As 2025 progresses, hospice and home health services are experiencing significant growth, driven by the likes of demographic shifts, technological advancements, and a dynamic mergers and acquisitions (M&A) environment. With an aging population increasingly favoring care at home, service providers within these sectors are expanding their capabilities, while M&A activity reflects a strategic push for scale and innovation.
This column dives into these topics, further examining the current state of hospice and home health and offers a professional analysis of the M&A trends shaping their future, enriched by insights from my attendance at the Home Care 100 conference earlier this year.
An Overview of Today's Hospice and Home Health Sectors
The demand for hospice and home health services is high, and perhaps at an all-time high. With approximately 60 million Americans aged 65 and older, the growing preference for aging in place is reshaping care delivery. To account for this demand, hospice providers are broadening their offerings, integrating palliative care to address chronic conditions earlier in the patient journey, supported by telehealth platforms and remote monitoring technologies designed to enhance end-of-life care and support.
Home health, meanwhile, is evolving to manage higher-acuity cases, exemplified by the expansion of hospital-at-home programs. The Centers for Medicare & Medicaid Services (CMS) has extended its Acute Hospital Care at Home waiver through September 2025, with over 300 participating hospitals, signaling a structural shift toward in-home acute care.
Technology is essential to enabling the growth of home care. Solutions like those powered by artificial intelligence (AI) and the aforementioned remote patient monitoring are helping optimize care delivery, reduce hospital readmissions, and alleviate pressure on staffing resources, which are greatly strained. Larger providers are leveraging their scale to secure more favorable reimbursement rates from Medicare Advantage plans, which often offer lower payments than traditional Medicare. Smaller agencies, however, face persistent challenges, including workforce shortages and financial strain, creating a competitive divide within the industry, and one that is likely to grow further.
M&A Outlook: A Strategic and Financial Perspective
Through a little more than the first quarter of 2025, it's apparent that the M&A landscape for hospice and home health is resurging, following a roughly 9% decline in health services deal volume through late 2024. We see several factors driving this momentum, including declining interest rates, a business-friendly regulatory climate under the new administration, and substantial capital reserves. Consider that private equity (PE) firms alone held $2.6 trillion globally by mid-2024.
Let's take a closer look at some of the most significant forces influencing the hospice and home health sectors.
Economic Tailwinds
The Federal Reserve's rate cuts in late 2024 have lowered borrowing costs, facilitating deal financing. Combined with significant unallocated capital, as noted in PwC's 2025 U.S. Deals Outlook, the environment is ripe for investment. Hospice and home health, with their stable cash flows and growing market, are particularly attractive targets for investors.
Key Players
Two buyer groups dominate these sectors. Strategic acquirers, like large home health operators, are pursuing acquisitions to expand geographic coverage and integrate advanced care models. PE firms, conversely, are generally targeting agencies with strong fundamentals or technological differentiation, often with an eye toward future exits.
While the blocked UnitedHealth-Amedisys merger in 2024, which will head to mediation in August, underscored regulatory risks, smaller transactions are proceeding with less friction.
A particularly noteworthy development in 2025 is the number of instances where we are seeing strategic buyers being outbid, often by PE firms or other aggressive acquirers. This shift marks a notable change from the typical dynamics seen in previous years.
Acquisition Priorities
Technology and scalability are top priorities. Agencies employing one or more of telehealth, AI-driven care coordination, and data analytics are highly sought after for their potential to enhance efficiency and outcomes while lowering costs. The fragmented nature of the hospice and home health markets — which are dominated by small operators — fuels consolidation, as buyers seek to build regional dominance or establish platforms for long-term growth.
Market Dynamics
Valuation negotiations remain a challenge, with sellers seeking premiums and buyers aiming to capitalize on market opportunities. However, the urgency to deploy capital and a robust pipeline of assets are aligning interests, according to PwC's analysis.
Additionally, EY's 2025 health outlook highlights a rise in vertical integration, with health systems acquiring home-based care providers in an effort to streamline patient care pathways. A potential relaxation of antitrust enforcement may further accelerate activity, though new Hart-Scott-Rodino Act filing requirements, effective February 2025, are increasing due diligence for larger deals.
