VITAS To Buy Hospice Assets of Covenant Care in Florida and Alabama

Rhea-AI Summary

VITAS Healthcare Corporation, a subsidiary of Chemed Corporation, acquires hospice operations and assisted living facility from Covenant Health and Community Services for $85 million. The transaction spans Florida and Alabama markets and is set to close in the second quarter.

Insights

Healthcare Industry Analyst

The acquisition of Covenant Care's hospice operations by VITAS Healthcare, a subsidiary of Chemed Corporation, represents a strategic expansion that could significantly impact Chemed's position within the hospice care market. By integrating Covenant's established presence in Florida and Alabama, VITAS stands to benefit from an expanded geographical footprint and an increase in market share. This move aligns with broader industry trends where healthcare providers are consolidating to create more efficient and comprehensive care networks.

From a financial perspective, the $85 million transaction indicates a commitment to growing VITAS's service offerings. Investors will be interested in how this acquisition will affect Chemed's revenue streams and whether the integration of Covenant's operations will lead to operational synergies that can enhance profitability. Additionally, the acquisition could provide a competitive edge in attracting and retaining talent, as well as potentially increasing bargaining power with payers due to a larger patient base.

It is also important to consider the regulatory landscape. The deal is contingent upon regulatory approvals and the hospice industry is subject to stringent regulations. Any delays or issues in obtaining these approvals could affect the timeline and finalization of the acquisition. Furthermore, as the healthcare industry continues to face scrutiny over billing practices, it is crucial that the acquisition does not raise any red flags in terms of compliance.

Market Research Analyst

With the acquisition of Covenant Care's operations, VITAS Healthcare is poised to strengthen its market position in the Southeastern United States. The addition of hospice services in key markets such as Tallahassee, Panama City and Mobile/Daphne is expected to bolster VITAS's market penetration and brand recognition in a region with a growing elderly population, which is the primary demographic for hospice services.

Demographic trends indicate an increasing demand for end-of-life care and this acquisition may position VITAS to capitalize on this growing market. The deal could also serve as a catalyst for further consolidation in the hospice industry, as smaller players may struggle to compete with larger, integrated providers like VITAS. It's essential to monitor how this expansion affects the competitive dynamics within the hospice care sector and whether it leads to improved economies of scale for Chemed.

Stakeholders should also be aware of the cultural and operational challenges inherent in merging organizations with different histories and practices. The success of this acquisition will partly depend on the smooth integration of Covenant's workforce and the harmonization of patient care standards to maintain the high-quality service both organizations are known for.

Financial Analyst

The acquisition's financial implications are multifaceted. The $85 million purchase price must be scrutinized in relation to Covenant Care's financial performance, such as its revenue, profit margins and existing market share. Investors should evaluate whether the price paid reflects a fair market value and how it compares to similar transactions in the hospice industry.

Post-acquisition financial integration will be a focal point, with attention on how quickly VITAS can realize revenue growth and cost savings from the transaction. The impact on Chemed's balance sheet, including any debt incurred to finance the acquisition, will be a key factor in assessing the financial health of the company post-transaction. Additionally, the long-term financial benefits, such as potential increases in EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) and cash flow improvements, will be critical in determining the success of the acquisition.

Lastly, it is important to consider how the market will react to the acquisition. The announcement could lead to fluctuations in Chemed's stock price as investors digest the news and its implications. The market's response will be an indicator of investor confidence in VITAS's strategic direction and Chemed's ability to execute on its growth strategy.

CINCINNATI--(BUSINESS WIRE)-- VITAS Healthcare Corporation, a wholly-owned subsidiary of Chemed Corporation (“Chemed”) (NYSE: CHE), announced it entered into an agreement on March 12, 2024 to acquire all hospice operations and an assisted living facility from Covenant Health and Community Services, Inc. d/b/a/ Covenant Care (“Covenant”) for an aggregate purchase price of $85 million. Covenant’s hospice operations span the panhandle of Florida and Alabama, specifically including the Tallahassee, Marianna, Fort Walton Beach, Panama City, Crestview and Pensacola markets in Florida, and the Dothan and Mobile/Daphne markets in Alabama.

