely challenging for a caregiver or nurse.”

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Despite Ongoing Operational Challenges, Brookdale Rebuilding Home Health Census

Brookdale Senior Living Inc. (NYSE: BKD) has performed over 100,000 COVID-19 tests across 44 states since the public health emergency began. It has been doing that while rebuilding its home health patient census, which took a substantial hit due to elective surgeries shutting down in spring.

Brentwood, Tennessee-based Brookdale operates and manages more than 730 independent living, assisted living, memory care and continuing care retirement communities nationwide, serving over 65,000 residents. Along with its senior living segment, Brookdale offers a range of home health, hospice and outpatient therapy services to thousands of additional patients.

To protect itself against potential spread and identify possible COVID-19 exposure, Brookdale has proactively implemented a resident and associate baseline testing program. This has allowed the company to identify and quarantine individuals who may have been asymptomatic, according to leadership.

To date, its testing efforts have resulted in positive outcomes for the company. As of the end of July, less than 1% of Brookdale’s residents had COVID-19-positive results.

“Baseline testing at all our communities allows us to … minimize the duration and impact a community experiences with a COVID-19 exposure,” Brookdale President and CEO Cindy Baier said Tuesday during the company’s second-quarter earnings call. “One of the pleasant surprises we experienced was that all those residents who tested positive for COVID-19, many passed through the full exposure period without becoming symptomatic.”

On top of testing, Brookdale has also leaned on technology to allow prospective residents to tour its communities virtually.

“Virtual visits are not as effective as in-person visits, but they have been much more effective than not being able to do a visit at all,” Baier said.

Rebuilding home health volume

Similar to most home health companies, Brookdale’s average daily census began to decrease in March due to coronavirus complications, ultimately resulting in an 18.7% decline in census during the second quarter.

“Lower occupancy in our communities combined with the acute care health systems that shut down — or severely limited — all elective procedures and limited access to care had a negative impact on our home health revenue,” Baier said. “But we are starting to rebuild our census.”

Brookdale’s census began to show recovery in June 2020, returning to levels attained in January 2020, according to the company.

“Our associates started educating patients and referral sources about our strong screening [policies] and protocols in order to continue to provide vital services,” Baier said.

Overall, Brookdale posted revenues of $865.9 million for the quarter, down from $1.02 billion in Q2 2019. The company’s home health revenue checked in at $60.9 million for the quarter, down from $85.2 million in Q2 2019.

Brookdale’s Q2 home health average daily census fell to 12,980, compared to 15,966 in the second quarter of 2019.

Recovering lost revenue

Brookdale leadership estimates that COVID-19 resulted in $15 million in lost revenue for the second quarter, specifically looking at its health care services segment, which includes home health and hospice care.

Company-wide, Brookdale has spent $71 million fighting the COVID-19 virus year to date, with the bulk of that going to fund personal protective equipment (PPE) and medical supplies.

To help offset those and future coronavirus-related costs in its health care services segment, Brookdale recognized several million dollars of federal support.

“In the second quarter, we recognized $27 million of grants income,” Steve Swain, executive vice president and CFO, said during the call. “The majority of the grants were related to our Medicare business, which is largely in our health care services segment and a small skilled nursing section in senior housing.”

The company also received $85 million in Medicare advance payments, a Centers for Medicare & Medicaid Services (CMS) program that provides emergency funding in response to a disruption in claims submission or claims processing.

Nationally, federal aid for senior living providers has been an advocacy mission for industry groups. Brookdale has been active on this front.

“Brookdale played a leadership role in emphasizing to [the U.S. Department of Health and Human Services], the administration and Congressional members the importance of providing financial relief to the senior housing industry to help protect our nation’s seniors against COVID-19,” Baier said.

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LHC Group CFO: Historic Home Health Consolidation Opportunity Remains ‘Compelling as Ever’

Since the worst stretch of the public health emergency, LHC Group Inc. (Nasdaq: LHCG) has seen a decrease in weekly COVID-related missed visits and improved its average daily census. It has also added thousands of new physician referral sources, a win for the company considering many institutional sources are at a standstill. 

Those are just a couple positives highlighted by the Lafayette, Louisiana-based company during a Thursday earnings call on its second-quarter financial results.

“We’ve learned a lot about the resiliency of our organization through this public health emergency,” Chairman and CEO Keith Myers said during the call. “[We] have incorporated best practices adopted during this period into our care model and operating strategies.”