Challenges and Resilience
Workforce shortages and reimbursement pressures from Medicare Advantage plans continue to strain smaller providers, which we are seeing as a motivating factor to push owners toward a sale. Regulatory oversight remains a consideration as well, but the sector's resilience is evident as deal volumes remain around 70% above pre-COVID levels, which we see as reflecting sustained investor confidence.
Pennsylvania Perspective
Activity in Pennsylvania, where I am from and represent many clients, offers a compelling lens into broader trends in hospice and home health, which are shaped by the state's demographics and healthcare dynamics. With over 20% of its 13 million residents aged 65 or older, Pennsylvania mirrors national aging trends but adds a rural-urban divide that complicates care delivery. We see providers like UPMC and Geisinger leading the charge in hospital-at-home adoption. Organizations such as BAYADA Home Health Care, which has a significant presence in Pennsylvania despite its New Jersey (Pennsauken Township) headquarters, are expanding services to meet demand. As in other states, rural areas, however, struggle with caregiver shortages, making technology a critical bridge.
A notable trend in Pennsylvania is providers working to narrow networks and raise barriers to entry for managed care organizations (MCOs). With MCOs dominating the state's Medicaid and Medicare Advantage markets — think Highmark Wholecare or UPMC Health Plan — home health and hospice agencies are tightening referral networks to favor longstanding partners. This strategy aims to protect revenue streams by limiting MCOs' ability to dictate terms or onboard new entrants, but it also restricts patient access to care options. This tension is a defining feature of Pennsylvania's 2025 landscape, and we expect to continue to see efforts around balancing provider autonomy with market pressures.
Insights from Home Care 100 2025
I had the privilege of attending January's Home Care 100 conference in Florida. This event is largely a gathering of C-level leaders in home-based care. The meeting, themed around optimizing financial performance and exploring M&A opportunities, offered a front-row seat to the industry's pulse. While in attendance, I connected with CEOs and innovators during sessions that drilled into leveraging technology, such as AI for predictive care, and navigating payer relationships amid consolidation.
One standout moment for me was a panel on workforce strategies, where leaders shared how tech-enabled solutions are easing staffing woes. The meeting offered many opportunities for networking, and through these I gained insights on how hospice and home health providers are allocating more resources toward aligning operations with value-based care. Conversations with peers also confirmed that the hospice and home health M&A buzz I had been tracking was part of a broader nationwide trend. My experience at Home Care 100 underscored the home health sector's momentum and the critical role of strategic partnerships in driving growth.
Implications for Hospice and Home Health in 2025
The hospice and home health sectors are at a pivotal juncture, with organizations working to balance unprecedented demand with operational challenges. Providers are adopting innovative technologies and care models to meet patient needs, while larger organizations are seeking to gain a competitive edge through scale and payer negotiations. From a mergers and acquisitions perspective, I expect to see heightened activity through the end of the year as strategic and financial buyers work to capitalize on favorable conditions to acquire assets that offer growth potential and operational synergies.
For industry stakeholders, it is clear that success will largely hinge on adaptability, including the ability to effectively leverage technology, navigate reimbursement complexities, and position organizations for consolidation. Through the first several months of 2025, I view the hospice and home health sectors as not only meeting the moment but also serving as a focal point for investment and transformation in the broader healthcare landscape — a reality brought into sharp focus through my time at Home Care 100.
If you are an owner of a hospice or home health organization and are interested in discussing how you can capitalize on these trends through the sale of your business, please reach out to VERTESS. We are a team of expert advisors on healthcare mergers and acquisitions and would welcome the opportunity to speak with you about your company and help you begin to formulate and execute a successful exit strategy business plan.
Anna Elliott, CM&AA
With over 15 years of experience in healthcare technology, post-acute care, hospice, and urgent care, I am a highly experienced healthcare executive. I have successfully supported numerous private equity roll-ups and exits in the home healthcare sector. My extensive knowledge of the healthcare industry and my leadership in the M&A community, as a certified M&A Advisor (CM&AA) and member of the Executive Committee of the Chapter of the Association for Mergers & Acquisitions Advisors (AM&AA), distinguish me from others in the field.
Throughout my career, I have specialized in healthcare and have excelled in attracting healthcare technology firms and industries that are growing through Mergers + Acquisitions. I have a strong ability to target specific needs and opportunities in the business supply and demand process, resulting in over $150 million in value delivered to organizations.
