M&A transactions up 70% in Q4. Mertz Taggart completes four in-home care transactions. After months of M&A uncertainty triggered by the COVID-19 pandemic, 2020 ended on a welcomed high note. Overall, there were at least 51 home health, home care, and hospice transactions in the fourth quarter of 2020, the latest data from Mertz Taggart shows. That’s 22 more than in Q3 2020 — and the most deals in any individual quarter over the last three years. “Deal volume started to recover or trend upward across the home health, home care, and hospice markets toward the middle of 2020,” Mertz Taggart Managing Partner Cory Mertz says. “We’re not surprised that Q4 was a big quarter. We called it months ago. Combine that with the threat of a near-term capital gains tax hike, and we expect an active 2021.” There are plenty of industry-specific reasons for the spike in M&A action at the end of 2020, Mertz noted. But buyers and sellers had plenty of macro-level factors to weigh, too, including the shift to a Biden Administration and expected higher capital gains taxes at some point in the near future. Following nine or ten months of a public health emergency, some sellers also probably just hit a wall in the fourth quarter, prompting an exit. Note: The sum of sub-industries (broken down above) does not always equal total sector deal volume, as some transactions include more than one sub-industry. Home Health M&A Activity Rebounds As expected due to the Patient-Driven Groupings Model (PDGM), home health dealmaking started off strong in 2020, with at least 14 transactions in Q1. There was a sharp dropoff in Q2 before M&A activity started to climb again starting around July. The most recent quarter saw at least 17 deals for home health assets, according to Mertz Taggart data. “There has been a lot of pent-up demand for home health businesses,” Mertz says. “And that demand is only growing strongly now, as the U.S. health care system looks to avoid skilled nursing facilities and facility-based care.” To some extent, the confirmed deals in Q4 were overshadowed by two possible industry-shaping deals to come. Birmingham, Alabama-based Encompass Health Corp. (NYSE: EHC) is a large operator of in-patient rehabilitation facilities (IRFs) that also runs the fourth-biggest home health provider in the nation. On Dec. 9, the company announced it is exploring “strategic alternatives” for its highly successful home health and hospice businesses. Encompass Health said it is exploring a range of options, including full or partial separation through a sale or other transaction. “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 upon the announcement. Less than a week later, rumors surfaced that Brentwood, Tennessee-based Brookdale Senior Living Inc. (NYSE: BKD), the country’s largest operator of senior living communities, is also considering a sale of its home health and hospice segments. “If those two items are any barometer, we’re in for a very, very interesting 2021,” Mertz says. Hospice Somehow Gets Hotter Unsurprisingly, hospice again drove home health, home care and hospice dealmaking in Q4. Mertz Taggart data shows there were at least 25 hospice-related transactions for the quarter, six more than the whopping 19 reported in Q3 2020. There have been at least 15 hospice-related transactions every quarter since the end of 2019. “It seems like every quarter we’re saying demand for hospice is at an all-time high — and then we see even more demand materialize,” Mertz says. In December, private equity-backed post-acute care provider Traditions Health purchased Oklahoma-based Centennial Hospice. The Care Team acquired InTeliCare Home Health & Hospice in Michigan the same month. In one of the most significant post-acute care deals of 2020, AccentCare completed its planned merger with Seasons Hospice & Palliative Care in Q4. Combined, the AccentCare-Seasons enterprise becomes a top-five player in both the home health and hospice spaces. “During the last several years, we’ve witnessed a growing need for post-acute care services that are patient-centered and easy to navigate,” Steve Rodgers, CEO of AccentCare, said upon the merger’s closing. “With our expanded organization, we will be able to meet the demands of our patients and partners, and offer a full range of innovative solutions that streamline the process of accessing care.” Home Care Sees Blockbuster Quarter Even more than home health care, home care transactions hit a lull throughout much of 2020. In fact, prior to Q4, no quarter in 2020 saw more than eight home care-related transactions, according to Mertz Taggart data. That all changed from October through December, however. There were at least 15 home care-related transactions during the last quarter of 2020. “We’ll continue to see deals for home care,” Mertz says. “Payers really saw firsthand the value of home care during the public health emergency. It was a vital resource in managing chronic conditions, especially with individuals avoiding in-person trips to the doctor.” Examples of Q4’s home care deals include 24 Hour Home Care’s purchase of Grace Care Management. In December, Care Finders Total Care further builds its Philadelphia blueprint by announcing