Since the end of June, LHC Group’s weekly COVID-related missed visits decreased from a high of roughly 8,600 to less than 300. Meanwhile, the company has seen a 9.3% increase in new referral sources compared to the same period in 2019.

“The momentum we established with new physician referral sources in January and February accelerated in April, hitting double-digit growth in both May and June,” Myers noted. “[That resulted] in nearly 4,000 new referral sources in the second quarter.”

Similar to LHC Group, many other home health providers have worked to expand relationships with physicians over the past few months, partly due to the realization that community-based referrals often mean a lower resource use and higher margins.

The company touted a number of other positives, too, including a proven ability to draw high-acuity patients away from skilled nursing facilities (SNFs), which will likely continue after the public health emergency ends.

“When we measure the number of SNF-diversion patients we’re taking, it’s not in the thousands,” Bruce Greenstein, chief strategy and innovation officer, said during the call. “But what’s happening is, we take in dozens and dozens [of patients]. We’re also bringing in new patients that would not have come to us otherwise.”

Still, LHC Group faced certain challenges and operational realities in Q2.

The cost of COVID-19

Overall, LHC Group incurred $27.3 million in COVID-19 costs related to personal protective equipment (PPE) and employee-compensation initiatives, including bonuses, increased pay and paid-time-off replenishments for front-line caregivers.

LHC Group also had to implement a number of cost-containment initiatives, including cutting non-essential travel and expenses. It also had to institute employee flexing, furloughs and other measures in some cases.

A home health, hospice and personal care services provider, LHC Group currently operates in 35 states and Washington, D.C. Overall, it posted net revenues of $487.3 million for the second quarter of 2020, down 5.9% from the same period a year ago.

The company’s home health business line brought in nearly 70% of that revenue total.

In terms of volume, its average daily census climbed from a low of 74,936 during the week ending April 18 to approximately 82,000 during the week of June 27. Its average daily census reached pre-COVID levels by the week of May 31, hitting 83,061 last week.

“This improvement has come despite some of our states being slow to fully lift bans on elective procedures,” Myers said.

All in all, organic growth in admissions for home health locations declined 4.7% for the quarter due to low points in April and May. The company fared better in June and July, with organic admissions growth up 7% and 8.5%, respectively, compared to the same periods last year.

That’s a good sign for the post-acute care provider, Jefferies analyst Brian Tanquilut told Home Health Care News.

“Volumes have recovered,” Tanquilut said. “If you look at their admission trends, it shows their average weekly admissions bounced back. That’s obviously a good sign that shows things are starting to recover.”

It’s also notable that LHC Group had a strong showing in states that have been highly impacted by the COVID-19 emergency. 

“They gave us the extra detail that they are showing pretty healthy growth in Florida, Texas and a few other states,” Tanquilut said. “It’s interesting, given that COVID-19 has obviously picked up in those markets in the last few weeks.”

To help offset COVID-19’s impact, LHC Group utilized the accelerated and advanced payment program from the U.S. Centers for Medicare & Medicaid Services (CMS). It received $310.7 million in funds under that program in April.

The company also received $88.7 million from the Provider Relief Fund, recognizing $44.4 million.

“[LHC Group] benefited from CARES Act grants. That helped them a little bit during the quarter as well,” Tanquilut said. “That probably holds true for a lot of providers.”

Consolidation opportunities

LHC Group’s joint venture partnerships with hospitals and health systems — a calling card for the company — has positioned it to play a meaningful role in the nation’s response to the public health emergency, according to Myers.

“While challenging, the COVID pandemic has provided a unique opportunity to highlight our clinical capabilities, how tightly integrated we are with our partners, how seamlessly we collaborate, and the extent to which they are leveraging our unique experience and capabilities to improve health outcomes, efficiency and patient satisfaction,” he said.

The company finalized a joint venture with Orlando Health — a not-for-profit health care organization that operates in nine Florida counties — on Aug. 1.

The deal is expected to bring in annual revenue of $3.5 million.

On the M&A front, LHC Group expects an acceleration of activity in terms of new hospital joint ventures and hospice acquisitions. It also still anticipates accelerated home health consolidation due to the Patient-Driven Groupings Model (PDGM) and the elimination of Requests for Anticipated Payment (RAPs). 

