Humana Inc. (NYSE: HUM) is moving more deeply into hospice care with its recent announcement that it will acquire Philadelphia-based Enclara Healthcare from Consonance Capital Partners and Enclara management.
Enclara is one of the largest hospice and pharmacy benefit management (PBM) providers in the country, serving 450 hospice providers and 97,000 hospice patients daily. This deal includes mail-order pharmacy Enclara Pharmacia, specialty PBM GuidantRx and pharmacy Avanti Health Care Services. Enclara’s palliative care provider, Turn-Key Health, is not included.
Consonance first invested in Enclara in 2014 and added ExcelleRx, PGM Holdings and Avanti Health Care Services in the following years.
This acquisition extends Humana’s comprehensive care continuum strategy to cover the pharmacy-related needs associated with hospice care. Humana expects the add-on will simplify the mail-order pharmacy experience for hospice patients and advance its own technology stack for in-home pharmacy through areas suchs as enhanced mobile medication management and improved EMR connectivity.
Although a price wasn’t disclosed by the parties involved in this transaction, there have been some guesses. Sources cited by PE Hub estimated Enclara’s EBITDA at $50 million to $60 million, with price expectations at 14x EBITDA. which suggests a value of $700 million to $840 million, according to PE Hub. However, Healthcare Dive reported Enclara’s estimated annual revenue was $27 million, without citing sources. That makes the $50 million-$60 million EBITDA estimates highly suspect.
Even at $700 million, Enclara is a good fit for Humana. In April 2018, health insurer joined private equity firms TPG Capital and Welsh, Carson, Anderson & Stowe in their acquisition of Curo Health Services LLC from Thomas H. Lee Partners. Humana took a 40% minority stake in Curo, equal to about $560 million of the consortium’s $1.4 billion bid.
The consortium had already announced their $4.1 billion deal for Kindred Healthcare in December 2017 (it closed in July 2, 2018). After the Curo Health Services deal closed on July 11, 2018, it was merged with the Kindred at Home division to create the largest hospice operator in the United States. Enclara will now provide specialty pharmacy services to Humana’s hospice population. Well worth the price, even if the deal is expected to be immaterial to HUM earnings in 2020.