Consolidation isn’t a novel concept in the healthcare market, although it has been slow to arrive for some. The Home Health & Hospice sector has experienced a few jolts in the past six months, as three publicly traded giants merged or were split up. Now the private equity side has sent a shock wave through this sector, pulling together three separate platform companies into a major contender.
Blue Wolf Capital Partners, which has backed both Great Lakes Caring and National Home Health Care for the past two years, joined with Kelso & Company to acquire Jordan Health Services from Palladium Equity Partners, LLC. Financial terms were not disclosed.
Upon closing the transaction for Jordan Health Services, Blue Wolf and Kelso merged the three to create one of the largest providers of home-based care in the United States. The combined company will serve more than 63,000 patients and their families on a daily basis, employing more than 31,000 caregivers across 15 states and 221 locations.
Each company’s corporate headquarters will remain in Connecticut, Michigan and Texas, and service lines will be maintained. Head officers of the combined company are G. Scott Herman, CEO of National Home Health Care, who has been named Enterprise CEO; Adam Nielsen, CEO of Great Lakes Caring, who has been named CEO of Home Health and Hospice; and Jeffrey Fisher, CEO of Jordan Health Services, who will lead the company’s continuing acquisition efforts as Chief Development Officer.
Jordan Health Services was founded in 1975 and became a portfolio company of Palladium Capital in 2012. Since then, the Texas-based home health provider has posted at least 25 acquisitions of smaller agencies in Texas, Louisiana, Oklahoma and Arkansas. Its most recent deal was announced in January, as the company moved into Missouri with the addition of Pyramid Home Health Services.
Sluggish 2017, until …
Throughout 2017, the Home Health & Hospice sector dozed along while other healthcare services sectors racked up near-record deal volumes. Some 54 deals were announced in 2017 (-31% vs. 2016) for all of the Home Health sector. Behavioral Health Care racked up 55 (+20%), Laboratories, MRI & Dialysis reported 56 (+22%) and Physician Medical Groups hit 166 (+27%), to name a few.
It wasn’t until November that a major deal was announced. That’s when Louisiana-based LHC Group (NASDAQ: LHCG) announced its merger with Almost Family, Inc. (NASDAQ: AFAM), in Louisville, Kentucky. LHC has been a leader in this sector, with a post-acute continuum of care in 320 home health locations, 92 hospice locations, 12 community-based service locations and 15 long-term acute-care hospitals.
Almost Family was already a major home health care providers, with 332 branch locations in 26 states, including its joint venture with Community Health Systems (NYSE: CYH). The company and its subsidiaries operate home health, other home-based services and healthcare innovations segments.
The estimated price of $983 million consisted of 0.9150 shares of LHC Group traded for each AFAM share. Upon closing, LHCG shareholders own approximately 59% and AFAM shareholders own 42% of the combined company.
A month later, the largest U.S. home health care provier, Kindred Healthcare (NYSE: KND), announced it would be sold to a consortium of three buyers. Two private equity firms–Welsh, Carson, Anderson & Stowe (WCAS) and TPG Capital–joined with managed care giant Humana Inc. (NYSE: HUM) in a combined $4.1 billion deal to buy and break up Kindred. Kindred stockholders received $9 in cash for each share of KND common stock.
The home health, hospice and community care businesses was separated from Kindred and operated as a stand-alone company owned 40% by Humana and 60% by TPG and WCAS. The LTAC hospitals, IRFs and contract rehabilitation services businesses will be operated as a separate specialty hospital company owned by TPG and WCAS called Kindred Healthcare.
Welcome to the new Home Health & Hospice sector.