“It has not been on the front page with all the challenges and priorities we have needed to focus on throughout the pandemic, but historic consolidation opportunity within the highly fragmented home health industry is still there — and as compelling as ever,” President and CFO Joshua Proffitt said.

While PDGM has had a bigger impact because of the coronavirus, LHC Group remains confident in its ability to operationalize and mitigate the financial effect of the model moving forward.

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Encompass Health CEO Mark Tarr: It’s in Every Company’s Best Interest to Make Diversity a Priority

Across the U.S., ongoing protests against police violence toward Black Americans and other people of color have caused many companies to take a closer look at issues pertaining to workplace diversity and inclusion.

For some companies, this time has been a call to action, with many announcing plans to develop initiatives aimed at addressing inequality within organizations.

One example is Birmingham, Alabama-based health care giant Encompass Health Corp. (NYSE: EHC). The company’s president and CEO, Mark Tarr, recently joined CEO Action for Diversity & Inclusion, a coalition of more than 1,000 CEOs pledging to advance workplace diversity and inclusion.

Encompass Health’s national footprint includes 245 home health locations, 83 hospice locations and 136 hospitals.

Home Health Care News recently caught up with Tarr to discuss Encompass Health’s larger diversity and inclusion efforts — and how the Black Lives Matter movement has impacted the company.

Below are highlights from HHCN’s conversation with Tarr, edited for length and clarity.

HHCN: Let’s start generally. Can you recap Encompass Health’s highlights and challenges since the start of the year? Specifically, the home health and hospice side of the business.

Tarr: First of all, we started off the year really well, whether it was on volumes or — on the home health side — implementing strategies for the Patient-Driven Groupings Model (PDGM). 

Then came the month of March — and the low point in April [in terms of] the impact from the pandemic and volume drop. The first three-fourths of the first quarter were good in terms of volume. We thought it was going to be a great year. Then this unknown, unplanned thing called COVID-19 hit, and we saw volumes drop. We subsequently saw the volumes start to pick back up at the end of April.

Now, we’ve seen our episodes start back up to pre-pandemic levels.

Both our management teams and the caregivers in the field have worked extremely hard to make sure they’re taking care of all patients in what has been a very challenging setting. 

We’re glad to see the volumes have recovered on the home health side. As far as hospice, we just didn’t see the variations and volatility. We hope we’re over the worst of it.

But certainly, the pandemic is still impacting business out there.

We have seen a shift in patients and their willingness to want to be treated. There was a time period where they were reluctant to let caregivers into their homes for fear of contracting the virus themselves. We’ve done a lot of education and communication with patients in terms of our preparations, in terms of what measures we’re taking with our own staff to prevent exposure and the spread of the virus. 

Encompass Health joined a coalition pledging to advance diversity and inclusion in the workplace. You’re one of more than 1,000 CEOs that have come together for CEO Action for Diversity & Inclusion. Why join that coalition?

I think it’s a good fit with the values and initiatives that we have within Encompass Health. One of our core values is setting the standard. I think it’s important for me as the CEO of our organization to set the standard — and that’s why I felt committed to signing on to this pledge.

It puts us in a nice company with other major corporate organizations. There is power in numbers. You have 1,000-plus companies, and I’m sure that number is growing every day now, as other CEOs evaluate this opportunity. 

This is all happening as we are seeing a larger shift toward greater racial equality, with the Black Lives Matter movement leading the charge. How is this impacting various parts of your company?

We treat a diverse patient population. We are in a wide swath of states. We certainly have a diverse staff across our 43,000 total employees, and that certainly covers home health and hospice as well. That diverse group has obviously been impacted.

I think that this is an opportunity for us.

We can all do better in terms of trying to understand differences and finding commonalities to better our organization.

It’s a good time to look inward. Clearly, the tragic death of George Floyd, which many of us saw on our TV screens, was somewhat of a call to action. I think that it was a prime opportunity for us to better understand what was going on out there in many of our communities. That’s what we’re doing as an organization.

The company is pledging to cultivate a workplace where diverse perspectives and experiences are welcomed and respected. What does this mean for Encompass Health, and what specific plans do you have in place to accomplish this?

Inclusion and diversity have been a priority for our organization for a long time.

We’ve had an inclusion-and-diversity council, which is made up of a number of our staff representing both of our operating segments, as well as our home office. We have a large geographic representation on that council, too.

