Medshares purchases 69 home healthcare agencies from IHS

By KAREN PIHL-CAREY

HHBR Staff Writer

At a time when many home health companies are selling, Medshares (Memphis, TN) purchased the home health nursing division of Integrated Health Services (Owings Mills, MD) for an undisclosed price last week. It is the company’s largest acquisition ever, adding another 69 home healthcare agencies with 251 locations to its portfolio.

"There is significant overlap between Medshares and IHS," Medshares Senior Vice President Robert Leech told HHBR. "But the primary reason we bought the home care unit is because IPS has obviously created a great deal of devastation in the home health industry, and it created a buying opportunity for us this year that we were able to take advantage of."

The purchase, financed through National Century Financial Enterprises (Dublin, OH), is expected to boost Medshares’ revenues this year to $550 million. The company’s revenues came to $175 million last year.

The acquisition comes just four months after Medshares bought 70 home health agencies from Columbia/HCA Healthcare (Nashville).

IHS announced plans last fall to sell its home care division, which was treated as discontinued operations beginning in its third quarter.

"We sold it because of the change in the reimbursement system," IHS Executive Vice President Marc Levin told HHBR. His company will now "focus on our three core business lines: nursing homes, home respiratory care, and contract rehab."

Medshares is buying at a time so many others are selling, not because it has had success with IPS, but because its economy is growing and can be used to combat the problems IPS has caused, Leech said.

"A lot of people right now are trying to get out of the Medicare home health business," he told HHBR. "We’re not. We’re just trying a different strategy."

Charles Lynch, an analyst for Schroder & Co. (New York), told The Baltimore Sun that the home health sale was "a positive" for IHS, and that the company may fare better than its competitors because it has diversified its business with home respiratory services and durable medical equipment. Lynch said he lowered his rating of IHS stock to "outperform" from "outperform significantly."

With the acquisition, Medshares will have 166 agencies with 445 locations in 29 states. Despite the problems with Medicare payment changes, Medshares’ officials believe demographics are on their side.

"I think that the companies that stay in Medicare home health have a lot of work ahead of them, and it’s going to be a tough road," Leech told HHBR. "The challenges are going to continue to be there. I just think for the ones that accept the challenges and overcome them, I think the rewards are going to be there."