April marked the busiest month in 2018 for healthcare M&A transaction volumes, as deal flow was highlighted by momentum in several areas we observed in the marketplace:
- Continued Consolidation in Home Health and Hospice Markets: In recent editions of this blog, we noted heightened levels of investor demand for high quality, low cost post-acute care delivery assets. This continued full-steam ahead in April as consolidation within the home health and hospice markets occurred at both the regional and national level. As the market settles around newly minted behemoths, LHC/Almost Family and Kindred/Humana, entrenched national players are left in search of additional scale while smaller regional players are scrambling for strategic alternatives to remain competitive. All of this is underpinned by favorable demographic and reimbursement trends, which continue to drive increased patient volume into post-acute settings.
- Resurgence of Telehealth M&A: Following a brief lull in Q1, the return of spring brought along a resurgence of telehealth M&A activity. Featuring several landmark transactions involving both incumbent players and new market entrants, April’s activity demonstrated a continued desire to not only leverage telehealth and remote solutions, but also expand these beyond their traditional primary care roots and into more acute settings. Ultimately, telehealth remains a high profile area for investment given its ability to enhance provider efficiency, lower cost of care, and serve as a key component in advancing the shift towards healthcare consumerism – all broader industry themes we’ve continued to highlight. We expect to see a similar uptick in activity in the second half of the year as venture capital and traditional buyout strategies continue to explore the space.
- Radiology / Diagnostic Imaging Gaining Momentum within Specialty PPM: Physician practice management (PPM) has long been a prime target for consolidation due to the industry fragmentation coupled with the inherent value of scale. We previously discussed dental practice management as an example of a transformative PPM rollup strategy. Other large-scale specialty PPMs have read the writing on the wall and have been increasingly active tucking in smaller practices to bolster services and expand their geographic footprint. As a result, radiology and diagnostic imaging saw increased M&A activity in April, in part, due to tailwinds from today’s managed care environment. Diagnostic imaging can be used to identify future medical problems and prevent their occurrence, translating to substantial cost reductions when comparing the fractional expense of an imaging screen against the savings from an avoided surgery. We believe the uptick in M&A activity for this specialty will continue as a result of these factors.
The following transactions in April align with these themes:
- Humana, Welsh Carson Anderson and Stowe, and TPG Capital acquired Curo Health Services, one of the largest remaining independent hospice providers, for $1.4B. The consortium will merge Curo with the hospice business of Kindred at Home, which it recently acquired. The acquisition will give Kindred, already the second largest hospice provider in the country, an additional 245 locations across 22 states.
- Great Lakes Caring, National Home Health Care, and Jordan Health Services announced a merger that will strategically position the newly combined company as one of the nation’s largest providers of home-based care. The news came on the heels of the acquisition of Jordan Health Services by Blue Wolf Capital and Kelso & Company. The merger brings together three market leaders, creating a comprehensive care continuum of personal care, skilled home care, and hospice care. The newly combined company will serve over 63,000 patients and their families on a daily basis, employing over 31,000 caregivers across 15 states in 221 locations.
- Addus HomeCare Corporation (NASDAQ: ADUS) purchased the assets of Arcadia Home Care & Staffing, a Michigan-based provider of home care services, for $18.5M. Arcadia provides services to 2,300 customers via its 26 offices across 10 states. The deal was completed at a trailing EBITDA multiple of 5.5x – 6.5x and is expected to be accretive to Addus’ 2018 financial results.
- American Well, a Boston-based telehealth provider, announced that it has entered into a definitive agreement to acquire Avizia, a Reston, Virginia-based provider of acute care telehealth. This acquisition will bring American Well comprehensive acute care capabilities and enhanced options available to clients across the diverse telehealth ecosystem, including health systems, health plans, consumer aggregators, and healthcare service innovators.
- InTouch Health, an enterprise telehealth platform, announced that it entered into an agreement to acquire REACH Health, a telemedicine software company based in Alpharetta, Georgia. The acquisition will help InTouch Health expand its presence as a partner for hospitals and health systems who wish to expand telehealth programs across the continuum of care.
- RubiconMD, a telehealth startup, announced that it has raised $13.8M from investors including HLM Venture Partners, Optum Ventures, and Centene Corporation. RubiconMD’s platform allows primary care doctors to ask a specialist to weigh in on a patient’s case, without requiring the patient to travel to see the specialist.
- RadNet, a provider of fixed-site outpatient diagnostic imaging services, acquired five imaging centers in Fresno California operated by Sierra Imaging Associates, Women’s Imaging Specialists in Healthcare, and Valley Metabolic Imaging. The acquisition will provide RadNet with approximately $12 million of additional revenue on an annual basis. The five centers perform approximately 65,000 imaging procedures per year. The transaction will add almost 100 employees and access to approximately 25 radiologists serving the greater Fresno area.
- MEDNAX, Inc. (NYSE:MD), announced the acquisition of Women’s Radiology Associates, LLP, a private radiology physician group based in Houston. The practice will integrate with Synergy Radiology Associates, a MEDNAX-affiliated physician practice, also based in Houston. The all-cash transaction marks MEDNAX’s fifth practice acquisition of 2018.
TripleTree and TT Capital Partners continuously monitor the market to identify the forces and themes impacting the healthcare industry. Thanks for reading and let us know if you have any feedback!