When Coltala Holdings acquired a stake in Choice Health at Home in June, its co-founders – Ralph Manning and Edward Crawford – were ecstatic.
After all, the Dallas-based private equity firm was looking to enter into the home health industry, but wasn’t sure it would be able to. Its confidence in finding the right provider was waning.
Despite a hot M&A market and more limited opportunities, Coltala was able to sift around until it found a home health provider it believed in with Choice. A growing company, Choice is a provider of home health, hospice and rehabilitation services with dozens of locations, primarily in the South.
With the right capital and resources, Coltala expects major things from the home health provider in the coming years. The PE group also anticipates big things for the industry in general.
Home Health Care News recently caught up with Manning and Crawford on an episode of Disrupt to find out what their process was when looking into acquiring Choice, what they expect for the future of home health, whether they may look into future opportunities in the industry and a lot more.
Highlights from the conversation are below, edited for length and clarity. Subscribe to Disrupt via Apple Podcasts, Google Play Music, SoundCloud or your favorite podcast app.
HHCN: You guys have mentioned previously that you felt lucky to end up on Choice because the opportunities in home health were sort of scarce. Can you share what that process was like?
Manning: I don’t think it was because the opportunities were scarce as much as that it’s become fiercely competitive for those opportunities. Health care is a growing space. And when we first got into it in the early 2000s, there were just a whole bunch of people in the investment community that were not interested in health care and didn’t view it as an attractive place to be. So we kind of entered in as contrarians, but that has really changed.
Crawford: I just think with home health, there’s a lot of risk to it. You get one audit, and it can mean a lot of trouble. And so the clinician-led culture was something we were attracted to with [Choice’s leaders]. That’s something we liked as we stacked them up against some of the other home health opportunities we came across.
Home health can be a great business to be in, but there’s still plenty of issues. So what can access to more significant capital do for a company like Choice?
Manning: You can’t just throw money at problems, that doesn’t solve anything, right?
It’s mostly about the ability to consolidate these businesses. We want to bring other like-minded folks into the fold and make them part of the Choice journey. That takes capital, and we have to respond quickly, because it’s very competitive. When you find the right opportunity, you need to be able to move fast.
Crawford: Exactly. I think Choice has a very compelling proposition. But in order to do that, you need to have that capital to really grow quickly, and I think it has helped them with speed of acquisition and speed of growth.
Where do you see Choice being in the next three to five years?
Crawford: I think [both us and Choice] would like to see it as a regional powerhouse. I think [Choice CEO David Jackson] would like to have a billion-dollar business. And we have a lot of faith that’s entirely possible.
Does Coltala have aspirations to get involved with any other companies that are in home health, home care or post-acute care generally?
Manning: Yes, absolutely. We’re interested in a number of areas. Health care services is our niche and where we like to play. But the home care model provides arguably the lowest-cost form of care – or at least a compelling cost model. And who wants to be anywhere other than their own home? So we just feel very fortunate to be in a space where there’s a very valuable proposition to the patient and to the payer.
Crawford: I would agree 100%. We’ve looked at everything from therapy to durable medical equipment (DME) to other home health-type opportunities. We like post-acute care, and we like the ability to take care of people in their old age. We’ve looked across it all, but I think that aligns with our values very well — and also offers good economic opportunities.
The post Why Finding a Home Health Provider to Acquire Has Become Tougher appeared first on Home Health Care News.
