Home Health & Hospice Week

 Expect the nation's largest hospice chain to go public quickly after sale

Hospice mergers and acquisition activity is almost certain to heat up even more this year, thanks to the pending acquisition of the nation's largest hospice provider. Cincinnati-based Roto-Rooter Inc. has announced it will buy Miami-based VITAS Health-care Corp. for $410 million by March 15. That will include $335 million in cash and Roto-Rooter's assumption of $75 million in VITAS debt, reports The Miami Herald. VITAS cofounder, chair and CEO Hugh Westbrook, 58, will pocket $200 million from the sale, and cofounder and vice-chair Esther Col-liflower, 76, will earn "somewhat less," the Herald says. Westbrook will also snag $25 million in consulting fees from VITAS for seven years after the sale. Analysts expect for-profit VITAS, currently a closely held private company, to go public shortly after the acquisition. It would then join Dallas-based for-profit Odyssey HealthCare Inc., which went public in November 2001, and Scottsdale, AZ-based VistaCare Inc., which went public in December 2002, in the ranks of public hospice chains. Estimates from The Daily Deal newspaper put VITAS' market value at $1.5 billion, a figure John Mahon-ey, principal of the Summit Business Group in Penfield, NJ, agrees with. "I can assure you that 20-plus years ago, when we were all working on passage of the Medicare hospice benefit, none of us were thinking that the value of a hospice and the phrase 'significantly in excess of $1 billion' would ever be used in the same sentence," quips Mahoney, former president of the National Hospice Organization. Odyssey racks up market capitalization of about $1 billion and VistaCare has a $550 million value, the Deal says. VITAS, the self-proclaimed largest hospice company in the nation, will remain an independent company with its current management team - except Westbrook and Colliflower - intact in the Miami headquarters, according to press reports. As for rank-and-file VITAS workers, "we've already told our employees that no layoffs are planned as a result of this transaction," company spokesperson Mark Cohen told the Herald.

Will Hospice Prices Climb Higher?  Hospice is already a hot sector in the mergers and acquisitions market, notes consultant Schuyler Hoss with Northwest Healthcare Management in Vancouver, WA. "Odyssey and Vista have been aggressive buyers, pushing up the value of individual hospice programs," Hoss tells Eli. This purchase by non-health care company Roto-Rooter will attract more institutional investors to the hospice market, Hoss predicts. That will mean more acquisitions in store for the industry, which in turn will drive prices even higher. VITAS itself might add to the trend - while VITAS hasn't been an active acquirer in recent years, it may use its new structure to start buying other hospices. "A successful [...]