It’s been a busy year in the Home Health & Hospice sector. Deal volume is poised to surpass the record 85 transactions announced in 2018. Through late November, 79 deals are in our DealSearchOnline database and more are expected before year-end.

Home health agencies account for the bulk of the transactions every year, making up 72% in both 2015 and 2016, for example. In the past two years, however, hospice companies have seen a surge in investor interest. In 2018, hospice companies accounted for 33% of the 85 deals in the sector. Through the end of November 2019, they make up 38% of the sector’s deal count.

Valuations are often described as “frothy” for home health and hospice companies. Panelists on our April 2019 Home Health & Hospice webinar were seeing home health companies with more than $10 million of EBITDA trading in the 10x to 12x range and hospice companies of similar size trade in the 11x to 15x range.

All were more bullish on hospice companies, based on the significantly more positive reimbursement environment, with Medicare Advantage plans set to roll out hospice benefits beginning in 2021, and the uncertainty currently playing out on the home health side before the January 1, 2020 launch of the Patient-Driven Groupings Model (PDGM).

Prices have been rising for pure-play hospice companies, as a result. In 2018, Curo Health Services, a portfolio company of Thomas H. Lee Partners, was sold for $1.4 billion to an unusual consortium of buyers: Humana Inc. (NYSE: HUM) and two major private equity firms, TPG Capital and Welsh, Carson, Anderson & Stowe (WCAS).

In December 2017, the consortium surprised the industry with its announced acquisition of the Kindred At Home division of Kindred Healthcare for $4.1 billion. Upon closing of of the Curo deal in July 2018, the buyers merged Curo with the hospice business of Kindred at Home to create the country’s largest hospice operator.

Another unlikely duo made a big hospice bet in September 2019. Not-for-profit Ascension teamed with TowerBrook Capital Partners to acquire Hospice Compassus from Audax Private Equity and Formation Capital. The approximately $1 billion price represented about 11.8x EBITDA.

And Addus HomeCare Corp. (NASDAQ: ADUS) made a splash with its $130 million deal (13.1x) for Hospice Partners of America, LLC in August.

Home health giant Amedisys, Inc. (NASDAQ: AMED) has been moving aggressively into the hospice space as a way to hedge the effects of PDGM. In 2018 it paid $340 million for Compassionate Care Hospice, a national provider with 53 locations in 24 states, making it the third largest hospice provider in the United States.

Two add-on acquisitions came in 2019. In February, it announced a deal for RoseRock Healthcare in Tulsa, Oklahoma. More recently, it added Asana Hospice, based in Fort Worth, Texas. Upon closing the latest deal, Amedisys will operate 146 hospice centers in 33 states with a daily census of 12,000 patients.

Neither deal will move the revenue needle very far for Amedisys and no prices were disclosed. Sources tell us Asana, which operates eight locations in Kansas, Missouri, Ohio, Pennsylvania and Texas, has revenue around $30 million. Based on the few revenue multiples we’ve seen on hospice deals this year (1.9x to 2.4x), the price would be in the $57 million to $72 million range.