Current Market Conditions
After years of consolidation LexisNexis has determined that the very largest home health providers only command about 5% of market share, meaning we still have much more consolidation to come. The same could probably be said for non-Medicare providers as the entire industry remains highly fragmented in spite of pressure for increased efficiency that continues to drive consolidation.
Medicare
Although Medicare providers are girding for PDGM implementation and some buyers will pause until the dust settles, there’s still plenty of activity in the space. Many formerly pure-play Medicare providers are diversifying their business mix in response to market dynamics and are thus active buyers across the continuum. Medicare certified in-home hospice is usually considered the most complementary business, but many home health providers are also delving into non-medical homecare in order to facilitate the best outcomes for patients as well as developing a new revenue stream that is free from the vicissitudes of government payment. Medicare certified home health providers also find themselves being acquisition targets as facility-based providers are incentivized to have a home health agency of their own.
Hospice
Hospice providers continue to enjoy very beneficial rate and regulatory conditions as well as excellent growth prospects due to chronic underutilization by beneficiaries. Buyers include not only existing hospices looking to expand their footprint, but private equity investors seeking to capitalize on growth, and home health providers wanting to diversify. With buyers interested in the space from every angle, valuations are at an all time high.
Medicaid
With a healthy economy and policy makers trying to improve efficiency, many Medicaid providers have benefitted from program expansion and increased rates. We’re seeing an uptick in interest from Medicaid providers who want to grow as well as diversified providers who want to focus on dual-eligible beneficiaries.
Non-Medical Home Care
Non-medical providers have had another very good year and private equity investors have noticed. Private equity sponsored platforms are gobbling up owner-operated agencies in every region of the county, driving premium valuations.
Conclusions
Buyers are aggressively seeking acquisitions but being very selective to ensure that transactions support rigidly defined strategic objectives. This translates into a volatile valuation environment as some buyers are paying high premiums for strategically essential targets while others are opportunistically bottom feeding for distressed assets.
As the year winds down and you plan for 2020, consider putting our experience to work for you!
Feel free to contact us any time: We’re always happy to discuss market conditions, valuations, and the process we undertake to effect a successful transaction.