Amedisys, Inc. (NASDAQ: AMED) has agreed to purchase Contessa Health, a Tennessee-based company that provides hospital-at-home and skilled nursing-at-home services, for a total consideration of $250 million, according to a Securities and Exchange Commission filing.
The transaction, expected to close Aug. 11, will bring higher acuity home-based care under Amedisys’ wings. The company will be among the first in the home-based care space to offer hospital or skilled nursing at home on a national scale. The multiple in the deal was 3.9 times EBITDA, compared to 6x for similar companies.
“Today’s announcement is a strategic and promised milestone for Amedisys’ strategic growth and differentiation, as we expand our capabilities to reflect growing market demands and evolving patient preference for higher-acuity in-home settings,” Amedisys Chairman and CEO Paul Kusserow said. “We have always worked to innovate and provide even more types of care in the home, as patients increasingly seek to ‘age in place’ in environments that are familiar and safe.”
Amedisys indicated that the acquisition would establish the company as a “tech-enabled, home-based care platform add capabilities, services, analytics, and management needed to become a risk-bearing, home-based care delivery organization.”
Amedisys expects the Contessa asset to spur growth for its traditional home health and hospice business lines, including absorption of Contessa’s current hospital partnerships. Contessa operates joint ventures and payor partnerships with Marshfield Clinic Health System, Ascension Saint Thomas, CommonSpirit Health, and Highmark Health.
In February Contessa launchd a palliative care enterprise in partnership with Mount Sinai Health System in New York City, branded as Palliative Care at Home. The company reportedly has a pipeline for similar partnerships that includes more than 100 in 28 states, according to a statement by Amedisys.
Amedisys earned more than $537 million in revenue during the first quarter of 2021, up from nearly $491.7 million in Q1 2020. The company’s hospice business accounted for $191.5 million in Q1, marking an increase from $169.4 million during the prior year’s quarter. Amedisys cares for nearly 420,000 patients annually across 39 states and the District of Columbia.
Contessa has developed a risk-based model branded as Home Recovery Care that it applies to its hospital- and skilled nursing-at-home services. The Amedisys deal includes an investment in expanding Contessa’s CareConvergence business and informatics platform, which manage logistics for home-based high-acuity care as well as the company’s risk-bearing contracts.
Amedisys began dipping its toes into higher-acuity care prior to the Contessa deal. Hospice News’ sister site Home Health Care News reported in April that the company was launching a SNF-at-home pilot program.
The COVID-19 pandemic in some ways helped to ripen the market for high acuity care in the home. More health services gravitated towards the home setting during the outbreak, due to concerns about spreading the virus or losing access to loved ones due to facilities’ visitor restrictions.
“What we were able to accomplish in 2020 is turn the headwinds of [the Patient-Driven Groupings Model (PDGM)] and COVID-19 into tailwinds,” Kusserow said in an earnings call. “Demographics are strongly in our favor. The burgeoning 75-plus population coupled with ever increasing unsustainable health care costs puts us in a very advantageous position.”
PDGM is a home health payment model that the U.S. Centers for Medicare & Medicaid Services (CMS) implemented in 2020.
“To continue building on the momentum we’ve created and to take advantage of all the growth opportunities which currently exist, we wanted a partner with a national footprint, a reputation for outstanding clinical quality, and the scale and infrastructure available to accelerate our trajectory,” said Contessa founder and CEO Travis Messina. Amedisys has all of that and more.”
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