Home Health M&A Activity Slumps, But Forecast Stays Positive

Home health and hospice mergers and acquisitions dramatically slowed during the second quarter of 2015, but the big picture remains positive for industry growth despite the dip in dealmaking, according to newly released figures.

Five publicly announced home health and hospice M&A deals occurred during this year’s second quarter, according to The Health Care M&A Report from business intelligence firm Irving Levin Associates, Inc. That’s a decline from 16 deals in the first quarter of the year. Home health agencies that are sold as part of a larger transaction—such as a hospital sale—do not make it into these quarterly stand-alone deal numbers, Health Care M&A Report Editor Lisa Phillips noted.

Furthermore, prices were not disclosed for any of the Q2 2015 deals, suggesting they were small in scale, Irving Levin noted in a press release Wednesday. The quarter did not include any mega-deals involving large post-acute providers, which are the types of acquisitions seizing headlines in the last year. They have included the $1.8 billion Kindred acquisition of Gentiva Health Services and the $750 million HealthSouth acquisition of Encompass Home Health and Hospice.


“The problem is that Medicare reimbursement has not helped with cash flow, which can cause a slowdown in M&A activity,” said Steve Monroe, a partner at Irving Levin Associates, in a prepared statement.

That problem may only be exacerbated in 2016, given that the federal government plans to cut home health Medicare reimbursement by a cumulative $350 million.

However, the large-scale shifts in the U.S. health care system should continue to benefit home health providers, given that more emphasis and financial incentives are being put in place for coordinated care across the whole acute and post-acute continuum, according to Monroe.


“With the push in Washington, D.C. for more home and community-based care options, home health care will undoubtedly grow as a business,” he stated.

Indeed, other firms also are bullish on home health’s prospects, and the climate for M&A activity in particular. Currently, the pool of potential buyers for home health assets is the largest and most diverse it has ever been, according to the Spring 2015 analysis from The Braff Group, a health care M&A company specializing in home health, among other areas.

The recent slowdown in activity is not likely to alter this assessment. In fact, Braff predicted that deal volume might decline in the short-term, in part because prime targets will get picked off and buyers then must look further downstream.

Written by Tim Mullaney

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