its acquisition of ORI HomeCare. Mertz Taggart provided sell-sides services for the ORI HomeCare transaction. Mertz Taggart Completes Four Transactions Including the aforementioned Ori transaction, Mertz Taggart completed four in-home care transactions in Q4. The others include: A large private duty home care agency based in Florida sold to a PE-backed strategic buyer; A large private duty home care agency based in North Carolina sold to a PE-backed strategic buyer; A mid-sized Medicare home health agency in Texas sold to a family-office-backed strategic buyer. For more information on these transactions, please contact admin@mertztaggart.com. 2021 Projections Home health, home care, and hospice transaction activity was up across the board in Q4. That should set up an action-packed 2021. “We have a confluence of factors that should drive higher-than-average transaction activity in 2021. The threat of a significant hike in capital gains tax rate and owner burnout as a result of the pandemic are two common themes we are hearing from owners,” Mertz said. Trackbacks/Pingbacks Healthcare M&A Transaction Recap for the Year 2020 - National Business Press - […] Taggart tracked 133 transactions in 2020 in the home health, home care, and hospice sectors, nearly 25% higher than… Top Home Care Trends for 2021 – My Blog - […] continue to see deals for home care,” Mertz Taggart Managing Partner Cory Mertz wrote in a Q4 M&A report.… Top Home Care Trends for 2021 - Healthcare & Pharma and Nutrition - […] continue to see deals for home care,” Mertz Taggart Managing Partner Cory Mertz wrote in a Q4 M&A report.… Top Home Care Trends for 2021 * Blog for Startups - […] proceed to see offers for house care,” Mertz Taggart Managing Accomplice Cory Mertz wrote in a Q4 M&A report.… CareFinders Total Care Reportedly Pursuing Growth Capital – My Blog - […] The fourth quarter of 2020 saw at least 15 home care-related transactions. Prior to Q4 2020, eight deals were… CareFinders Total Care Reportedly Pursuing Growth Capital – Kapi News - […] The fourth quarter of 2020 noticed a minimum of 15 house care-related transactions. Previous to This fall 2020, eight…

Readying your agency when an acquisition is underway. The COVID-19 public health emergency has had a profound impact on the health care sector, particularly in post-acute care. As home-based care providers experienced a range of disruptions, including census dips, and as banks paused on financing new deals to assess the impact of the pandemic, M&A activity cooled off. During the second quarter of 2020, for instance, there were only 18 transactions across home health, hospice, and home care, according to Mertz Taggart statistics. That’s a substantial drop compared to the 26 transactions that took place during the same period a year prior. But don’t let the somewhat depressed M&A numbers fool you. There is still money to be made during the pandemic — as long as buyers and sellers stick to the M&A playbook. And the demand for quality agencies is on the rise. “We might not be seeing as many deals materialize, but that interest in quality assets is still out there,” Mertz Taggart Managing Partner Cory Mertz says. “The entire U.S. health care system, and everybody associated with it, are looking for ways to shift care into the home and away from facilities. Interest in home-based care has probably never been higher.” For home health, hospice and home care agencies exploring a sale in the current preparation is paramount to a successful transaction. Here are three tips for streamlining the process. 1. Approach the sale before you’ve decided to take the “plunge” Agencies should begin readying themselves for a sale long before they officially take the “plunge” and initiate the sales process. An important part of that is identifying key employees and management members — the influencers and decision-makers who make your operating model tick. In many cases, buyers aren’t just interested in acquiring scale and market share; they’re interested in acquiring new voices, ideas, and systems. The identification of key employees and management members should be made prior to starting the process. After pinpointing cornerstone leaders, sellers should make sure those individuals are willing to stay on board during a transition. How and when that should occur can vary, however. That might even extend to the agency owner. Take, for example, PE-backed Caring People’s acquisitions of Acappella In Home Care, Aging Care LLC and AMR Care Group. “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,” Caring People CEO Steven East told Home Health Care News on Aug. 20. “We felt that we could continue working with them and growing what they built.” The big question agency leaders need to think about: When should I tell my employees a sale is coming? “Sellers need to make sure their team is ready to lead during a transition, but they don’t want to tip their hand too early,” Mertz says. “To wait or not to wait? It’s an extremely delicate question that we will typically pose early with our clients early in the engagement process.” 