Companies in the post-acute care and senior housing sectors continue to be opportunistic when it comes to mergers and acquisitions, but the difficult task of combining organizations is forcing some to take a breather.
Healthcare services company Cardinal Health on Tuesday announced it will pay $290 million to take a majority stake in naviHealth, a company that helps match patients to the best post-acute care setting.
Although its core business is still in drug distribution, Cardinal is putting more emphasis on its medical segment, which offers products and support services to healthcare providers.
NaviHealth works with health plans and health systems to create discharge plans for patients. Its LiveSafe tool is a database of about 800,000 care episodes that allows providers to see how other patients with similar conditions and risk factors are typically managed in post-acute care settings, and what they can expect in terms of outcomes.
The Brentwood, Tenn.-based company also has more than 350 of its own clinicians to conduct patient evaluations and make sure they're sent to the most appropriate post-acute care setting.
But Cardinal's deal isn't the biggest one this year. That honor goes to Brookdale Senior Living, which in March entered into an $849 million definitive agreement with HCP to acquire Chartwell Retirement Residences' portfolio of 35 private pay senior housing communities.
Brookdale, based in Brentwood-Tenn., will own 10% of the portfolio, with HCP, a Long Beach, Calif.-based real estate investment trust, owning 90%. Brookdale had already been managing the communities, and that familiarity made the deal attractive, said Ross Roadman, senior vice president of investor relations at Brookdale. “You're buying something you know very well, and it takes some of the risk out,” he said.
Brookdale will continue pursuing M&A deals, Roadman said, but the company is not as active now because of the difficult task it faces with integrating Emeritus Corp., which Brookdale merged with in February 2014 in a $1.4 billion deal. Still, Brookdale may want to acquire entry-fee continuing-care retirement communities in its joint venture with HCP, he said.
Other big players in post-acute care have been active. HealthSouth Corp., a Birmingham, Ala.-based post-acute care company, put up $730 million in June to acquire Reliant Hospital Partners, a Richardson, Texas-based rehabilitation provider. Additionally, HealthSouth acquired Lexington, Ky.-based Cardinal Hill Rehabilitation Hospital, in February.
But overall, opportunities for blockbuster deals are hard to come by, experts say. When two large companies such as Brookdale and Emeritus merge, the number of available portfolios shrinks, said Daniel Bernstein, senior analyst at Stifel, a Baltimore-based financial services holding company.
Midsized private post-acute care companies, however, will be looking to expand during the rest of 2015 and beyond, Bernstein said. Those companies will look to buy smaller mom-and-pop-run shops, he said.
