Hospice:
HOSPICE BECOMES BIG BUSINESS
Published on Thu May 15, 2003
Explosive earnings for two publicly traded hospice companies have sparked keen interest from the investor community in the market's business potential.
"These extraordinary earnings in the hospice market have caught attention," notes Diane Dillon Ryan with health care mergers and acquisitions firm The Braff Group outside Pittsburgh. The nation's largest hospice chain, VITAS Healthcare Corp., is privately held so doesn't have to report its earnings. Miami-based VITAS, founded in 1978 with 23 locations in eight states, has an average daily census of more than 7,000 patients. The next-biggest kid on the block, Dallas-based Odyssey HealthCare Inc., has a census of more than 5,300, it reported in its earnings statement for the quarter ended March 31. Scottsdale, AZ-based VistaCare Inc. is closing fast with an ADC of more than 4,100 for the quarter. Odyssey, with 67 locations in 26 states, has reported stellar earnings since going public in October 2001. Net income for the most recent quarter, $7.2 million, was a 79 percent increase over income of $4 million for the same period in 2002. Revenues grew 50 percent to $60.1 million for the quarter. Likewise, VistaCare, which went public last December, has seen significant growth. Net income for the quarter was $2.8 million, a 211 percent increase from the year-ago quarter, says the company, which has 38 locations in 14 states. And revenues grew 52 percent to $42 million. VistaCare reported a length of stay of 84 days for the quarter, while Odyssey saw 69 days, the companies say. The hospice market has a lot of pros right now that make it less risky than either the home nursing or durable medical equipment markets, says Dillon Ryan. While home health agencies have seen two recent Medicare reimbursement cuts and the threat of competitive bidding for DME looms on the horizon, hospice Medicare reimbursement seems very stable with reliable inflation updates, she notes. The Centers for Medicare & Medicaid Services is going out of its way to encourage the use of the hospice benefit. In March CMS instructed its contractors to publish an article on the advantages of hospice, directing the message especially to physicians, nursing homes and hospitals (see Eli's HCW, Vol. XII, No. 12, article "Industry Notes"). And last summer CMS Administrator Tom Scully wrote an open letter to physicians urging them to consider hospice for their patients. CMS also placed an article in physicians' professional publications assuring docs they wouldn't be hit for fraud scrutiny by referring to hospice. Added to the demographics of an increasing aging population, the hospice market is looking more and more attractive, Dillon Ryan concludes. Experts expect to see existing hospice providers such as Odyssey and VistaCare continue to experience significant growth, primarily [...]
