Amedisys Inc. (Nasdaq: AMED) has entered into a deal to acquire Contessa Health, one of the largest players in the home hospital market, for $ 250 million.
The acquisition brings Amedisys’ total addressable market for home care services from $ 44 billion to $ 73 billion, according to the company. Strategically, Amedisys believes it can leverage its existing home care capabilities and national footprint to accelerate Contessa’s growth.
The transaction, which Amedisys will fund through its cash and credit facility, is expected to close later this summer.
“Today’s announcement is a strategic and promised step for Amedisys strategic growth and differentiation, as we expand our capabilities to reflect growing market demands and evolving patient preferences for environments at home of higher acuity, ”said Paul Kusserow, Chairman and CEO of Amedisys. declaration.
The Contessa, based in Nashville, Tennessee, helps healthcare systems deliver hospital-level home care through its in-home recovery care model. The need for such services exploded during the COVID-19 crisis, as health systems sought to free up space for beds inside their facilities.
Founded in 2015, Contessa’s current health system and payers partnerships include Mount Sinai Health System, Marshfield Clinic Health System, Ascension Saint Thomas, CommonSpirit Health, Highmark Health and others.
Beyond hospital home care, Contessa has also developed SNF home programs, as well as palliative home care. Mount Sinai Health System is one of the partners that has already turned to Contessa on the palliative care front.
Once the acquisition is finalized, Contessa will become a wholly owned division of Amedisys.
Shortly after the deal was announced, Amedisys and Contessa held a joint conference call to review their combined strengths. During this call, Kusserow said that Contessa marked a “strategic milestone” in the history of Amedisys.
“With the signing of this agreement, we are taking an important step in realizing our innovation strategy to provide more and better home care to all who want it,” he explained. “[We’re] further differentiating ourselves from the traditional home health and palliative care industry.
Amedisys is one of the largest providers of home health, hospice and personal care services in the United States. It provides services to more than 418,000 patients per year at 514 health centers in 39 states and the District of Columbia.
The Baton Rouge, Louisiana-based company has also partnered with 2,900 hospitals and 78,000 physicians nationwide to provide post-acute care.
With Contessa in tow, Amedisys will be able to treat the highest acuity patients at home, a point that has been at the heart of the business over the past year.
“While Amedisys continues to be a national leader in providing quality home and palliative care services, we have always worked to innovate and provide even more types of home care as patients seek more and more to ‘age in place’ in safe environments, ”Kusserow said. “Integrating the Contessa team into our family significantly advances this strategy. “
Since its launch, Contessa has raised at least $ 59.8 million, according to Crunchbase. Its previous investors include Blue Cross BlueShield Venture Partners, Deerfield Management, Health Velocity Capital, Martin Ventures, Noro-Mosely Partners and Optum Ventures.
As part of the agreement, Amedisys plans to invest not only in the future growth of Contessa, but also in its proprietary IT platform, “CareConvergence”. CareConvergence is a data and analytics platform that helps with care management, revenue cycle and insurance claims.
“We launched Contessa with the ambitious vision to create innovative models that would enable as many patients as possible to receive the highest acuity care in their preferred environment – home,” said Contessa CEO Travis Messina, in a press release. “In the years since, we have made great strides towards this goal and are proud to partner with some of the best healthcare systems and payers in the country to treat more patients at home.”
Recently, Contessa’s growth has been accelerated by favorable industry winds such as the Centers for Medicare & Medicaid Services (CMS) exemption from “Acute Hospital Care at Home”.
Now that industry insiders expect a version of this waiver to continue, Contessa’s value proposition is even higher.
“To continue the momentum we have created and take advantage of all the growth opportunities that currently exist, we wanted a partner with a national footprint, a reputation for exceptional clinical quality, and the scale and infrastructure available to. accelerate our trajectory, “Messina continued.” Amedisys has all this and more. “
The purchase price of $ 250 million is a multiple of 3.9 times 2022 revenue, according to Amedisys. For reference, other tech-based health services companies are trading at around 6 times 2022 revenue.
In addition to its existing partners, Contessa is currently targeting 133 health systems in 28 states. In the past, one of the biggest challenges for the business was staffing, as it takes a highly trained clinician to take over hospital care at home.
Amedisys has always been a premier employer, which has strengthened its position as an attractive partner, Messina said on the post-announcement conference call.
“It is not traditional home medicine,” he said. “Making sure you have someone who is willing to invest in high quality nurses… is absolutely critical to success. “
During the call, Kusserow was careful to note that Amedisys will invest heavily around Contessa and its continued growth, suggesting that the asset will not become an immediate revenue accelerator.
Despite this, Amedisys believes it has enough firepower to continue making traditional acquisitions in the home care, palliative care and personal care spaces.
“We have some good business in the works,” Kusserow said.
Messina, together with his management team, will continue to lead Contessa. The company will retain its brand and operate as a separate and unique segment within Amedisys.