As companies in the post-acute care sector try to keep from buckling under tightening federal regulations and shrinking reimbursement rates, Birmingham, Ala.-based HealthSouth Corp. announced plans to acquire privately held home-healthcare company CareSouth Health System.
The $170 million cash transaction is expected to be completed in the fourth quarter, and HealthSouth’s Encompass Home Health will combine with CareSouth’s 45 home-health locations.
CareSouth, based in Augusta, Ga., chose to accept the offer because of the changing payer and regulatory climates, said Rick Griffin, president and CEO of CareSouth. “There is strength and sustainability with larger organizations that can withstand the ever-increasing cuts in reimbursement, and the ever-increasing oppressive regulatory environment,” he said.
Merger and acquisition deals are nothing new for CareSouth. In July 2013, the company entered into a joint venture with LCS, a Des Moines, Iowa-based provider of senior lifestyle products and services, including in-home care, insurance, and national purchasing consulting services. As part of this joint venture arrangement, CareSouth jointly owned the homecare division of LCS Health at Home, with LCS owning the larger portion. CareSouth has been responsible for all of the day-to-day operations of Health at Home in LCS senior living communities.
To coincide with the HealthSouth Corp. acquisition, CareSouth announced Monday it would be rebranded as Careity, effective fourth quarter 2015. CareSouth will keep the Health at Home name as an LCS partner, within LCS communities, and will build new agencies around the coordinated care model under the new Careity name, Griffin said.
The acquisition adds to HealthSouth’s portfolio, which offers short-term facility-based and home-based care across 33 states and Puerto Rico, and enables it to access new markets in Alabama, Georgia, North Carolina, South Carolina and Tennessee. It reported an operating revenue of $2.4 billion in fiscal year 2014, up 5.8% from the previous year.
Operationally, CareSouth will be fully integrated into the Encompass platform, said Doug Coltharp, chief financial officer at HealthSouth. The integration will be made easier by virtue of the fact that both Encompass and CareSouth utilize the Home Care Home Base information technology platform, he said. Post-closing, clinical collaboration opportunities will be pursued in those markets in which a CareSouth location and a HealthSouth inpatient rehabilitation hospital are both present, said Coltharp.