Hospice M&A Could Overtake Home Health

Though the mergers and acquisitions market for home health remains remains hot, investors will likely shift greater attention towards hospices in 2019 and coming years, according to analysis by the Braff Group, an M&A advisory company.

“The market for home health agencies could very well be on ice for a year (or more) beginning July 1, 2019,” said the Braff Group in a new report.  “Given similar clinical underpinnings of home health and hospice as well as a far more stable payment methodology (at least for now), buyers will likely pivot towards the comparative safety and predictability of hospice.”

Braff Group attributes this development to concerns about ongoing Medicare payment reforms, particularly the US Centers for Medicare & Medicaid Services Patient-Driven Groupings Model (PDGM), which becomes effective Jan. 1, 2020.

The Partnership for Quality Home Healthcare has estimated that PDGM could lead to a 6.42% Medicare base rate reduction for home health, amounting to $1 billion in lost revenue for home health providers in 2020 alone.

Health care M&A advisory firm Mertz-Taggart made a similar forecast.

“We expect 2019 will be another active year for M&A. However, most of the growth will come from hospice and private duty home care” according to Mertz-Taggart, who also cited PDGM as a contributing factor.