As a co-founder of M&A Finders, a boutique Merger and Acquisition advisory firm in Pittsburgh, I have been able to pursue my passion for advocating on behalf of buyers and sellers in achieving their M&A goals. I am excited to bring my skills and network to VERTESS, where I have access to the necessary resources to further expand my impact in the healthcare industry.
We can help you with more information on this and related topics. Contact us today!
As a Managing Director at VERTESS, which specializes in healthcare mergers and acquisitions (M&A) advisory, I've witnessed the industry's inherent cycles shaped by the likes of economic trends, regulatory shifts, and technological innovations. The latest analyses point to the likelihood of a significant rebound in healthcare M&A as we near the end of 2024 and move into 2025 — and I personally share this sentiment.
At VERTESS, we are seeing an uptick in new clients exploring exit strategies, recapitalization, and growth opportunities, alongside an increasing interest from various buyers and emerging investment groups. I do not believe this revival is a fluke. Rather, it's a culmination of a blend of factors redefining the strategic landscape for healthcare organizations.
Such a bounce back for the healthcare industry would be welcome news, considering the turbulent few years we are hopefully starting to put behind us. Regulatory uncertainties, volatile valuations, and the impacts of the COVID-19 pandemic — which still weigh heavily on some sectors — led to a noticeable slowdown in healthcare M&A activity. Additionally, the dual pressures of inflation and rising interest rates prompted many organizations to tread cautiously with their capital.
However, the following are five emerging indicators that suggest we are on the cusp of increases in strategic healthcare M&A transactions.
1. Market stabilization
Organizations are beginning to regain confidence in their strategic capabilities, which is helping stabilize the market. In addition, clearer regulatory guidelines, in areas such as telehealth and value-based care, are fostering a more stable environment that would appear ripe for M&A activities.
2. Consolidation trends
The healthcare sector continues to undergo a significant consolidation phase — and evidence points to this period continuing for some time, even with some consolidation efforts receiving increased scrutiny. Buyers are seeking opportunities to enhance their operational efficiencies and achieve economies of scale.
3. Technological advancements
The pandemic further accelerated the adoption of digital health technologies, thus fundamentally reshaping our industry. Companies specializing in health tech solutions, including those using artificial intelligence and machine learning, are becoming highly sought-after acquisition targets, both because of their results to date and their perceived long-term value. The integration of innovative solutions represents an opportunity for traditional healthcare providers to improve patient outcomes and operational efficiency while differentiating themselves from competitors and potentially capitalizing on the continued movement toward value-based care.
4. Private equity involvement
The recent lull in M&A activity has resulted in private equity firms accumulating substantial capital reserves. We see that the firms are eager to invest and have a growing interest in doing so within healthcare. These firms, which are often focusing on long-term value, are well-positioned to drive a new wave of consolidation. In 2025, I expect elevated consolidation in more fragmented markets like home health, behavioral health, and outpatient services, to name a few.
5. Focus on value-based care
The ongoing transition to value-based care models is prompting some healthcare organizations to pursue partnerships specifically aimed at enhancing care coordination and improving patient outcomes — two key contributors to value-based care success. We are seeing how M&A can lead to innovative care delivery models that enable healthcare organizations in value-based care arrangements to meet the evolving expectations of payers and patients.
My Strategic Healthcare M&A Outlook
Recognizing that 2025 is likely to see a resurgence in M&A activity, I believe stakeholders across the healthcare spectrum should begin preparing now — if they haven't started already — to capitalize on the growth in transactions. Organizations must prioritize initiatives that support efforts to identify strategic partnerships that align with their long-term objectives, bolster their competitive positioning, and enhance patient care.
The cornerstone of successful healthcare M&A lies in meticulous due diligence and developing a concrete understanding of the strategic rationale behind potential deals. Healthcare executives would be well-served to collaborate with seasoned M&A advisors who can provide invaluable insights into market trends, help identify suitable targets, and facilitate negotiations that yield fair value for all parties.
When I read the tea leaves, I see a healthcare M&A landscape that stands on the precipice of revitalization, driven by market stabilization, technological innovation, evolving care delivery models, and other influences. As we approach the end of 2024 and transition into 2025, organizations that remain agile and proactive in their strategic planning will be ideally positioned to seize the opportunities that lie ahead. In this dynamic environment, the role of M&A advisory will be essential in navigating the complexities of transactions, helping ensure that healthcare organizations not only survive but thrive.
