Humana starts hospice sale process

As anticipated, Humana is looking to unload the hospice arm of Kindred at Home, which it took full ownership of last year after buying out its joint venture partners.

Details: A Goldman Sachs-run divestiture process aimed at private equity is underway, three sources tell Axios. The company last year explored a strategic sale of the hospice arm shortly after buying out its private equity JV partners, two people add.

• The company generates approximately $300 million in EBITDA, sources say.
• The sale aims to fetch 12x EBITDA for the assets, one person adds, which suggests a deal could be valued in the upper $3 billion range if that EBITDA is applied.

Between the lines: 12x is lower than recent private market trades for scale hospice companies.

• In late 2020, Thomas H. Lee Partners bought Care Hospice from Martis Capital at about 15x EBITDA, shortly after H.I.G. Capital snapped up Vistria Group’s St. Croix Hospice at a 15x to 16x multiple.

Yes, but: Public comps have had a tough several months.

• Amedisys shares lost 43% in 2021 and have fallen another 20%-plus already this year.

Be smart: Hospice benefits are currently only covered by FFS Medicare, but are also part of a Medicare Advantage pilot program that it is running.

• It’s possible that hospice is eventually “carved in” to MA, but Congress would have to enact legislation.
• If Humana originally got into hospice thinking that a "carve in" was a near-term possibility, the pilot now indicates that those discussions are several years off.
• Getting out of hospice might suggest Humana prefers it remain excluded from the MA benefit package, so that it doesn't have to deal with those expensive patients without the opportunity to capture the upside.

Catch up fast: Last year, Humana bought the 60% of Kindred at Home it didn't already own, which included Kindred’s home health, hospice and community care businesses.

• The deal put an $8.1 billion valuation on Kindred at Home and provided an exit for its former JV partners — TPG and Welsh, Carson, Anderson & Stowe.
• Humana at that time declared its intentions to ultimately divest the hospice and community care businesses.

Humana and Goldman Sachs declined to comment.

Sarah Pringle co-authors the Axios Pro Health Tech deals newsletter. Subscribe at AxiosPro.com.