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Home health and hospice, which have been consolidating for many years, are in the midst of a surge in acquisition demand. Reimbursement is comparatively stable, and population management and coordinated care initiatives have placed an even greater value on these services. Private equity is back, and a new breed of non-traditional buyers have entered the fray, with new money – and new reasons – to acquire home health and hospice, setting the stage for another long run of M&A activity.

Home Health & Hospice Experts

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Reg Blackburn, MBA

Managing Director

Phone : 866-455-9198
Email: rblackburn@thebraffgroup.com

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Mark A. Kulik, M&AMI, CM&AP

Managing Director

Phone : 888-922-1838
Email: mkulik@thebraffgroup.com

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Bob Leonard , MBA

Managing Director

Phone : 888-922-1836
Email: bleonard@thebraffgroup.com

Market Data

HHH-chart1After eight consecutive years of 70-80 deals, Medicare Certified transactions plunged dramatically in 2015 to 45. But the risk-return fundamentals remain the same, demand remains high, and values, which began to move upwards in 2013 have held. So why the fall-off? We suspect that, much as we have seen in other sectors before, after a sustained period of elevated activity, it is not unusual to see a drop-off in deal volume simply as a function of reduced supply.
HHH-chart2After two consecutive years of minimal M&A activity, deal volume in Medicaid and state funded home health rose to its highest levels since 2010. We anticipate a sustained period of increased demand – and activity – in the space as buyers look to expand their service offerings to create competitive advantages as health care moves toward population management.
HHH-chart3Transaction activity in the private duty space remains in what has become a five year slump. However, there’s reason to be optimistic. Much like we have already seen in the Medicaid and state funded segment, we may see an increase in activity as buyers seek to create a broad continuum of home health and home care services to become more competitive as health care transitions from fee-for-service to population management.
HHH-chart4After the private equity fueled run on home health that peaked between 2007 and 2008, we have seen a steady, though not unexpected, fall-off in activity. Notable however is the rise in new platform transactions from 2013 to 2015. This reflects a second wave of PE interest given (a) a comparatively predictable reimbursement climate, and (b) opportunities to create sustained competitive advantage with investments in technology and process improvements.
HHH-chart5Although not quite as pronounced, the trend in hospice transactions closely mirrors that of Medicare certified home health. Despite sustained, highly attractive, acquisition fundamentals, after six years of elevated activity, deal volume fell to its lowest level since 2008. And just like in the Medicare space, we suspect that this is due a reduction in supply of acquisition candidates after the sustained run.
HHH-chart6Of all the trends in home health and hospice M&A through 2015, PE activity in hospice – particularly platform investments – is perhaps the most difficult to explain, especially in light of a recent rise in such activity in home health. As 2016 continues to unfold, we should gain insights into whether 2015 was an anomaly, or an indicator of fundamental changes in acquisition strategies.

 

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