Why Consolidation in Home Health Care is Critical in Keeping Patients and Profits Healthy

The home health care industry is going through a transformation. Not only is it getting smallerwith the number of independent agencies decreasing every year since 2015—but it’s also getting stronger.

A Changing Landscape

Consolidation can sound like a dirty word, conjuring up images of hatchet men and corporate raiders. But in the home health care market, consolidation is proving to be beneficial for both patients and businesses alike. Why? In an increasingly hostile regulatory environment, consolidation enables struggling, cash strapped companies to better compete. As for patients, the merging of companies can offer tremendous benefits, including cost savings and increased care coordination.

How Did We Get Here?

Lean Covid years and staffing shortages have hit the home health care market hard. New government regulations, such as Review Choice Demonstration (RCD), aren’t helping either. With the broader rollout of RCD along with the recent announcement by The U.S. Centers for Medicare & Medicaid Services (CMS)  regarding a potential rate cut starting January 1, 2023, independent agencies will have to evolve if they wish to survive. According to the CMS, the changes are designed to reduce the burden on providers. But as independent agencies are finding out, changes made to the payback cycle are leaving many of them in a tremendous cash crunch. It has all been too much for many smaller agencies to bear.

Market Future Looks Bright

One thing is clear based on both economics and patient outcomes, care in the home is the future of health care. While current public market valuations are taking a hit, the overall home health care market shows no signs of slowing down, thanks to an aging population and Medicare Advantage plans asking more and more from providers. Enter: consolidation. By joining forces and creating scale, home health care providers are once again able to thrive. And with better business, comes better patient care—plus an overall strong home health care market.

M&A Optimism

Hyde Park Capital is becoming increasingly active in the home health sector. Private equity acquisitions broke a record in the home health care industry in 2021. And while the home health market has cooled a bit in 2022, the industry long view still looks good and we are optimistic that the number of deals will rebound. The hard work that goes in before and after a transaction is absolutely critical to the deal’s success. If you’re considering buying, selling or consolidating a home health care company, our team has the experience and expertise necessary to ensure that both your business and patients get the win.

For more insights on the home healthcare market, we encourage you to read our latest market report. If you have questions, or if we can be of any assistance, please reach out. Our expert team is eager to help!