Health Care Deal News: Spotlight on Home Health Care

It will be interesting to see how the home health and hospice business evolves as the Accountable Care Organization (ACO) phenomenon continues to gain traction.  Will the stand-alone home health companies be at a disadvantage because they have influence over only one aspect of care?  Or will they play an increasingly larger role as home and community-based care has become the flavor of the month?  Obviously the home health companies are continuing to make their bet on the latter, as Gentiva Health Services (NASDAQ: GTIV) purchased a well-established home health company, Family Home Care, based in Washington and also serving Idaho.  Although a price was not disclosed, the target company has 400 employees so it is relatively large, but Gentiva indicated it would not have a material impact on earnings.

Kindred Healthcare (NYSE: KND) announced one of the largest home health care acquisitions of the year as part of its strategy to be the partner of choice with ACOs.  Kindred signed an agreement to purchase Texas-based IntegraCare Holdings, Inc., which operates out of 75 locations in Texas offering home health care, hospice care and various community services.  The cash purchase price is $71.0 million, plus up to $4.0 million of additional milestone payments based on 2013 cash flow. The price is 1.0x revenue based on the base price, and 7.89x EBITDA.  With $1.5 million of expected cost synergies, the price-to-EBITDA multiple declines to 6.76x, and the acquisition is expected to be accretive to 2013 earnings by $0.07 to $0.09 per share.  Kindred’s home health and hospice division now has a revenue run rate in excess of $200 million.  IntegraCare is a portfolio company of Flexpoint Ford, LLC...........Want to read more? Click here for a free trial to The Health Care M&A Information Source and download the current issue today