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Amedisys' (AMED) Contessa Buyout to Boost Home Health Business

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Amedisys, Inc. AMED recently inked a definitive agreement to acquire Contessa Health, a Nashville, TN-based company that offers higher-acuity hospital-at-home and skilled nursing facility (SNF)-at-home services.

With this buyout, Amedisys has revealed its additional plans to invest in growth of Contessa’s business and proprietary informatics platform, CareConvergence. The transaction is expected to close during late summer upon fulfillment of customary closing conditions, including receipt of regulatory approvals.

For investors’ notice, Contessa is an advanced claims analytics platform with risk-taking capabilities that has proven to improve patient outcomes and experience while reducing costs and hospital readmissions. Notably, Contessa is set to operate as a wholly-owned division of Amedisys, post the closing of the deal.

Per the company, this agreement is intended to advance Amedisys’ strategy to innovate and offer more in home care options that cater to the evolving patient preference with respect to ‘age in place’ in familiar and safe environments.

The latest buyout is expected to bolster Amedisys’ portfolio of home-based health and hospice services.

Deal Rationale

Amedisys’ acquisition of Contessa bears multiple strategic benefits, including enabling Amedisys to create a premier home-based health system, substantially expanding Amedisys’ Total Addressable Market, creating an innovation platform for the company to invest in, and to recruit and retain highly trained and skilled clinicians.

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The buyout also places Amedisys as the first national Home Health provider with the ability to scale across a large geographic area. It also boosts admissions growth opportunities for Amedisys Home Health and Hospice. It enhances Amedisys’ ability to provide quality care and outcomes at minimal cost through value-based care arrangements for commercial, Medicare, Medicare Advantage and managed Medicaid payors.

Industry Prospects

Per a report published in MarketandMarkets, the global home healthcare market size is set to witness a CAGR of 8.6% by 2025. Factors such as rapid surge in the elderly population, rising incidence of chronic diseases, growing need for cost-effective healthcare delivery and technological advancements of home care devices are expected to drive market growth.

Given the substantial market prospects, Amedisys’ recent acquisition seems strategic and well-timed.

Notable Developments

In May 2021, Amedisys entered into an agreement to acquire the home health and hospice operations of the non-profit Visiting Nurse Association (VNA). Through this acquisition, the company is expected to build on VNA’s legacy by providing additional scale and resources to advance care and home health services, and expand its presence in Nebraska and Iowa.

In the same month, Amedisys closed the deal concerning the acquisition of regulatory assets that permits the company to conduct certified home health care operations in Randolph County, NC, and surrounding areas within a 50-mile radius, including Montgomery County.

In April 2021, the company collaborated with Sound Physicians to launch the Home Health Advanced Program in the Southeastern United States. The program is expected to provide Amedisys’ personal care services, telemedicine services through Sound Physicians to patients in their homes post discharge from an acute setting.

Share Price Performance

Over the past year, Amedisys outperformed the industry it belongs to. As per the last trading price, the stock has gained 28% compared with the 5.7% rise of the industry.

Zacks Rank and Key Picks

Currently, Amedisys carries a Zacks Rank #3 (Hold).

A few better-ranked stocks from the broader medical space are PetIQ, Inc. PETQ, National Vision Holdings, Inc. EYE and DaVita Inc. DVA.

PetIQ, currently sporting a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 25%. You can see the complete list of today’s Zacks #1 Rank stocks here.

National Vision Holdings, which carries a Zacks Rank #1, has a long-term earnings growth rate of 23%.

DaVita, which carries a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 14.4%.

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Amedisys, Inc. (AMED) : Free Stock Analysis Report

DaVita Inc. (DVA) : Free Stock Analysis Report

PetIQ, Inc. (PETQ) : Free Stock Analysis Report

National Vision Holdings, Inc. (EYE) : Free Stock Analysis Report

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