2. Communication is king — but be strategic After you reveal plans to your key team members that you’re considering a transaction, you will eventually need to communicate with all levels of employees. This should be done as late in the process as possible, certainly after the purchase agreement and confidentiality agreements are signed. Until then, only key players involved in due diligence should be informed. Additionally, make sure there aren’t any outstanding issues when it comes to HR, accounting, or other departments. “Owners often feel compelled to tell their employees early on, out of loyalty, which is both understandable and admirable,” Mertz says. “But letting them know too early can actually create more uncertainty in-house, and hard-to-control speculation, both internally and in the markets they service.” Once the purchase agreement is signed, it’s time to communicate the sale with the rest of your employees. This should be a well-coordinated communication plan. Change comes with many unknowns, which often leads to anxiety for employees. Let them know exactly what the sale means to them. This opens up the opportunity for them to be introduced to the buyer, put a face to the name, and the buyer can then communicate their plans for the company. This introduction will also open the floor to the employees to ask the difficult questions that are on their minds. “Let your team know their day-to-day will not change,” Mertz says. “Employees dread change, but less fear usually means smoother integration and lower odds of information being leaked outside your organization.” Once workers know their day-to-day roles won’t drastically change, assure them that you have a strong transition plan in place. As you share that transition plan, have other agency leaders back you up, demonstrating that the entire leadership team is pulling from the same end of the rope. Prior to commencing any communications with employees, it’s vital to make sure paperwork is organized and free of inaccuracies or inconsistencies, particularly regarding accounting and financial documents. In the age of COVID-19, that preparation is even more important than usual, with Provider Relief Funds, advanced payments from the U.S. Centers for Medicare & Medicaid Services (CMS) and Paycheck Protection Program (PPP) loans. 3. Utilizing change management Effective preparation and communication both fall under the “change management” umbrella. Broadly, change management is the collective term describing philosophies associated with leading individuals and organizations during times of change. Before, during and after any transactions, it’s always good for both buying and selling parties to keep best change management practices in mind. Here’s what Encompass Health Home Health & Hospice CEO April Anthony had to say on the topic: “I think successful change management starts with a strong culture. If you create the kind of environment where people say, ‘You know what? We’re on the same team. I know my leadership cares about me. I believe in the mission we’re pursuing’ — that aligns any organization with being prepared to deal with big, transformative change in processes.” So remember: Whatever the external market factors, there are key areas to prepare any time a sale will be taking place. When it comes to readying an agency for sale, advance preparation, thorough and appropriately timed communication, and a planned change management strategy will help set the stage for a smooth change in ownership. To learn more about the sales process when selling your home health, home care, or hospice agency, visit Our Process Page.

ST. LOUIS–(BUSINESS WIRE)–Pathways Health and Community Support, LLC (Pathways), one of the largest providers of behavioral and mental health services in the United States, announced today it has completed its acquisition of three Community Intervention Services (CIS) companies: Access Family Services (AFS), Family Behavioral Resources (FBR) and Autism Education and Research Institute (AERI), which will operate as one entity (FBR-AERI). The three CIS companies are large, clinically focused providers of community-based behavioral health and substance use services in the eastern United States. The acquisition makes it possible for Pathways to expand and strengthen its presence in Pennsylvania and North Carolina and add new service lines in South Carolina. Terms of the agreement were not disclosed. AFS and FBR-AERI’s service offerings align with Pathways’ mission to improve the lives of people by inspiring personal growth, health and wellness. AFS offers community-based, school-based and outpatient behavioral health and autism services in North Carolina and South Carolina. Managed as one company, FBR-AERI operates from 30 locations throughout Pennsylvania and is also a leading provider of outpatient and community-based behavioral health services. Integrating these programs and services into Pathways’ current service offerings will enable Pathways to offer a broader range of programs in more communities. Read the full press release here. Trackbacks/Pingbacks Behavioral Health M&A Report: Q4 2020 – Mertz Taggart - […] Health and Community Support, LLC completed the acquisition of Access Family Services, Family Behavioral Resources, and Autism Education and...

