HCA Healthcare just locked in its $400 million majority stake purchase of Brookdale Senior Living’s home health and hospice business in July, yet the hospital chain is already looking to trim off the fat with some extra dealmaking.
On Wednesday, the hospital chain announced that it has entered into a preliminary agreement with home care provider LHC Group to sell off nearly 50 home health locations, hospices and therapy agencies across 22 states.
The companies are planning to finalize the deal in the fourth quarter of 2021. LHC Group did not share the sale price in its announcement but said it expects to gain roughly $146 million in annualized revenue from the purchased assets.
For HCA, the sell-off falls in line with the chain’s primary strategy of strengthening its existing networks, William Rutherford, executive vice president and chief financial officer of HCA, explained Thursday during a virtual session of the Morgan Stanley Annual Global Healthcare Conference.
He said the initial Brookdale acquisition “was an important strategic acquisition” in that much of its existing locations were already in HCA’s active markets, allowing the chain to add new services that support existing acute, outpatient and ambulatory surgery offerings.
But outside of “a select opportunity here or there” where HCA may see a chance to enter into a new market, Rutherford said that the company has little interest in piecemeal home health offerings that fall outside of its networks.
“We believe the real value is in the network development, so our focus will continue to be in markets where we have that full range of services,” he said during the virtual session.
While the home health and hospice moves are the most recent examples of HCA’s established strategic merger and acquisition strategy, Rutherford noted that the company’s strong balance sheet offers “the capability and willingness” to keep cutting deals across acute care and other network support services.
“We’ll continue to look for acquisitions in all of those domains: our hospital acquisitions, our outpatient and ambulatory, and then to the extent there are new service opportunities we’ll evaluate that so long as they continue to meet our strategic and long-term objectives,” he said.
For now, though, HCA is not looking to spin out or sell off any major pieces of its portfolio such as its revenue cycle management business. The only exceptions, Rutherford said, would be the odd facility or two that is not contributing to the strength of an existing network, as was the case with some of its Georgia-based hospitals earlier this year.
Keeping an eye on COVID-19
Rutherford also fielded a handful of questions from virtual attendees related to COVID-19 and how his company is handling the disease’s apparent fourth wave.
He said that the chain has become more seasoned in terms of managing electives, capacity and staff. Many of these disruptions would need to be handled on a facility-by-facility basis, he said, although those experiences and no signs of government-mandated shutdowns are both working in the chain’s favor.
“The experiences we’ve had during the past 18 months have really proven to help us navigate this current surge going forward,” Rutherford said.
However, there is “no question” that the labor market has been and will continue to be strained as a result of the pandemic, he said.
The executive said that the organization has an arsenal of programs and initiatives that it can lean on to weather the storm, such as its temporary staffing agency, shift bonuses and CHIP coverage. HCA will need to be responsive with these tools in areas that face staffing drop-offs, but so far Rutherford said he has not heard of a need for any large-scale or system-wide sign-on bonuses to attract talent.
Regarding COVID-19 vaccines, the executive said that the organization has had numerous discussions on whether to require the shots as a condition of employment but has not yet taken a solid position either way. Rutherford characterized the decision as an ongoing consideration and stressed that HCA as a whole is encouraging vaccination and vaccine-supportive policies across its workforce.
Little fear of disruption
Rutherford was also questioned on HCA’s view of up-and-coming trends in care delivery such as tech-enabled primary care or value-based care.
He replied that, as of now, neither of those approaches pose a major risk to the organization’s activities. He pointed to major markets in Florida and California where these players have been in play for a handful of years and highlighted HCA’s strong performances in those same regions.
Further, it’s not as if the chain is against dipping its toes into these areas at some point down the line.
“We can be really select in our response and we can partner with these entities as they unfold going forward,” he said. “And, we are developing some of those capabilities on our own, with our own employed physician network.”
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