Acquisitions boosted HealthSouth Corp.'s revenue last year as the post-acute company added hospitals and expanded into home care. And now, more deals, albeit modest, are expected in coming months.
The activity will position the company for shifts in demographics and demand as Medicare moves to change how it pays for care provided after patients leave the hospital, said HealthSouth CEO Jay Grinney to analysts after the company announced its results.
Expansion of post-acute hospitals will be needed as aging baby boomers enter their late 70s, he said. “We don't like to think about it, but inevitably, a large number of those are going to have strokes, are going to have chronic neurological conditions, they're going to find themselves in the acute care hospitals with conditions that are going to require hospital-level post-acute,” he said. “And that's the niche that our facilities will provide.”
Investment in home care also positions the company to grow as Medicare introduces new financial incentives for patients to seek care in lower-cost settings. “There is a change going on in the post-acute world, out of facilities and in to the home,” Grinney said. “In fact that's clearly one of the reasons we looked at expanding into home health.”
Birmingham, Ala.-based Health South is expected to invest $120 million to $180 million this year on construction to expand capacity and buy companies, he said. Deals will not include any major acquisitions, however.
The company ended last year with 121 hospitals up from 107 at the end of 2014, as the company built new hospitals and acquired Reliant Hospital Partners in a $730 million deal last October. HealthSouth expanded its home health operations to 23 states last year, up from 16 the prior year. The company acquired CareSouth Health System last November for $170 million after closing on a deal for Encompass Home Health and Hospice at the end of 2014.
The growth helped to boost HealthSouth revenue by 31.5% last year to $3.2 billion up from $2.4 billion the prior year.
Expenses grew more rapidly at 34.7% to total $2.6 billion compared with $1.9 billion the prior year. That left the company with net income for the year down 15.9% when compared to 2014.
For the fourth quarter, HealthSouth reported a jump in inpatient rehabilitation demand of 18.6%, as measured by the number of patients discharged. That was largely a result of new construction and acquisitions. Growth was 3% last year among those post-acute hospitals operated by HealthSouth in 2014.
Revenue in the fourth quarter increased 43.3% to $879.3 million compared with $613.4 million the same three months the prior year. Operating expenses increased 43.6% to $713.4 million, up from $496.8 million. For the quarter, the company's net income increased 16% to $47 million from $40.5 million the prior year.