EAGLE, Idaho, Sept. 16, 2020 (GLOBE NEWSWIRE) — The Pennant Group, Inc. (NASDAQ: PNTG), the parent company of the Pennant group of affiliated home health, hospice and senior living companies, today announced that it has acquired the assets of CMS Home Health Care, which has locations in Brownwood and Coleman, Texas. The acquisition was effective September 16, 2020. Danny Walker, Pennant’s Chief Executive Officer, commented, “With sister operations in Abilene, Austin, and Dallas, this off-market acquisition is an excellent strategic fit for our burgeoning Texas portfolio of home health and hospice operations. Our local leaders, supported by dedicated field and service center resources, continue to source and cultivate new opportunities for growth while navigating dynamic operating environments in their local communities.” “The team at CMS Home Health has a reputation for compassionate care and excellent clinical outcomes,” said Brent Guerisoli, President of Cornerstone Healthcare, Pennant’s home health and hospice portfolio company. “We are excited to welcome the staff and patients of this well-respected home health agency into the Pennant family. We look forward to working with these talented caregivers and the local healthcare community to bring life-changing service to the patients we are privileged to serve.” Mr. Walker reaffirmed that Pennant will continue to pursue opportunities for growth in the home health, hospice and senior living industries, targeting strategic and underperforming operations of all sizes. Read the full press release here. Trackbacks/Pingbacks Home Health, Home Care and Hospice Mergers & Acquisitions Quarterly Report: Q3 2020 – Mertz Taggart - […] the known deals: The Pennant Group Inc. (Nasdaq: PNTG) announced in September that it had acquired CMS Home Health… The Pennant Group Acquires Arizona Hospice Agencies - [...] The Pennant Group, Inc. (NASDAQ: PNTG), today announced that it has acquired two affiliated hospice agencies in Arizona...

MIAMI–(BUSINESS WIRE)–Acorn Health, a national provider of Applied Behavior Analysis (“ABA”) therapy for children diagnosed with Autism Spectrum Disorder (“ASD”), is pleased to announce the acquisition of the ABA therapy assets affiliated with Concord Foundations Network (“Concord”), an industry leader in providing high quality, center-based and in-home ABA therapy services to children and adolescents. The acquisition of Concord will enable Acorn Health to expand services into Maryland, Pennsylvania, and Tennessee, as well as significantly enhance its current capabilities in Michigan and Virginia. The combined company will serve more than 1,200 families across seven states and a network of 35 clinics. Read the full press release here. Trackbacks/Pingbacks Behavioral Health M&A Quarterly Report Q3 2020 – Mertz Taggart - […] Acorn Health, a national provider of autism services for children, has acquired the ABA therapy assets affiliated with Concord…

PHILADELPHIA, July 30, 2020 /PRNewswire/ — Providence Treatment, an outpatient addiction treatment provider with three locations in the Greater Philadelphia area, has acquired Main Line Recovery, an outpatient facility in Haverford, Pennsylvania, offering comprehensive assessment for behavioral health concerns and psychotherapy for individuals, couples, families and groups. Main Line Recovery facility will officially operate under Providence Treatment’s name effective August 1, 2020. Providence Treatment, a state-licensed, Joint Commission accredited treatment center, has provided quality healthcare for professionals and families affected by addiction. Providence Treatment is a recognized leader in the treatment of professionals with substance use disorders and associated mental health challenges. By providing state-of-the-art therapies with highly qualified clinicians and staff, Providence Treatment aids physicians, dentists, pharmacists, attorneys, commercial pilots, and others in overcoming the disease of addiction. Read the full press release here.

