Wednesday, June 16, 2010

Odyssey Hospice Acquired by Gentiva - Let's Talk

If you have not heard by now Gentiva Health Services (Stock Ticker: GTIV), a large home health care company has acquired Odyssey Hospice (ODSY) for a straight up cash deal worth nearly $1 Billion dollars. That's right one b-b-b-b-billion.  But oddly I have not heard very many people in hospice talking about this super-size merger. (Late edit: Larry Beresford covers it here)   I have lots of questions so I thought I would throw them to you.

  • What impacts will this have on hospice care?
  • Will we see a response of local hospices merging to consolidate market share?
  • Or will smaller hospices run to local hospital and home health companies to take advantage of a secure referral source?
If you thought hospice agencies in your area were competitive before, get ready for some changes.

Quick disclaimer: Odyssey and Gentiva both operate in the Kansas City area where I practice. I don't work for either of them, and have no inside information.  All I am writing here is based on news reports and thoughtful speculation. Nor do I own stock in either.

Let's look at some basic numbers:

Odyssey Health Care: (from 2009 Annual Report)
  • Based in Dallas
  • 92 hospice offices in 30 states
  • Average Daily Census Dec 2009: 12,380 (avg 134 pts/office)
  • Net Patient Service Revenue $686mil

Gentiva Health Services: (from 2009 Annual Report)
  • Based in Atlanta
  • 32 hospice offices in 6 states
  • Mostly home health but does have hospice services under various brand names in MS, AL, SC, TN, GA, FL
  • Net Patient Service Revenue: $1152mil ($74mil is hospice related)

Combined (estimates):
  • 14,000 patients
  • Operating in 30 states
  • Annual revenue: $1.8B
  • Control of 6% of the hospice market ^ (Vitas has 5% currently``)
  • 60% revenue from home health, 40% from hospice``
Now from a disease management view this looks like a great plan since many patients who are initially referred to home health may then move onto hospice after the strategy of 'let's see if you get stronger and come back and see me in a couple weeks" doesn't pan out.  If Medicare starts bundling payments for outcomes in home health then may be very advantageous to have a option of transferring to hospice within the same system so the company doesn't lose out on the savings that instead would be distributed amongst the rest of the health care system.  This may also be a reason you start to see hospitals or nursing homes merge with home health and hospice companies as well.  It may also provide some EMR continuity and possibly even provider continuity although home health and hospice skill sets are quite different to those who see it every day.
Some of what I said above is best captured in this Wall Street-ese sentence:
Jefferies and Co. analyst Arthur Henderson called Gentiva's acquisition of Odyssey "a strategically sound move that will not only drive incremental growth for the company, but will also allow it to diversify its business while generating operations synergies."#
So what impact do you see this having on hospice in your local area, regionally or nationally?  Will VITAS or Amedisys do something similar? Is this a good thing, bad thing, neither?  And has any clinical person ever read an annual report for a hospice company?  If you have, would you want to give us a summary? They are pretty long and dense so I think there is a lot to learn.

Other little tidbits found in researching this post:
  • Gentiva also coincidentally has come under some questioning by the Senate Finance Cmte regarding necessity for patient visits.*
  • In researching this story I heard about Amedisys which operates 68 hospices in 23 states**. Never heard of them before, but apparently they are a big player too in the national for-profit hospice scene.

Sources: *NY Times, ^Yahoo Finance, **Amedisys financial statement, ``Yahoo Fincance, # WSJ

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