Last September, ModivCare Inc. (NYSE: MODV) acquired major personal care services provider Simplura Health Group for $ 575 million. Less than nine months later, ModivCare President and CEO Daniel Greenleaf shared a vision to grow his company into a $ 1 billion home care provider with a true national presence.
ModivCare has now come a big step closer to this goal.
The Denver-based health services company announced Monday that it had entered into an agreement to acquire CareFinders Total Care LLC, another large, high-density personal care company in the northeast. Under the terms of the transaction, which is expected to close in the third quarter of 2021, ModivCare will acquire 100% of the shares in CareFinders for a purchase price of $ 340 million.
“We are pleased to announce a significant expansion of our business with the acquisition of CareFinders Total Care,” said Greenleaf during a conference call on Monday to discuss the transaction. “This transaction expands access to home personal care solutions for patients and supports our strategy of being the preferred partner for caregivers, payers and states as we advance our goal of creating the industry’s first truly national personal care platform. ”
With the core of its legacy non-emergency medical transportation (NEMT) business, ModivCare is unlike any other home care provider. The company delivers around 75 million trips in 49 states in a typical year.
Among the many reasons, ModivCare decided to move into the personal care space to build a one-stop shop that could transport and then care for patients after a hospital discharge. In addition to its transportation and personal care lines, ModivCare also offers nutritional support, remote monitoring services, and other offerings that focus on the social determinants of health.
“Creating healthier communities means providing connections and more reliable care,” Greenleaf continued. “And with the acquisition of CareFinders, we are thrilled to be advancing health equity for those who need it most.”
Once the acquisition of CareFinders is complete, ModivCare’s Personal Care segment will include nearly 16,000 nurses working in seven states providing approximately 30 million hours of care per year for 18,000 patients.
“CareFinders has throughout our history been dedicated to improving the lives of our patients and creating a uniquely rewarding environment for caregivers, a press release announcing the news.
Robinson and other members of the CareFinders management team are expected to continue at ModivCare.
The advantages of overlap
ModivCare and CareFinders are no strangers to each other. ModivCare is working with the personal care provider to arrange more than 85,000 trips for caregivers to drive home to patients during the COVID-19 pandemic.
Geographically, CareFinders has a scaled presence in New Jersey, Pennsylvania, and Connecticut. This fits in perfectly with ModivCare’s existing presence, which includes these three states plus Florida, Massachusetts, New York and West Virginia.
The northeastern intersection of ModivCare and CareFinders. | Source: ModivCare
“One of the beauties of this is the overlap,” Greenleaf said on the conference call. “We basically overlap in all three of the states we do business with, so we already know the markets CareFinders operates in. I can’t underline how important that is. “
About 88% of CareFinders’ service mix is related to Medicaid, with a small portion related to private pay and other sources. In the 12 months ended March 31, 2021, CareFinders’ pro forma sales were approximately $ 202 million, according to additional information from ModivCare prior to the conference call.
Together, ModivCare and CareFinders would have pro forma sales of approximately $ 654 million over the same period. ModivCare’s total revenue for the twelve months ended March 31, 2021 was $ 1.74 billion.
According to Greenleaf, ModivCare’s overall goal for its personal care segment is to create a $ 1 billion company with an EBITDA of $ 100 million.
While CareFinders ModivCare is certainly helping to get closer to these numbers on a large scale, Greenleaf and his team are already evaluating follow-up options.
In fact, ModivCare targets up to 20 companies at any one time, the CEO stated.
“We are constantly evaluating growth opportunities,” he said. “We believe the possibilities are limitless as we continue to expand our presence and look forward to further transforming the way supportive care is delivered in the United States to improve health outcomes for vulnerable populations.”
The above purchase price includes an estimated $ 34 million in net present tax attributes generated by the transaction, implying a net purchase price of $ 306 million, according to ModivCare. The company intends to fund the transaction through a combination of cash and its credit facility.
“The transaction is expected to generate immediate profit growth for ModivCare,” said CFO Heath Sampson in the press release. “In addition, in addition to an exciting long-term development, we expect short-term business dynamics as the COVID-19 pressure subsides and the most recent interest rate hikes are implemented.”
Beyond the bottom line
In addition to the immediate benefits in terms of size and density, the agreement to purchase CareFinders also strengthens ModivCare’s partnerships with states and payers, Greenleaf said.
“Our strong regional presence will further strengthen our partnerships with the government payers and managed care organizations we serve as we become a one-stop shop for supportive care services that address social determinants and health “, he said. “ModivCare has excellent long-term relationships with its states and payers in the markets in which CareFinders operates, and we expect this transition to strengthen those ties.”
Additionally, the deal helps with recruitment and retention, thanks in part to CareFinders’ reputation as a quality employer.
During some of the worst parts of the pandemic, CareFinders was among those organizations that, for example, offered workers hazard compensation to show appreciation.
“It is one thing to be grateful and to share in times of abundance,” Robinson previously told HHCN. “But it’s a whole different thing to share in times of need, and then that’s the greatest appreciation [needed]. “
Despite several short- and long-term tailwinds, home care providers often remain trapped by labor shortages and their ability to handle new cases.
The acquisition of thousands of Nurses from CareFinders will go a long way in cementing ModivCare’s future growth goals.
“Nurses are an important part of our organization,” said Greenleaf. “And successfully increasing the number of our caregivers will enable us to accelerate our organic growth and meet the strong demand for personal care services.”