Anna Elliott, CM&AA
With over 15 years of experience in healthcare technology, post-acute care, hospice, and urgent care, I am a highly experienced healthcare executive. I have successfully supported numerous private equity roll-ups and exits in the home healthcare sector. My extensive knowledge of the healthcare industry and my leadership in the M&A community, as a certified M&A Advisor (CM&AA) and member of the Executive Committee of the Chapter of the Association for Mergers & Acquisitions Advisors (AM&AA), distinguish me from others in the field.
Throughout my career, I have specialized in healthcare and have excelled in attracting healthcare technology firms and industries that are growing through Mergers + Acquisitions. I have a strong ability to target specific needs and opportunities in the business supply and demand process, resulting in over $150 million in value delivered to organizations.
As a co-founder of M&A Finders, a boutique Merger and Acquisition advisory firm in Pittsburgh, I have been able to pursue my passion for advocating on behalf of buyers and sellers in achieving their M&A goals. I am excited to bring my skills and network to VERTESS, where I have access to the necessary resources to further expand my impact in the healthcare industry.
We can help you with more information on this and related topics. Contact us today!
Considering the substantial global and national turmoil of the past several years, it should come as no surprise that the current mergers and acquisitions (M&A) landscape is complex, and navigating it is challenging. These are a few of the main reasons why healthcare business owners and buyers frequently reach out to the VERTESS team: They are looking for expert help with executing successful transactions that meet personal and professional goals in this dynamic landscape.
A significant role we play as healthcare M&A advisors is to answer questions from our clients and prospective clients about the issues affecting sellers, buyers, and transactions more broadly. Below are 10 of the questions we are being asked and answers intended to capture the current sentiments and strategic considerations in the M&A market.
Q1: M&A deals declined in the first half of 2024. What was the cause?
A: Several factors contributed to a fairly significant downturn in deal activity. Among them: high interest rates, lower current valuations than the same period last year, and political uncertainty.
Q2: Is M&A activity likely to increase in the near future?
A: Yes, there is a strong belief that M&A activity will rebound, and it will be driven by pent-up demand from both buyers and sellers as uncertainties that have been weighing on the market begin to resolve.
Q3: How are private equity firms responding to the current M&A landscape?
A: Many private equity firms are feeling increased pressure to sell, particularly those with portfolios comprised of numerous aging companies. Such a scenario is prompting an elevated focus on realizing returns to maintain investor confidence.
Q4: Are there signs of increased activity among sellers?
A: We have seen a noteworthy rise in sale preparations, which include the development of full-potential business plans and vendor due diligence engagements.
Q5: I heard that the need for M&A is greater now than in previous periods. Why is this the case?
A: We canpoint to the cumulative pressures of low-growth economic conditions combined with the need for businesses to adapt and innovate as reasons that are driving an elevated interest in strategic transactions.
Q6: Artificial intelligence (AI) continues to be a big topic of discussion within and outside of healthcare. How could AI influence M&A transactions?
A: Generative AI, which is the use of algorithms (e.g., ChatGPT) to create content, has the potential to disrupt various sectors, including healthcare. Disruption creates challenges and opportunities for companies. This then influences M&A strategies — potentially significantly, depending upon the extent and short- and long-term impact of the disruption.
Q7: When is the optimal time to sell my business?
A: The optimal time to sell is when you, as the owner, feel personally ready to move on to your next chapter, whether that's retirement, starting a new venture, or spending more time with family.
Q8: How should I take market conditions into consideration when deciding whether to sell my company?
A: While market conditions usually influence the valuation and sales price of a company, they should not be the primary factor in your decision to sell. The timing should be based on your readiness rather than trying to time the market. My colleague, Bradley Smith, tackled the topic of timing the market for an exit in this column.
Q9: How do rising interest rates impact the sale of my business?
A: Rising interest rates can affect the overall financing landscape, making it more expensive for buyers to obtain the loans they typically need to make acquisitions. However, it's important to understand that buyers adapt to these changes. While the cost of debt has increased, many buyers are shifting toward equity financing and still actively seeking acquisitions. Interest rates may influence buyer behavior, but they won't necessarily deter potential buyers from pursuing your business.