(Sarasota Herald-Tribune) – After a nine-month consolidation process, First Step of Sarasota and Coastal Behavioral Healthcare have officially – as of July 1 – begun operations under the First Step name and brand. The core services and programs will still be available to community members in need but organizational leaders assert that the merger will result in stronger, more comprehensive solutions for those with mental health and addiction disorders. The merger enables the organization to further the “no wrong door” approach to social services, whereby any point of entry results in a client receiving direct services or linkage and case coordination, rather than being bounced from one agency to another. First Step of Sarasota is now the largest nonprofit behavioral health care agency in Sarasota County, with a long-term goal of further collaboration with area private and public entities. Full Article

After two quarters, 2020 is proving to be an active year in behavioral health mergers and acquisitions, according to the latest data from M&A advisory firm Mertz Taggart. Deal volume among addiction treatment organizations led the segment in Q2 with 11 announcements, for a total of 18 transactions in behavioral health. “Overall, the sector held up pretty well,” said Mertz Taggart Managing Partner Kevin Taggart. “While transactions are down a little from the past six quarters or so, the lull isn’t especially significant. We didn’t see any transactions fall apart directly due to COVID-19, but we suspect some deals were quietly pushed back or halted completely amid the chaos in March and April.” Taggart attributes the fall-off to uncertainty about the effects of coronavirus on the healthcare delivery system at large. However, healthcare M&A ultimately witnessed an uptick of activity in June—likely signaling a resurgence in transactions throughout the remainder of 2020. “There was a period where banks were panicked. Most of that has passed, but there are still some banks that are not lending or have tightened their requirements,” he said. Looking back over the past 12 months, behavioral health has averaged nearly 20 deals per quarter, according to Mertz Taggart data. The steady pace is an indicator of investor confidence in the segment. Taggart said that most buyers are still in a growth phase, building their portfolios to achieve scale. And there is plenty of opportunity to do so. Additionally, he notes that investors are now going to want to examine the fundamental infrastructure for each deal target in greater detail, including any stipulations related to financial relief provided through government support as well as the practical impact the pandemic has had on operations. Increased transparency and legal diligence will be important for them to understand where they might have additional risk. For example, providers that have established reliable COVID-19 testing for residential, inpatient or partial hospitalization programs will fare better than those that don’t. And organizations that have found recent success in providing telehealth options—with significant patient adoption of the technology—will also have some advantages, knowing that payers are supporting the modality with reimbursement dollars. Regardless, Taggart said, behavioral health organizations still need to provide excellent clinical care with a sustainable delivery model. Demand for addiction treatment, mental health, and other services remains high, with the prevalence of a number of conditions increasing by double digits since the start of the pandemic, according to data released in May by the Blue Cross Blue Shield Association. The association also found that although nearly half of Americans delayed medical care because of the pandemic, 75% of those with behavioral health conditions continued receiving services. Providers benefitted from fewer patient “no-shows” when telehealth was made available, resulting in revenue for those services. “Beyond enterprise value, buyers will be taking a closer look at calculations of cash, debt and working capital,” Taggart said. Addiction Treatment Anxiety, social isolation, and economic uncertainty seem to be fueling an increase in overdose deaths, according to White House officials. Their analysis shows an 11.4% year-over-year increase in fatalities for the first four months of 2020. Providers will be looking to scale up services to meet new demand. “Diversity will be key for addiction treatment,” Taggart said. “Being able to reach different markets and provide high-quality services throughout the continuum will be important to create scale.” Q2 was a busy quarter for BayMark Health Services. In May, its AppleGate Recovery brand announced the acquisition of Medication Assisted Recovery Centers, an outpatient opioid treatment program with two locations near New Orleans, Louisiana. The transaction increases AppleGate’s total network in the state to eight facilities. BayMark has owned AppleGate since 2016. In June, BayMark announced the acquisition of Narcotic Addiction Treatment Agency, which provides