The transaction is structured as an asset purchase and parties will seek to close the transaction in the second quarter, subject to certain regulatory and other approvals.

Nick Westfall, Chairman and CEO of VITAS Healthcare, stated, “Covenant Care has a 44-year history of providing high-quality, patient-centered care across communities in Florida and Alabama. Being a similar long-standing, mission-focused provider, VITAS is looking forward to building upon their legacy by following our key values of putting patients, families, and our team members first. We are excited to welcome the Covenant Care team members who decide to join our VITAS family as we collectively move forward with making a difference in all the communities we have the privilege of serving. I would also like to thank the Covenant Care executive team and Board of Directors whose vision for how this transaction will help to fulfill both organizations’ commitment to our missions led us to this successful announcement today.”

Jeff Mislevy, President and CEO of Covenant Care, stated, “Today is a monumental day for Covenant Care because it allows the organization to broaden and deepen its focus on improving healthcare for the communities we serve by supporting new solutions and filling gaps in the care delivery system, while at the same time, keep our promise to the communities by continuing to deliver the world-class hospice and palliative care they deserve with the experts at VITAS Healthcare. As a result of the growth, expansion, and success over the past several years, it became clear that the organization was well positioned to join forces with a nationally renowned strategic partner. During this thorough search for the right provider, it was evident from the beginning that both our organizations shared an aligned culture, mission, and passion which led to the Board of Directors unanimously selecting VITAS Healthcare for this transaction.”

Dr. Rodney Guttmann, Chairman of the Covenant Care Board of Directors, stated “The Board of Directors is excited for today’s announcement as it allows us to continue our mission of providing support for patient care and family grief through existing programs such as MyWish and Nonie’s Place. Additionally, this allows us to expand our reach and impact by supporting solutions across the health care continuum with special focus on behavioral health, pediatrics, and veteran care.”

Listed on the New York Stock Exchange and headquartered in Cincinnati, Ohio, Chemed Corporation (www.chemed.com) operates two wholly owned subsidiaries: VITAS Healthcare and Roto-Rooter. VITAS is the nation's largest provider of end-of-life hospice care and Roto-Rooter is the nation’s leading provider of plumbing and drain cleaning services.

Statements in this press release or in other Chemed communications may relate to future events or Chemed's future performance. Such statements are forward-looking statements and are based on present information Chemed has related to its existing business circumstances. Investors are cautioned that such forward-looking statements are subject to inherent risk and that actual results may differ materially from such forward-looking statements. Further, investors are cautioned that Chemed does not assume any obligation to update forward-looking statements based on unanticipated events or changed expectations.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240313721058/en/

Michael D. Witzeman

(513) 762-6714

Source: Chemed Corporation

FAQ

What is the name of the subsidiary of Chemed Corporation acquiring hospice operations?

VITAS Healthcare Corporation is the subsidiary of Chemed Corporation acquiring hospice operations.

What is the total purchase price for the acquisition of hospice operations and an assisted living facility from Covenant Health and Community Services?

The total purchase price for the acquisition is $85 million.

Which markets are included in the transaction for the acquisition of hospice operations from Covenant Health and Community Services?

The transaction includes the Tallahassee, Marianna, Fort Walton Beach, Panama City, Crestview, and Pensacola markets in Florida, and the Dothan and Mobile/Daphne markets in Alabama.

When is the expected closing date for the transaction for the acquisition of hospice operations from Covenant Health and Community Services?

The parties aim to close the transaction in the second quarter, subject to certain regulatory and other approvals.

What are the key values mentioned by Nick Westfall, Chairman and CEO of VITAS Healthcare, in relation to the acquisition?

Nick Westfall mentioned the key values of putting patients, families, and team members first.