The Chicago-based private equity firm the Vistria Group has agreed to sell St. Croix Hospice to an affiliate of the investment company H.I.G. Capital for an undisclosed amount. Vistria’s portfolio focuses on health care, education and financial services.
Minnesota-headquartered St. Croix has a substantial Midwestern footprint that extends across six states and has been on a strong growth trajectory in recent years, completing a number of acquisitions of its own during 2019 and 2020. The company has also added five de novo locations so far during 2020, as well as several others the prior year.
“We are excited to partner with H.I.G. They are our fourth private equity partner, and we’ve had a great relationship with each one. We are looking forwa
rd to continued growth and currently serve patients from our 35 branches in six Midwestern states,” Heath Bartness, founder and CEO of St. Croix. Vistria has been seeking a buyer for St. Croix since at least July, when the Wall Street Journal published a story that the hospice was going up for sale.
“We received a significant amount of interest in St. Croix and thought there was an opportunity to recapitalize it for the next phase of its growth Typically we plan in five-year windows, but St. Croix was well ahead of the curve. This time was right,” said David Schuppan, senior partner at Vistria.
In March, St. Croix entered the Missouri market through the acquisition of Serenity Care Hospice in Harrison, Mo., for an undisclosed amount. Last August, St. Croix also purchased Brookfield, Wis.-based Hometown Hospice & Homecare, which consists of three hospice and home health operations in eastern Wisconsin. The company has plans for future expansion with a focus on Midwestern markets.
A number of factors have whetted the appetites of private equity firms for hospice in recent years, including the fragmented nature of the industry, increased acceptance of palliative care services, demographic tailwinds, the changing regulatory landscape, and movement towards value-based payment models. A culture of regulatory compliance also plays a key role in attracting private equity buyers. As the U.S Centers for Medicare & Medicaid Services (CMS) continues to ramp up audits and other enforcement activity focused on the hospice space, potential investors are wary of organizations that have a spotty record on compliance. Geographic location is also a key factor that can determine whether a private equity firm will invest in a hospice. For instance, high hospice utilization rates and growth among the senior population can pique an investor’s interest.
For example, Iowa, where St. Croix opened three de novos in the past 12 months, ranked seventh in the nation for hospice utilization in 2018; 56.6% of Medicare decedents elected hospice, compared to a national average of about 50%, according to the National Hospice & Palliative Care Organization.
The M&A market for healthcare companies is strengthening as we enter Q4 and ahead of the upcoming election. There is unprecedented capital in market, the lowest interest rates in US history and strong acquirer motivations for high quality healthcare companies. Across the continuum of care, buyers and investors are looking for well established, profitable businesses and offering strong valuations and options for management.
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