medication-assisted treatment in the Greater Los Angeles area. Also in June, BayMark purchased Middlesex Recovery with four clinic locations in Massachusetts. It will continue to operate under the Middlesex Recovery brand. In its third transaction in June, BayMark added Norton HealthCare to its New England network, bringing its number of sites in Massachusetts to five and adding its first in New Hampshire location. Veronis Suhler Stevenson and NewSpring Health Capital in April announced the completion of an investment in the BRC Recovery Family of Programs in Austin, Texas. The transaction also included the formation of a new holding company, BRC Healthcare. Founded in 2006, the program offers a full continuum of care for addiction treatment, from detox and intensive outpatient to residential treatment and sober living. Also in April, Yukon Partners announced an investment in Crossroads Treatment Centers, a portfolio company of Revelstoke Capital Partners. Crossroads provides methadone and other outpatient medication-assisted treatment programs. Since the initial Revelstoke investment, which completed in January 2015, Crossroads has grown organically from fewer than 10 locations to more than 90. The Nashville-based Integrative Life Center, a mental health, addiction, and dual-diagnosis treatment service provider, acquired Begin Again Institute of Boulder, Colorado, a center specializing in treating process addictions in adult men. Clearview Capital Fund III, LP, announced in May the acquisition of IHP-Med-Psych-Solutions, Inc., (dba Restorative Health and Recovery), by its portfolio company, Community Medical Services. With this transaction, it gains Restorative Health and Recovery’s office-based opioid treatment program. Intellectual/Developmental Disabilities New data from the U.S. Centers for Disease Control and Prevention shows a 10% increase in the rates of autism spectrum disorder (ASD), compared to two years prior. The rate for ASD is 1 in 34 among boys (or 2.97%) and 1 in 145 among girls (or 0.69%). “This type of data indicates a greater awareness among health professionals, demonstrating that they’re evaluating patients for an appropriate diagnosis of ASD,” says Taggart. “And that informs the outlook on the overall demand for services.” Sequel Youth & Family Services in Dallas, Texas, acquired Pine Cone Therapies, with four locations in Dallas/Fort Worth and Houston, Texas. Pine Cone provides services for ASD, attention deficit and other disorders. Founded in 1999, Sequel’s network spans 21 states. The Columbus Organization announced in April the acquisition of Community Support Network, a provider of I/DD support coordination services in Florida. The company serves 140 state and local agencies and school districts in 42 states. In May, Acorn Health, a provider of applied behavior analysis (ABA) for children with ASD, announced the acquisition of Behavior Basics, LLC. Acorn operates in four states, and the transaction expands its presence in Virginia. Bain Capital Double Impact announced a significant investment in Broadstep Behavioral Health, a provider of programs and services for those with I/DD. Broadstep, with 86 centers in five states, aims to use the investment to expand into new markets. Rethink Autism, a global health technology company, in June acquired TheraWe, a website and HIPAA-compliant app for therapy providers and caregivers of children with intellectual or developmental disabilities. Lighthouse Autism Centers, LLC acquired Autism Therapy Services, LLC in the greater-Indianapolis market. According to the company, the transaction makes Lighthouse Autism Center one of the largest ABA providers in the state of Indiana. Mental Health Referrals from primary care will continue to be key resources for mental health treatment providers. Even though primary care has seen a reduction in face-to-face visits recently, the need for specialty care is well established. “Having a solid referral network will be attractive to strategic buyers, especially with the recent trend in formal partnerships among local care organizations that seems to be reinforcing stability for specialty providers,” Taggart said. TPG Capital in April joined existing investors—Summit Partners and Silversmith Capital Partners—in a partnership to support LifeStance Health, which provides outpatient behavioral health services, including telemedicine. LifeStance has 200 care sites, and the deal was assigned a value of $1.2 billion. LifeStance was formed in 2017 and grew to a $1.2 billion dollar valuation faster than any behavioral health services company in history. Kindred Healthcare, LLC has acquired two behavioral health hospitals: WellBridge Greater Dallas and WellBridge Fort Worth. Each hospital has 48 licensed beds and provides additional outpatient services. In June, Odyssey Behavioral Healthcare announced a deal to acquire Clearview Treatment Programs in Venice, California. Odyssey provides a continuum of care for mental health and addiction treatment with 21 locations and outpatient services in eight states.