Q10: Is feeling burned out with my business a good reason to consider selling?
A: It's a very good reason to consider selling. When enthusiasm for owning and operating a company declines, it will likely negatively affect your business and its performance. This may not only hurt your company's valuation and thus its sales price, but it may also turn away buyers who see a company moving in the wrong direction.
Ready to Answer Your Healthcare M&A Questions
These questions and their responses help paint a picture of the current M&A market and key considerations for sellers and buyers. They also emphasize the importance of remaining adaptable and well-informed as you pursue a sale of your healthcare company or acquisitions of businesses. If you are looking for expert assist with transactions, including getting questions like those above answered, reach out. The VERTESS team of Managing Directors, who are focused on specific healthcare verticals, would welcome the opportunity to speak with you about your situation and what we can do to help ensure you achieve the best transaction outcome possible.
Anna Elliott CM&AA
With over 15 years of experience in healthcare technology, post-acute care, hospice, and urgent care, I am a highly experienced healthcare executive. I have successfully supported numerous private equity roll-ups and exits in the home healthcare sector. My extensive knowledge of the healthcare industry and my leadership in the M&A community, as a certified M&A Advisor (CM&AA) and member of the Executive Committee of the Chapter of the Association for Mergers & Acquisitions Advisors (AM&AA), distinguish me from others in the field.
Throughout my career, I have specialized in healthcare and have excelled in attracting healthcare technology firms and industries that are growing through Mergers + Acquisitions. I have a strong ability to target specific needs and opportunities in the business supply and demand process, resulting in over $150 million in value delivered to organizations.
As a co-founder of M&A Finders, a boutique Merger and Acquisition advisory firm in Pittsburgh, I have been able to pursue my passion for advocating on behalf of buyers and sellers in achieving their M&A goals. I am excited to bring my skills and network to VERTESS, where I have access to the necessary resources to further expand my impact in the healthcare industry.
We can help you with more information on this and related topics. Contact us today!
A lot of merger and acquisition (M+A) deals fail. That's been the case for a long time. The M+A failure rate that's frequently cited puts the percentage between 70 percent and 90 percent. A Harvard Business Review column largely blames failure on unexpected problems that pop up during the transaction process, which makes the process drag on and eventually motivates the involved parties to go their separate ways.
While unexpected problems contribute to deal failure, I would argue that a growing contributing factor is that buyers are scrutinizing deals more closely with prolonged intentions. That's apparent when we look at how buyers are approaching their quality of earnings (QofE) evaluations.
The Oversized Impact of the Q of E Process
The assessment of a company's value and the facilitation of deal negotiations are significantly influenced by the QofE evaluation. Recent trends in the healthcare industry indicate that the QofE process has become more prolonged due to heightened buyer scrutiny of a company's financials during the due diligence phase, which is creating a challenging and time-consuming process.
As due diligence firms delve even deeper into scrutinizing QofE, as if the small middle-market companies they're evaluating are publicly traded and require such an intense amount of analysis, the duration of the due diligence process extends. Failure to properly oversee this aspect of a transaction may result in disagreements about a variety of transaction issues and lead to prolonged negotiations, highlighting the importance for M+A advisors to adhere to the established protocols and remain open to considering alternative buyers for their clients. This mindset is crucial in accurately capturing the true value of the transaction and preventing wasted time, as extensive delays can jeopardize the success of the deal.
In today's competitive M+A landscape, it has become increasingly common for buyers to unintentionally disrupt a seller's process by moving at a sluggish pace. This can be frustrating for sellers who are eager to close a deal and move on to what's next in their career or begin to enjoy retirement.
Buyers must understand the importance of moving quickly in the M+A process to keep up with the fast-paced nature of the market. If they are unable to do so, they risk losing out on valuable opportunities and potentially hindering the success of the deal. As it is said, "Time kills all deals."
Improving the Likelihood of Deal Success
It is imperative for sellers to be well-prepared before putting their business on the market and initiating the M+A process. This includes getting financials in order, from cash basis to accrual, and we highly recommend sellers complete a QofE on their own company and have this report ready before launching the sale process. Such an initiative can significantly expedite the transaction process and eliminate or at least greatly reduce the level of scrutiny from a buyer's accounting firm.