We’ve used that council to provide feedback to the organization and identify steps we can take to better highlight and implement inclusive actions within our company. We’ll continue to use that diversity council as we go forward.

This has given us an opportunity to look at what we have done over those 10 or 12 years that the council has been in existence. What can we do better? What best practices can we take up as we further investigate and read about what other companies are doing?

Have there been any initiatives, best practices or policies that have sprung from the company’s diversity council that you would want to highlight?

The council has helped us develop an inclusion-and-diversity plan for this next year. The plan is really focused on four areas: workforce, patient experience, supplier diversity and community partnerships.

To give you just a little bit more detail, we have provided scholarships, for example. We have affiliations with five universities and have worked with them to support minority-endowed scholarships for deserving students entering health professions.

In 2019, we were recognized by the Women’s Forum of New York for raising the bar for female board representation. This award went to directors and boards that have at least 30% female representation.

We have an annual partnership with a local school here in Birmingham that has a diverse student population. We have created internship opportunities for these students. They have an opportunity to come and work within different departments in our home office here in Birmingham and get exposed to various aspects of what we do here, whether it’s finance and accounting, human resources, or any of the functions that we have here that help support our company.

Those are just a few of the things that we have done. It’s a comprehensive program, and it’s one that we continue to find opportunities to add to every year.

Encompass Health has long been recognized as a great place to work. What was the company already doing when it comes to diversity?

Well, one thing that happened recently, as part of the Black Lives Matter initiatives, is we have been developing a series of videos that we refer to as “Encompass Health Today.” Our employees will share situations that happened in their lives around racism and how they’ve handled it. We want to create these dialogues so that they can be used as tools out in the field. 

Some call them “uncomfortable conversations,” but they can be very constructive, particularly given the challenges in and around diversity. We released two of the videos now. We have others in the works, and these will be used to have positive dialogues around this sometimes difficult subject matter. 

In addition to promoting these important discussions, what other goals does Encompass Health have when it comes to addressing inclusivity?

Certainly, one of our biggest goals is to increase the strength of the diversity at the leadership levels. We have been aggressively doing that for the past several years. We think we have a lot of opportunities there, whether that is through just organic succession planning or making sure that there are opportunities for employees to participate in leadership development programs.

It’s both a short-term and a long-term goal because it can take a while, particularly if you’re doing it internally.

Our readers always want the “bottom line” connection to a given topic. How does diversity impact a provider’s financial well-being or overall business model? 

I think there are some well-publicized studies that show how companies that build and promote a diverse workforce also do well financially. 

We are no different. We see that as being very important to our overall success, whether that’s through financial growth or otherwise.

If we can build and continue to build upon the diversity that we have within our organization, I think it can help our recruitment and retention efforts, for instance. You can work better as a team because you’re more diverse and have different viewpoints to accomplish a collective goal. I think the patient benefits from that — and the organization benefits from that.

It’s in every company’s best interest to make diversity a priority. It certainly pays off in terms of shareholder value. I think it’s important for both the quantitative and qualitative goals that we set forth.

Shifting gears, I know you just talked about Encompass Health’s plans and goals for the remainder of the year during the Q2 earnings call, but can you close by summarizing how you see the home health and hospice segment performing in the final five or so months of 2020 and into 2021?

We withdrew our guidance, so I can’t say anything relative to future guidance.

Generally, we think that the demand for home health and hospice services is only going to grow in the future. 

We have grown aggressively in the past when you look at our ability to acquire new home health and hospice agencies. We certainly plan on doing that moving forward. One area of focus is what we call our “overlap markets,” where we have home health in addition to one of our rehabilitation hospitals. We’re very committed to that.

More and more patients are going to want to be treated in the home setting. It’s the low-cost setting. There will be an interest from the payers to see what all can be done in the home setting from a care standpoint.

We are in this for the long term. We think that PDGM will likely create opportunities where smaller, struggling agencies are looking for someone to acquire them, so they can be part of a larger-scale organization. That’ll be an opportunity for growth for Encompass Health going forward.

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Home Health, Hospice Multiples Hit Record High Amid COVID-19 Emergency

Despite the economic turmoil of the ongoing COVID-19 emergency, home health and hospice multiples hit record-breaking numbers in the first half of 2020. 