Overall Transaction Activity Dipped in Q2, but Hospice M&A Remains Strong Post-acute care transaction activity experienced a marked lull during the second quarter of 2020, as was to be expected based not only on a tumultuous health care landscape and the financial marketplace due to the COVID-19 pandemic but a post-Patient-Driven Groupings Model operating landscape. The initial rise in COVID-19 cases nationwide in April combined with the spread of the virus across the southern and western U.S. in June certainly stressed the economy and many health care providers, but the pandemic was not only to blame for the lowest quarterly home health, hospice and home care deal volume since the third quarter of 2017. Home health mergers and acquisitions activity continues to be affected by the January 1 implementation of the Patient-Driven Groupings Model (PDGM), which was just taking hold when the pandemic hit. In all, the home health, hospice and home care industries saw just 18 deals during Q2, down from a combined 26 transactions reported during the same period a year ago, according to the latest M&A update from advisory firm Mertz Taggart. There were 27 total transactions in Q1 2020. As has been the case since for some time now, the hospice segment led dealmaking activity during Q2 2020, with home health trailing. “The industry is facing some major challenges at the moment, but overall, hospice has managed to remain relatively stable compared with home health and home care,” Mertz Taggart Managing Partner Cory Mertz says. “Similar to home health agencies, hospice providers saw a downturn in new admissions following the Trump administration declaring a state of emergency in late March. Unlike home health providers, though, hospice agencies aren’t also adjusting to a major payment overhaul.” Home Health Transactions Slow There were just five home health deals in Q2, down from the previous quarter, which saw 13 transactions. The majority of these transactions were paired with hospice deals, or were highly targeted. The decline in standalone home health deal volume was to be expected, as the industry was already prepped for a cautious approach to dealmaking after the implementation of PDGM on January 1. Still, more data needs to surface in order to get a full picture of PDGM’s impact, especially in the wake of COVID-19. Early data analyses suggest providers have been able to mostly navigate the payment model’s cash flow impact, though cash flow hasn’t fully recovered to December 2019 levels. “There was an automatic gap in valuations between buyers and sellers, and the only way to settle that gap is through data,” Mertz says. “We needed to see the first three to six months of data under PDGM before we could really establish a fair market value. This has been exacerbated by the COVID-19 crisis, which skews the data from late March onward.” One of the rare standalone home health deals that took place in the quarter was Lafayette, Louisiana-based LHC Group Inc.’s (Nasdaq: LHCG) joint venture with Orlando Health, a nonprofit health care organization that operates in nine Florida counties. The deal helps LHC Group gain even more of a foothold in a market that has been successful for the company. Other targeted deals included The Pennant Group Inc. (Nasdaq: PNTG) announcing in early July it had purchased two home health agencies with multiple locations throughout southeastern Idaho and northern Utah. Hospice Stays on Top Despite the overall decline in transactions, hospice maintained its stronghold on M&A activity in the post-acute care space during the quarter. With 13 transactions — compared to 14 in Q1 — hospice is one of the few industries that has remained relatively unscathed during the public health emergency. The highlight of all transactions that took place in Q2 was the Amedisys / AseraCare acquisition. Amedisys acquired AseraCare for a cash purchase price of $235 million. AseraCare Hospice cares for a daily census (ADC) of 2,100 patients and employs more than 1,200 hospice professionals in 44 locations across 14 states, generating approximately $117 million in annual revenues. The transaction also included a tax asset for $32 million, bringing the net purchase price down to $203 million, or approximately $97k/ADC. “Hospice doesn’t appear to have missed a beat, as transaction totals are in line with what we’ve seen over the past year,” Mertz says. “Nothing has really changed for hospice. It was an investment target before COVID-19 and continues to thrive despite the public health emergency, remaining relatively easy to finance. This makes hospice even more attractive to the investment community.” Among the hospice transactions to take place in the quarter was Choice Homecare’s purchase of Nextgen Hospice, a Houston, Texas-based provider. Additionally, Dallas, Texas-based Three Oaks Hospice acquired hospice assets from VeraCare Hospice, Hospice Partners of Kansas, and AMED Management. Looking ahead, Mertz Taggart expects to see continued strength in hospice, barring a significant threat of reimbursement changes or payment cuts. Home Care M&A Activity Plummets The second quarter of 2020 saw a sharp dropoff in home care deals, with only three transactions reported, compared to seven deals in Q1. However, the decline in home care transactions isn’t due to a lack of investor interest. “There just isn’t a lot of investible, quality home care agencies on the market, and this is likely impacted by COVID-19 to some extent,” says Mertz. One notable deal that took place during Q2 was home care franchise company Senior Helpers’ purchase of hospice companion provider