By Stephen Tweed
One area that is of great interest to many members of our Home Care CEO Mastermind Groups is Mergers and Acquisitions. Our members are frequently buying or selling companies. In a 24 month period, Ten of our members sold their businesses. During that same time, at least five of our members acquired other companies to expand their businesses.
Therefore, we are constantly monitoring the trends in Mergers and Acquisitions in home care.
This week, our friend and Resource Partner, Cory Mertz and Mertz Taggart wrote a great article on “Five Reasons Why Investors Love Home and Community Based Services.”
Here are the Five Reasons he highlighted:
I. Increased Government Spending.
According to the Kaiser Family Foundation, the federal government and individual states spent $116 Billion on HCBS.
““We are seeing much stronger interest in home and community-based services today than at any time pre-pandemic,” says Cory Mertz. “It’s coming from private equity groups seeking platform opportunities and strategic buyers executing on their care continuum strategies.”
II. Potential for Innovation
The HCBS market presents opportunities for innovation and the development of new care delivery models and technologies. This is leading to interest from investors in companies that are at the forefront of these developments.
III. Evolving Payor Landscape
According to a report by the AARP Public Policy Institute, the average annual cost of HCBS per person was $43,539 in 2018, while the average annual cost of nursing home care was $102,200. By investing in HCBS, investors can help reduce the overall spending on Medicaid, which is one of the largest budget items for states and the federal government. For Managed Care Organizations paid on a per member, per month (PMPM) basis, these numbers can be compelling. Payors are taking notice.
IV. Aging Population
“Chronically ill seniors with multiple medical problems drives ~75% of the total Medicare spend. In our view, this is THE healthcare crisis in America, posing significant financial and clinical delivery burdens on the healthcare system,” New Day President/CEO Scott Herman shared with us recently. “HCBS programs that provide low acuity activities of daily living, designed to deliver “bridge care” or a “little help” for patients so they can remain at home, rather than in an institution, is a critical element of Medicare program solvency and positive clinical outcomes”
V. Market Fragmentation
The Medicaid HCBS market is highly fragmented, with many small providers serving local communities. This fragmentation can make it difficult for providers to achieve economies of scale and can limit their ability to invest in new technologies and care delivery models. Further consolidation will allow large organizations to collect meaningful data to give them a seat at the table with the payors, who seek narrower networks to manage.
Read the Entire Article
You can learn more about how Mertz Taggart can help you plan your exit strategy or plan to acquire another company in our Home Care CEO Resource Partner Program.