Pulling off M+A deals, where the rate of success is well under 50 percent, requires extensive careful planning and due diligence, managing risks, and making smart decisions to increase the likelihood of sealing the deal and doing so in a manner that is fair for both parties. In this context, having a proficient healthcare M+A advisor to oversee the process is crucial for sellers, and collaboration with the advisor around preparation is key. Sellers have much at stake and more emotional involvement than buyers. The M+A advisor should prepare them for what's to come and help navigate the seller through the complexities of the deal.
It's worth noting that buyers occasionally attempt to disrupt a seller's process by submitting pre-offers prior to the designated submission date. The rapid acceptance of a preemptive bid by sellers may result in a missed opportunity to gain valuable market insights and enhance bargaining power, which can ultimately lead to a more favorable deal. Insufficient evaluation could potentially embolden buyers to dictate terms during negotiations, thereby endangering the success of the transaction. The M+A advisor must ensure compatibility and diligently adhere to the offer terms, or, alternatively, swiftly transition to the next prospective buyer if necessary.
It's also important for sellers to understand how to best respond to preliminary offers. An offer provided to a seller prior to the company being brought to the market can potentially lead to a protracted negotiation process and limit the number of potential buyers. In other words, a preliminary offer that's accepted by a seller can essentially become a trap if the buyer submitting the offer then takes advantage of a QofE analysis to decrease the value of the offer now that the seller has begun to move forward with the transaction.
During a market sale, it is advisable for an M+A advisor to utilize any preliminary offers to effectively manage the transaction timeline and better achieve the objectives of obtaining the best value, fit, and terms for the seller's company.
In addition to the importance of thorough preparation and clear communication, it is also essential for all parties involved in healthcare transactions to maintain transparency throughout the process. By being open and honest about expectations, goals, and concerns, potential pitfalls can be addressed and mitigated early on. Such a level of transparency can build trust and collaboration, make the transaction process less daunting, and lead to a smoother transaction and more successful outcome for the parties.
Anna Elliott CM&AA
With over 15 years of experience in healthcare technology, post-acute care, hospice, and urgent care, I am a highly experienced healthcare executive. I have successfully supported numerous private equity roll-ups and exits in the home healthcare sector. My extensive knowledge of the healthcare industry and my leadership in the M&A community, as a certified M&A Advisor (CM&AA) and member of the Executive Committee of the Chapter of the Association for Mergers & Acquisitions Advisors (AM&AA), distinguish me from others in the field.
Throughout my career, I have specialized in healthcare and have excelled in attracting healthcare technology firms and industries that are growing through Mergers + Acquisitions. I have a strong ability to target specific needs and opportunities in the business supply and demand process, resulting in over $150 million in value delivered to organizations.
As a co-founder of M&A Finders, a boutique Merger and Acquisition advisory firm in Pittsburgh, I have been able to pursue my passion for advocating on behalf of buyers and sellers in achieving their M&A goals. I am excited to bring my skills and network to VERTESS, where I have access to the necessary resources to further expand my impact in the healthcare industry.
We can help you with more information on this and related topics. Contact us today!
At VERTESS, we've seen our number of home health clients increasing throughout 2023. I thought it would be worthwhile to share what we're witnessing and anticipating for this sector as we move into the final quarter of the year and head toward the new year.
Here are nine of our observations.
1. Demand will continue for home health services
We expect the demand for home health services to continue growing, with contributing factors including an aging population, rising healthcare costs, and the consumer preference for personalized care. With individuals seeking convenient and accessible healthcare options, this is an opportune time for home health providers to meet the escalating demand. Those that are successful here will make themselves more appealing to strategic partners.
2. Buyer competition is heating up
The ever-increasing demand for home health services is creating a more robust buyer pool actively seeking acquisitions. This is leading to escalating competition among buyers looking to acquire established and successful home health businesses. Such high demand should lead to increased purchase prices and put sellers more in the driver's seat in terms of their bargaining position.
3. Buyers are seeking operational excellence and efficiency
In our conversations with buyers, it's apparent that they are prioritizing home health agencies demonstrating operational excellence and efficiency. Other qualities high on buyers' priority lists include:
scalability while maintaining high-quality care;
streamlined processes, well-defined protocols, and optimized resource allocation; and
strong performance metrics in areas such as regulatory compliance and cost efficiency.