Lowcountry Companions. “Our acquisition of Lowcountry Companions strategically expands our reach in South Carolina allowing for more growth of in-home and hospice care opportunities,” Amy Petersen-Smith, owner of Senior Helpers of Charleston, said in a statement. The most recent home care deal was announced by Addus HomeCare Corporation (Nasdaq: ADUS) on July 1. The company unveiled its plans to buy Kalispell, Montana-based home care provider A Plus Health Care Inc. Looking Ahead With the impact of payment changes still not totally realized and COVID-19 cases still spreading across the country, the dealmaking landscape will likely continue to be stressed for the foreseeable future. Yet the steady presence of hospice deals bodes well for the overall market outlook despite the uncertainty from the pandemic. Trackbacks/Pingbacks How to Prepare for the Sale of Your Healthcare Agency – Mertz Taggart - […] instance, there were only 18 transactions across home health, hospice, and home care, according to Mertz Taggart statistics. That’s… Home Health, Home Care and Hospice Mergers & Acquisitions Quarterly Report: Q3 2020 – Mertz Taggart - […] M&A activity was slow in the third quarter. Mertz Taggart tracked just two deals, down compared to Q2’s five… Home Health, Home Care and Hospice Mergers & Acquisitions Quarterly Report: Q4 2020 – Mertz Taggart - […] dealmaking started off strong in 2020, with at least 14 transactions in Q1. There was a sharp dropoff in…

LEXINGTON, Ky. (WTVQ), a comprehensive outpatient addiction treatment provider with 18 locations throughout Ohio, has acquired Rebound Recovery Centers with locations in Lexington, Paris, and soon to be Nicholasville. The Lexington and Paris centers officially began operating as BrightView facilities on July 7. Originally opened in 2017 in Paris, Rebound Recovery was created to address the opioid epidemic overwhelming Kentucky. After recognizing the significant need, Rebound Recovery expanded to Lexington in 2018 and was in the process of opening a center in Nicholasville, BrightView said in a release. By joining BrightView, Rebound Recovery will be able to expand its services and continue to provide life-saving care to those struggling with addiction, BrightView said in a statement announcing the purchase. Full Article Trackbacks/Pingbacks Behavioral Health M&A Quarterly Report Q3 2020 – Mertz Taggart - […] BrightView, an outpatient addiction treatment provider with 18 locations in Ohio, announced that it has acquired Rebound Recovery Centers…

BayMark Health Services has recently acquired a Narcotic Addiction Treatment Agency (NATA), an Opioid Treatment Program (OTP) in Sun Valley, CA.  In business for over 35 years, the company provides medication-assisted treatment (MAT) in the San Fernando Valley area. The company’s focus is to provide comprehensive treatment for opioid addiction professionally without losing sight of the compassion component. NATA specializes in outpatient methadone maintenance and detoxification with combined substance use counseling and behavioral therapies. This evidence-based approach is individualized to meet the needs of each patient. In addition, they also provide addiction and relapse education, coordinated treatment during pregnancy, in-house lab services, and referrals to community resources to assist patients in rebuilding their lives. According to the press release, David K. White, Ph.D., Chief Executive Officer of BayMark Health Services, said, “While California is a leader in affordable, accessible opioid use disorder (OUD) treatment, there is still a need to expand and enhance those services in response to the unabating opioid crisis. BayMark has a significant presence in the State and is pleased to continue growing that footprint to provide services to Californians in need of help.” This is the seventh treatment agency acquired by BayMark in the LA area; they recently acquired two Suboxone Clinics in May of this year. You can read the M&A details M&A details here. Read the original acquisition article here.

Hospice and home health provider Traditions Health, LLC has acquired Tomball, Texas-based Hospice with Grace, expanding the company’s footprint in the Houston region. Financial terms of the transaction were not disclosed. Traditions is a portfolio company of family-owned investment firm Dorilton Capital Advisors that operates in Texas, California and Arizona. The hospice provider has been on a growth trajectory during 2019 and into 2020. “I am extremely excited to extend our presence in Texas and serve the community of Tomball and the greater Houston area,” said Bryan Wolfe, president and CEO of Traditions, in a statement. The hospice M&A market continues to stay hot despite a brief dip due to the fallout of the COVID-19 pandemic, driven by demographic tailwinds stemming from the aging population, as well as disruption in the home health space due to implementation of the patient-driven groupings model (PDGM). Uncertainties surrounding PDGM have led some companies that offer both services lines to pivot towards an emphasis on hospice growth. Effective Jan. 1, 2020 Medicare began reimbursing home health care providers through PDGM, which classifies patients into payment categories based on clinical characteristics and other patient information, and shifts the home health payment model to a 30-day payment period rather than the current 60-day episode. “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,” Cory Mertz of the M&A advisory firm Mertz Taggart said in a report. “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.” Read more here…HospiceNews