Hospices stand to benefit from bridging divides in the care continuum, including filling gaps between home health and end-of-life providers, according to Eddie Norris, managing partner at Canyon Home Care & Hospice.
Hospice News recently connected with Norris to discuss how Canyon has been stretching its geographic footprint. The Utah-headquartered provider’s service region covers a sizable portion of its home state in addition to Arizona, Colorado, Idaho and Nevada. Canyon’s services include hospice, home health, skilled nursing, personal and pediatric care.
Canyon has been on a growth trajectory, including some recent acquisitions. In this month alone, it acquired Arizona-based physician practice Thomas G. Dallman, MD, LLC and also picked up Utah-based Uintah Home and Hospice.
What has been key to Canyon’s growth strategy thus far, and how has this evolved over time?
We started in Utah with one location, and our strategy has been to get coverage for the entire state to work more efficiently with managed care and hospital systems.
We have taken a similar approach as we have expanded across the intermountain West. From our expansion, we try to grow to new states that are contiguous to our existing states. The vast majority of our growth has been organic, with us first focusing on hiring the best clinicians and then working to grow our census.
Canyon recently acquired Uintah Basin Home Health and Hospice. How does this move fit into your overall growth strategy?
We currently have a location in Vernal, Utah, which is about 30 minutes outside of Uintah Basin Hospital in Roosevelt, Utah. We are the largest home health and hospice provider in that area. Adding on Uintah
Basin was attractive because we already had a presence in that area. It also solidifies our relationship with the Uintah Basin Healthcare system.
Overall, it fit well into our growth strategy because it allowed us to further expand our geographic reach into the state of Utah.
What made Uintah Basin a promising target?
We were already working closely with the hospital system for home health and hospice. We were expanding our services, and it was a natural extension of our geographic reach, as it was a synergistic target.
Uintah also uses similar software, which makes it easy for clinicians to onboard with our company.
Utah has the highest hospice utilization rate among Medicare descendants nationwide. How does the future of hospice look at this rate?
Hospice has become exceedingly competitive. I believe it’s due to private equity groups and financial buyers entering the market.
Over-valuation of hospice targets has created a surge of start-ups. I believe a hospice-only provider without home health and other ancillary services will struggle going forward as competition has ramped up.
Though Utah ranks high for hospice utilization, its merger and acquisition activity levels run lower compared to some other states. What are some factors behind Utah’s M&A market forces?
Utah only has a couple of very large hospice providers: Community Nursing Services, now owned by the University of Utah, and Intermountain Healthcare, a dominant hospital and health plan in the state.
Those two companies are not actively acquiring, which decreases the M&A activity. The smaller hospice providers typically aren’t as attractive of acquisition targets to the financial buyers.
How does the M&A market compare across other states where you provide services?
I see more opportunities in Arizona for hospice acquisitions. Colorado doesn’t seem to have many deals. In Utah and Idaho, there are a lot of smaller size hospice providers looking to exit.
One of the biggest factors hurting M&A activity is the sheer lack of clinicians in the major metropolitan cities such as Denver and Phoenix. With nursing shortages and the inability to secure clinicians post-acquisition, a deal can easily go upside down if you lose the clinicians.
Traveling agencies and nursing companies have depleted nursing from the home health and hospice space. Hospitals are increasing wages, thus pressing post-acute providers. Even though our company has grown, most companies have struggled to grow because of a lack of clinicians.
Further, I have seen buyers much more cautious in acquisitions, including myself, as Medicare has ramped up audits, capitation issues, and hardly any barriers to entry to enter the market space. Sellers are still asking for valuations set by private equity groups and financial buyers during 2019 and 2020.
Do you have further hospice acquisitions planned in your pipeline? What are key considerations as you take steps towards these?
Yes, we have several we are looking at. We are focused on the current states we are in and attempting to stabilize the clinical shortage that is happening in our industry. I focus on location, valuation, and staffing.
Canyon is in a strong position, as our home health has swelled and we will focus on transitions as part of our growth.
[Easing] the transition from home health to hospice is key for organic growth for our company. We have expanded our mobile medical groups and internal medicine practice to help with these transitions. It starts early on educating family members/patients on hospice care.
How does the rising influence of private equity factor into development and growth for providers?
We have been, and continue to be, very selective with our hospice acquisitions, as we have seen private equity groups overpay for acquisitions to satisfy their short-term objectives.
I do not participate in any auction process deals, as we know we will not be able to match private equity group valuations. Our acquisitions are not financially backed. Thus, I believe we are much more selective with our deals as it must make financial sense for our company.
Private equity groups’ model of acquiring and flipping in three- to five-year exits are more focused on short-term census growth for an exit. We are more focused on long-term sustainable growth, fair valuation, managed care contracts, and whether a particular location fits into geographical coverage.
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