4. Technology integration and data analytics taking on greater importance
It's increasingly apparent that home health agencies investing in technology, integration, and data analytics will stand out against those that are not. Adoption of solutions such as remote patient monitoring, telehealth platforms, predictive analytics, and artificial intelligence (AI)-driven care coordination tools will enhance an agency's appeal to buyers.
Furthermore, the ability to leverage digital advancements to improve patient care, outcomes, operational efficiency, revenue, and cost-effectiveness will help set agencies apart and attract more potential buyers willing to offer higher multiples.
5. Care continuity and coordination are prioritized
Sellers interested in piquing buyer interest should improve how they coordinate and manage care across the healthcare continuum. The ability to achieve seamless transitions and strong communication between healthcare providers is becoming increasingly crucial for home health agencies.
6. Diversified service offerings and specialized care are additional differentiators
In highly competitive markets, buyers are favoring home health agencies with diversified service offerings and niche specialization. Providers offering comprehensive services such as palliative care, complex disease management, mental health support, rehabilitative therapies, and pediatric care will be more attractive. In addition, niche specialization will help differentiate agencies and position them as leaders within specific segments. This should help attract substantial interest from various buyers.
7. Proposed Medicare and Medicaid cuts are a concern
Proposed cuts to Medicare and Medicaid funding may pose potentially big challenges for home health providers considering whether to go to the market in the near future. If finalized, agencies would be facing a roughly 2% payment reduction in 2023 and an additional 1.25% in 2024. Assuming these cuts are finalized, it will be increasingly important for home health providers to prepare for Medicare cuts, prepare for a portion of Medicaid revenue to go to caregivers, and hope the final ruling is sustainable.
8. "Agency model" is in vogue
One of the contributing factors to the surging popularity of acquiring home health businesses is the increasing demand for both Medicare-certified skilled home health and non-skilled services. These have been driven by staffing shortages in the healthcare industry, which has led to the rise of the non-skilled "agency model" in the home health sector.
With this model, individuals can step in and provide much-needed care for their loved ones, while also getting paid for services rendered. Such an approach presents a win-win situation where families receive reliable caregivers and individuals seeking work can fill the gap in home health services.
The appeal of the agency model lies in its ability to provide flexible care options while giving greater control to families over who is providing home healthcare. Rather than relying solely on professional caregivers or nursing homes, families can choose someone they trust, such as a friend or family member. This can not only create a more personalized experience but also help alleviate the shortage of skilled home healthcare workers.
9. Preparing the bottom line and EBITDA is key
Home health agencies looking to maximize valuation should focus on ways to shore up and strengthen their bottom line and EBITDA (earnings before interest, taxes, depreciation, and amortization) as they prepare to come to the market. This includes adopting strategies to optimize financial performance, control costs, and improve efficiency. In addition, prospective sellers should meticulously assess their revenue streams and cost structures while identifying areas for improvement that can demonstrate their ability to maintain profitability despite potential reimbursement and other challenges.
Today's and Tomorrow's Home Health Industry: Key Takeaways
The home health sector provides significant M+A opportunities going into 2024, driven by evolving buyer expectations. We're seeing buyers increasingly value operational excellence, technological integration, care continuity, and diversified service offerings. However, concerns surrounding proposed reimbursement cuts require careful consideration.
Despite these challenges, favorable market conditions and intense competition among buyers make it an opportune time for home health agencies to explore their options for strategic alliances or sales. With the help of an expert M+A advisor like VERTESS, home health agencies can navigate the complex market landscape and better position themselves for a successful transaction.
If you would like assistance with preparing your home health agency for a sale, please contact me using my information below. I'll be attending next month's 2023 Home Care and Hospice Conference and Expo with my colleagues, Bradley Smith and Blake Peart. If you will be in D.C. for the conference, send me an email and we'll find a time to meet up!
Volume 10, Issue 7, March 31, 2023
I was fortunate to attend the ViVE Conference in Nashville earlier this week. If you are not familiar with ViVE, which launched in 2022, it merges the leadership of College of Healthcare Information Management Executives (CHIME) and the HLTH digital marketplace. The meeting is designed to bring together senior and executive digital health decision-makers who are interested in the business and transformation of healthcare.
At ViVE, I had the opportunity to learn from and interact with many healthcare professionals, from industry leaders to representatives from startups, venture capital firms, academic institutions, and more. This variety of perspectives and experiences led to meaningful conversations and tremendous opportunities for collaboration.