Specifically, multiples reached 29 times in the early part of this year, beating their previous high of 26 times in 2019, according to a recent report by PricewaterhouseCoopers’ (PwC) Health Research Institute. Contextually, those figures are in reference to LTM EV/EBITDA.

PwC is a global network of firms that delivers tax and consulting services for businesses.

The record-high multiples reaffirm what so many experts have said over the past few months: The coronavirus is elevating the importance of home-based care, finally earning providers the recognition they deserve.

“COVID-19-driven needs could impact the types of assets health services companies find valuable,” the report said. “For example, the pandemic has accelerated the shift to virtual health, home health and remote work, making targets that enable these functions more attractive.”

From a multiples perspective, home health and hospice performed among the best of any sub-sector in health care during the first six months of the year. In fact, their sky-high multiples helped elevate the health care sector as a whole.

Overall, health care sector multiples hit 13.9 times, up slightly from 13.8 times in 2019. Without home health and hospice, that figure would have fallen to 12.3 times in the first six months of the year.

Deal volume, however, was a different story.

As a whole, the health care sector saw mergers-and-acquisition activity slow in the first six months of 2020, falling below 500 transactions for the first time since 2015.

“From 2016 to 2019, the health services sector routinely experienced more than 500 deals by the year’s halfway mark,” the report said. “[The first half of] 2020 fell just 3% short of that level, even amid the unprecedented challenges of the COVID-19 crisis.”

Overall, there were 483 health care deals in the first half of 2020, according to the report. The home health and hospice space saw 32 of those, with year-over-year deal growth by volume falling more than 33%.

While the coronavirus has undoubtedly played a part in slowing overall health care deals, the implementation of the Patient-Driven Groupings Model (PDGM) is more so responsible for delaying deals in the home health M&A market.

At least, that’s what Cory Mertz, managing partner at M&A advisory firm Mertz Taggart, believes.

“We may have had a few deals get pushed back or killed due to COVID-19, but most of this dip is a predictable result of PDGM,” Mertz previously said. “Buyers want to wait until the dust has settled on PDGM and see how potential targets perform under the new model, which requires at least a few months of financial and patient data.”

Deal activity should get back to near-normal levels by mid-2021, Mertz predicted.

Meanwhile, skilled nursing facilities, assisted living facilities and long-term care hospitals saw the greatest decline in multiples in the early part of this year. That’s possibly due to the market’s perception of these facilities’ vulnerability to COVID-19 cases, the PwC report speculated.

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Interest in Standalone Home Health Agencies Appears to Be Waning

Increasingly, home health providers have worked to expand their service offerings to care for patients on a more longitudinal basis. Mergers-and-acquisitions activity in the second quarter of 2020 reflected that trend.

Specifically, Q2 saw a number of deals that consisted of home health care and hospice pairings, according to the latest monthly M&A report from advisory firm Mertz Taggart.

Overall, Q2 2020 saw a drop in M&A activity, as prospective home health buyers had to navigate both the impacts of the COVID-19 emergency and the Patient-Driven Groupings Model (PDGM). There were a total of five home health transactions, with two of the deals paired with hospice, according to Mertz Taggart data.

There were 18 home health, home care and hospice deals in total. That number is a decrease compared to Q2 2019 when there were 27 total transactions.

The decline of standalone home health deals is something that may continue for the coming months, Cory Mertz, managing partner at Mertz Taggart, told Home Health Care News.

“In the short-term, we will see fewer standalone home health deals,” Mertz said. “Buyers will want to see how agencies perform under the new payment model before making a competitive bid. They’ll need at least a few months of data and financial performance to do a thorough evaluation and submit an offer.”

The home health and hospice deal pairings are in line with the overarching strategy of most of the larger providers, which is to provide care for their patients across the post-acute continuum, he noted.

Amedisys is one example of that trend.

Over the past few years, the Baton Rouge, Louisiana-based provider has aggressively gone after valuable hospice targets, with deals including a $235 million acquisition of AseraCare Hospice. Historically a home health care giant, Amedisys is also now one of the five largest hospice providers in the country.

“All of the big providers have their eyes set on providing both home health and hospice in each of the areas they service,” Mertz said. “Most of the larger transactions over the past 24 months have been the traditional public home health companies acquiring hospices that have some geographic alignment with their home health [businesses]. This allows them to capture referral synergies and generate additional business. It also helps prepare them for future value-based and risk-sharing payment models.”

