Aging-in-place company Amedisys Inc. (Nasdaq: AMED) on Wednesday announced plans to acquire pioneer home hospital Contessa Health for $ 250 million.

From a technical standpoint, the deal – which is expected to be concluded later this summer – makes a lot of sense for Amedisys.

Among the strategic advantages, for example, it offers the Baton Rouge, Louisiana-based company an unprecedented range of home care capabilities, adding acute-level care to its existing mix of home health services, palliative and personal care. In addition to extending its home care continuum, Contessa offers turnkey partnerships with highly reputable healthcare systems and extensive experience in the world of risk, which Amedisys has long prioritized.

Yet from a broader and longer-term perspective, the deal was about much more than that, Amedisys CEO and Chairman Paul Kusserow told Home Health Care News.

“We are taking home health to new places,” Kusserow said. “This has always been our ambition. I know it sounds a bit arrogant, but I think this acquisition shows how we continue to find new places to foster home care, to promote aging in place. We continue to lead in this effort.

The current home healthcare landscape remains highly fragmented, with the top 10 companies accounting for just over 25% of the national market share. While they have all taken different paths to become home health giants, their overall business models are sometimes similar, defined by the focus on the three traditional home care service lines.

With Contessa under its roof acting as a single business segment, Amedisys instantly moves away from the contemporary home care package, Kusserow explained.

Additionally, by adding inpatient home, home SNF, and palliative care programs to its bag of home care tips, Amedisys simultaneously grows its total addressable market from around $ 44 billion to $ 73 billion. of dollars.

“As we digged into this, I saw a really comprehensive and thoughtful company that took risks and took care of the highest acuity patients,” Kusserow said. “And he’s able to expand our market in a way that I don’t think we can reach, nor do I think the rest of the industry could, in the next four or five years.”

In many ways, the same could be said of what Amedisys does for Nashville, Tennessee-based Contessa.

When Contessa was launched in 2015, there were many individual inpatient home programs, but few promising companies specializing in acute home care. This is still true, with Contessa, Medically Home and DispatchHealth often being seen as the de facto market leaders.

But healthcare entrepreneurs and others have increasingly turned to the home hospital space due to the COVID-19 pandemic, which means the current field may soon become crowded.

Once his deal with Amedisys is finalized, Contessa will be in a class of its own, Travis Messina, founder and CEO of the company, told HHCN.

“We’ve heard a pretty consistent message from health system leaders that they are increasingly wary of having a partner for home health, a different partner for the hospital at home, a partner different for et cetera, et cetera, ”Messina mentioned. “The partnership and the company, once the agreement is concluded, will be able to provide the full continuum of home care services. I think continuity is something that is very appealing to these executives.

How it came together

Deals can sometimes be completed in a few months. In a sense, Amedisys’ agreement to acquire Contessa took place over several years.

Prior to taking on the role of CEO of Amedisys in 2014, Kusserow held various executive roles at Alignment Healthcare Inc. (Nasdaq: ALHC) and Humana Inc. (NYSE: HUM). His previous experience also included time with the Ziegler HealthVest Fund, San Ysidro Capital Partners, Roaring Mountain, and Tenet Healthcare Corporation (NYSE: THC).

At one point, Kusserow even helped build Clinically Home, one of the first to adopt the home hospital program.

“It was always an idea that I really liked,” he recalls.

In the pre-Amedisys era, Kusserow and Messina had crossed paths on numerous occasions, with the former focusing on the latter’s developing career. When the time came for Kusserow to leave Clinically Home, he attempted to call on Messina to help guide the business – but was ultimately rejected.

“It’s actually a funny story,” Kusserow told HHCN. “When Travis started, I was like ‘Wow. Smart guy. Why don’t we give it a chance? And he refused me.

Obviously, Messina had its own ambitions as a home hospital. He formed Contessa after serving as Chief Investment Officer of Martin Ventures, growing it from a small start-up to a home care innovator with seven major healthcare system partnerships and around 140 employees, raising funds. tens of millions of dollars in the process.

While Contessa was doing well before the pandemic, the home care spotlight put “a lot more attention” on her role model, Messina said. The US Centers for Medicare & Medicaid Services (CMS) waiver of “acute hospital home care” also accelerated interest.

As of June 28, CMS had approved 68 health systems and 142 hospitals in 32 states to participate in the home hospitals initiative, according to publicly available data.

With more momentum than ever before, Messina and her team began to think about the next chapter of Contessa.

“In fact, we were looking for private equity funds to be that growth partner going forward,” Messina said. “But after sitting down with the Amedisys team,… it made sense that it would allow the hospital at home and the SNF at home, allowing Contessa to succeed to her highest potential. The capabilities they bring from their home care delivery experience – and the quality of the nurses they bring home – are unmatched. “

The purchase price of $ 250 million is a multiple of 3.9 times 2022 revenue, according to Amedisys. Other tech-based health services companies are trading at around 6 times revenue in 2022.

“It became clear that they were going to look for another round of funding or potentially sell,” Kusserow said. “My team came to me and told me that… if we’re going to follow the talk, we’ve got to get this business. “

“It was obvious,” he added.

Strategic advantages

In Wednesday’s announcement, Amedisys and Contessa executives hammered home the transformational nature of their deal.

However, there are also more immediate strategic benefits.

Amedisys currently provides home health, hospice, and personal care services in 39 states and Washington, DC. It is able to do this thanks to its workforce of around 21,000 employees, the lifeblood and greatest asset of the company, according to Kusserow.

In recent years, Amedisys has invested heavily in recruitment and retention initiatives, which include the use of predictive analytics to track and prevent turnover. The acquisition of Contessa would add to these efforts as many clinicians seek to hone their skills through new models of care delivery.

“Nurses are hard to find, especially high-level qualified nurses,” Kusserow said. “And they’re hard to keep. When we enter a market, it gives nurses a chance to be at the forefront of new types of care. It also validates home health for many of these people. “

Contessa’s model also relies on highly trained clinicians who are comfortable tackling a range of complex conditions at home. But to grow beyond its current seven-state footprint, Contessa knew she needed to acquire more medical professionals.

Instead of diverting resources to hiring, Contessa can now rely on Amedisys’ workforce, Messina noted. Besides rapid growth, having a partner like Amedisys will go a long way in reassuring doctors, he said.

“One of the most critical elements of our model is to ensure that the physicians who admit patients into the program are comfortable with the nurses who are at the bedside,” said Messina. “If you don’t create that trust, there’s no way you can drive adoption of the model. “

Additionally, teaming up with Contessa also gives Amedisys a solid foothold in the door with health systems like Mount Sinai, Highmark Health and others.

“It brings us to a new audience with a new conversation, but with an established product that they enjoy,” Kusserow said.

In addition to all of the aforementioned benefits, the acquisition of Contessa will also fuel the growth in admissions into home care and palliative care services while giving Amedisys more firepower to establish risk-sharing agreements.

“We think this is where the world moves,” Kusserow said. “And this is where we have to play.”


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