While I am still digesting everything I took in during my four days at ViVE, I wanted to provide some commentary on some of the advanced technologies that were spotlighted throughout the meeting and share a few other highlights from the meeting.
Rapid Adoption of New Technology
Whereas healthcare has historically been slower to adopt technology than other industries, the sentiment at ViVE is that this seems to be changing — fast. The healthcare industry is expected to further capitalize on the technology trends that have arisen over the past few years. The likes of multiomics, molecular diagnostics, personalized care, and digital health solutions are all set to become increasingly prominent, with the industry embracing advanced technologies such as artificial intelligence (AI)-enabled solutions and digital ecosystems and working to maximize their potential.
The rise of AI and machine learning is quickly transforming healthcare. AI is being used to speed up diagnosis, improve patient care, and enable more personalized treatments. AI-driven technologies are being used to automate administrative tasks (more on this below), analyze medical images, track patient vital signs, and help clinicians make faster and more accurate decisions, among many other applications.
Telemedicine has maintained its popularity coming out of the pandemic, with a feeling at ViVE that the best may be yet to come. We're seeing increased adoption of and innovation in remote patient monitoring, virtual visits, digital health tools, and online doctor consultations. It is being used to reduce healthcare costs and improve access to care, especially in rural and underserved areas.
Digital health solutions, such as wearables and mobile apps, are becoming more prevalent as they enable patients to access their health data and manage their health from anywhere. These solutions are helping to improve patient engagement, reduce healthcare costs, improve the quality of care, and support the continued shift toward value-based care.
The rise of consumerism in healthcare and the importance of delivering an improved patient experience were hot topics at the meeting. Consumers are increasingly demand more transparency and access to their health data, as well as more personalized care and services. Providers are responding by expanding their investments in technologies such as patient portals, telemedicine, and digital health solutions to meet these demands.
One area that received particularly high levels of interest at ViVE is precision medicine. Next-generation sequencing (NGS) technologies are driving the development of more precise and personalized diagnostics.
By leveraging the power of big data, multiomic technologies are enabling clinicians to uncover new insights into the molecular basis of disease and develop more precise diagnostics. For example, multiomic technologies are being used to identify novel biomarkers and drug targets for cancer and other diseases, as well as to develop more precise diagnostics and treatments. For example, NGS with genomic DNA testing and analysis is proving very powerful.
Coming out of ViVE, there is an expectation that as we continue to see companies leverage the power of big data and multiomic technologies continue to evolve, we are likely to see the way we diagnose, treat, and prevent diseases radically transformed in the coming years.
Other Key Takeaways
Despite some market uncertainty concerning digital health, you wouldn't know it at ViVE considering the wealth of discussions around mergers and acquisitions (M+A). It is clear that there is still great interest in and potential to be found in companies pursuing and offering tech-enabled care coordination and innovation.
My conversations with various healthcare chief information officers (CIOs) revealed that organizations are continuing to embrace technology and automation to maximize their teams' productivity and help combat the persistent staffing shortages we are experiencing within healthcare. Staff recruitment and retention challenges remain significant factors in pushing healthcare organizations to increasingly invest in technology and automation to achieve greater output and efficiency.
While presentations covered a wide range of topics and issues, I noted some recurring themes. First, the importance of health equity is high on the minds of many companies and organizations. Second, as an industry, there is a longing for trustworthy data that can help us better unlock the power of human-centered care. Third, there remains significant interest in the opportunities to further and better leverage virtual care, in part to help navigate staffing shortages, increase access to care, and reduce the overall usage of resources.
The private equity groups (PEGs) in attendance seemed to have their sights predominantly set on companies within three industries: those providing revenue cycle management, cybersecurity, and post-acute services. In my conversations with buyers, these were the sectors that stood out most, although it's clear that PEGs are not looking past any sector when it comes to potential transactions.
Let's Connect
If you attended ViVE but our paths did not cross, I'd love to hear from you. The VERTESS team will be attending HIMSS in Chicago in April, so please reach out if you will be attending as well and would like to meet up. If you are interested in discussing any of the topics covered in this column or find out how our team at VERTESS can help your company with a sale or acquisition, do not hesitate to contact me.
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