Insurers see broad market opportunities with end-of-life care

As payers large and small look toward hospice care business models, a number of prominent deals have surfaced.

Rebecca Pifer

Oct. 17, 2018

Blurring lines between payers, providers and other healthcare players and the move toward value-based care are among the factors driving a renewed interest in the end of the life as a business opportunity.

CMS is expanding Medicare reimbursement for hospice and considering integrating managed care programs into the benefit. The move comes as a new crop of start-ups have emerged looking to fill gaps in healthcare for the growing cohort of retirees.

And, although hospice deal trends have slowed overall following five years of furious activity between 2010 and 2014, payers have recently started getting into the act, scooping up end-of-life care companies. Insurance giants Anthem and Humana are among the biggest players in recent months making moves.

"That's where the world's going," said Thomas Scully, former CMS administrator under President George W. Bush, who currently has an 89-year-old mother in hospice. "The players in the thick of it that are going to figure that out and provide good services at a reasonable price are going to make a margin."

For-profit hospices increased considerably between 2000 and 2016. Though the businesses made up 30% of the 2,255 hospices in 2000, that proportion grew to two-thirds of the roughly 4,400 hospices in operation in 2016 according to CMS data.

And chain providers accounted for 32% of the market in 2011, a figure that continues to tick up as the market consolidates. Analysts don't expect a slowdown in growth or M&A any time soon, with recent well-publicized deals spurring industry interest in the multibillion-dollar industry.

Insurance giant Humana, along with private equity firms TPG Capital and Welsh, Carson, Anderson & Stowe acquired home health and hospice giant Kindred last December for $4.1 billion. Kindred held 5.85% of the national home health market share in 2017 according to Lexis Nexis Risk Solutions, and 3.54% of hospice.

The Humana-private equity consortium doubled down on hospice acquisitions a scant four months later, setting their sights on smaller prey in hospice operator Curo in a $1.4 billion deal.

Humana intends to merge the Mooresville, North Carolina-based company with Kindred at Home once the transactions close. The two separate deals, both of which are pending regulatory closure and expected to get the OK soon, will make Humana a hospice behemoth: the largest operator in the country with hundreds of locations spanning dozens of states.

Interest is not exclusive to traditional brick and mortar hospice models, however. In May, Anthem acquired palliative care provider Aspire Health, which focuses on in-home, coordinated support for patients with serious or chronic illness.

Aspire's model is "less capital-offensive, more capital-efficient" than its more traditional cousin, according to Leerink equity analyst Ana Gupte, and will serve Anthem well as it looks to pursue savings in the high-risk, high-cost population.

https://www.healthcaredive.com/news/insurers-see-broad-market-opportunities-with-end-of-life-care/532900/