I've suggested in the past that the hospice industry is sub-scale (too many small providers) so I've been asked recently if the news about the Gentiva acquisition of Odyssey marks the beginning of a consolidation that will benefit the delivery of hospice services in the US.
The recent business transaction between Gentiva and Odyssey is a blockbuster deal (or as some analysts put it, a game-changer) not only because of the dollars involved (a billion of them) but also because it involves the combination of a for-profit home health provider with a for-profit hospice.
Several points struck me:
-Gentiva will be under great pressure to make this deal work because it expects to raise $1.1 billion in NEW DEBT financing to fund the purchase price and refinance existing debt. Such financial pressure encourages management decision-making where patient enrollment trumps patient service.
-Identifying synergies (not to be confused with economies of scale) between home health and hospice has been elusive. It's probably why there haven't been such large-scale combinations to date, and why even small-scale home health/hospice collaborations (either for-profit or not-for-profit) have been few and far between. That said, Gentiva's management has had a solid track record and may be up to the task of capitalizing on these elusive synergies.
-Health care (especially home and hospice care) is local, and after the transaction is completed, the key question will be: can a home health-hospice behemoth better advance (than other organizational delivery models) the provision of palliative care to those with chronic or advanced illness? To the extent that the new Gentiva/Odyssey entity may be able to develop accountable palliative care organizations (APCOs) within the communities it serves, then it may be worth the effort.
I'm curious to learn your thoughts.
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