For many larger home health providers, these deals mean becoming one-stop-shops for care needs.

Hospice’s relatively stable regulatory environment has made it an attractive acquisition asset for buyers, too.

The standalone home health deals that did take place during the second quarter were highly-targeted, strategic deals, according to Mertz.

One such deal was the joint venture formed between LHC Group Inc. (Nasdaq: LHCG) and Orlando Health in Florida. The JV agreement is slated to close on Aug. 1.

The JV agreement allows LHC Group to further strengthen its Florida presence. LHC Group will acquire majority ownership and assume management responsibility of three current Orlando Health providers.

“This is in line with LHC’s hospital JV strategy,” Mertz said. “The other [standalone home health deals] were relatively small but allowed the buyers to further expand into an existing or contiguous geographic service area.”

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WellSky Nabs New Investment from Leonard Green & Partners

Private equity-backed health care software company WellSky has a new investor and a new capital structure, the company announced Monday. 

TPG Capital — the PE platform that currently owns WellSky — has entered into a definitive agreement to add private equity firm Leonard Green & Partners LP (LGP) as a capital partner. As part of the deal, TPG Capital will also make a new equity investment in WellSky.

Terms of the transaction were not disclosed. However, WellSky CEO Bill Miller provided Home Health Care News with some color on the company’s new structure.

“I think it’s safe to say [the deal] is more like a 50/50 partnership,” Miller told HHCN. “Leonard Green has come in and has taken a meaningful stake on par with TPG.”

WellSky offers technology solutions, analytics and services to post-acute and community care providers. That includes home health agencies, hospices and hospital systems, just to name a few examples.

As an organization,WellSky’s goal is to empower organizations to improve whole person care and care coordination using predictive insights and other services. The Overland Park, Kansas-based tech giant currently serves more than 15,000 client sites around the world.

Meanwhile, TPG Capital — which acquired WellSky, then Mediware Information Systems Inc., back in December 2016 — is the private equity platform of alternative asset firm TPG. Since 1993, TPG Capital has invested $50 billion, with about $11.5 billion of those investments in the health care space.

Kindred Healthcare — which is also co-owned by Humana Inc. (NYSE: HUM) and Welsh, Carson, Anderson & Stowe — is one notable home-based care example.

LGP, on the other hand, has raised over $40 billion of committed capital since inception. It specializes in consumer, business and health care services providers, as well as businesses in retail, distribution and industrials. 

WellSky will use its new investments from TPG Capital and LGP to grow and expand its current capabilities and service offerings. Miller singled out analytics, telehealth and payer relationships as specific growth areas of interest.

“For our clients, this is great news,” Miller said. “This is just adding to our capacity, capabilities and the ability to support them better. The management team is staying the same, and we’re the same company we were yesterday. We just have the wherewithal to continue to develop solutions that support them — and to use our ears better and really get things done faster.”

The addition of LGP and the new investment from TPG Capital will help the company “be better at everything” it already does, Miller added.

The transaction is expected to close in the third quarter of 2020.

From rumors to reality

WellSky’s Monday announcement doesn’t come as a total surprise.

PE Hub speculated WellSky could be getting new ownership earlier this month, citing “five sources familiar with the matter.”

The publication reported WellSky’s full sale valuation could be around $3 billion, thanks to the company’s EBITDA of about $150 million. It also floated the possibility of the 50-50 joint structure that came to be.

Miller also confirmed other details listed in the report, such as the timing of the transaction.

“This is something we had contemplated doing this year,” he said. “We were definitely contemplating it when the coronavirus outbreak hit … and it gave us some pause.”

When WellSky saw that its business continued to perform “very well” amid the COVID-19 emergency, it decided to move forward with the deal process. It heard from a handful of interested buyers and ultimately went with LGP due to the “aggressiveness of its bid” and its understanding of the WellSky vision and markets, according to Miller.

Growth trajectory

Since being acquired by TPG in late 2016, WellSky has grown significantly, thanks in large part to M&A. Recent transactions include the purchase of ClearCare late last year and another five acquisitions in 2018.

With the help of LGP, WellSky hopes to continue with that trajectory, using both organic and transactional growth methods.

“I fully expect the company to double in size again,” Miller said. “I don’t have any doubt about it. That’s what we do, and that’s what we’ve done. Largely, we’ve tripled in size, and now I suspect, we’ll double and triple again over the next handful of years.”

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