Home Health Deals Commanded Impressive Valuations in 2016

Out of all health care sectors, home health posted the highest trading multiples for mergers and acquisitions in 2016, according to data in a newly released PricewaterhouseCoopers (PwC) report.

Out of the seven health care sectors considered, home health/hospice had the highest mean enterprise value to EBITDA multiple last year, at 15.2, the data show. Home health/hospice also had the largest increase in multiple value compared with 2015, of 2.5x.

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There were 55 home health deals in 2016, according to Irving Levin Associates data included in the PwC report. That’s about an 8% growth in volume from 2015; however, deal value increased 121% in that timeframe. Total deal value for 2016 was $1.16 billion.

As for why home health volume and valuations increased last year, look to the continued acceleration of value-based care models, says Jim Moskal, leader of the global health care practice for Chicago-based M&A and debt advisory firm Livingstone Partners.

These initiatives—such as the Comprehensive Care for Joint Replacement (CJR) program that launched last April—are designed to increase home health volume by diverting patients from more expensive but sometimes unnecessary in-patient post-acute facilities, he notes.

“As a result of CJR and other bundled payment models, home health agencies are becoming an even more important factor in reducing costs and improving patient outcomes in the post-acute care continuum,” Moskal tells Home Health Care News. “These factors are one of the reasons valuations in the sector increased from 2015 to 2016—buyers are seeking home health assets with the size and scale to satisfy this additional demand.”

The long-term care sector—including skilled nursing facilities, assisted living communities, and long-term acute care hospitals—also had a strong year, leading the pack in deal volume, at 337, and deal value, at $14.4 billion.

Fewer managed care deals played a large role in keeping M&A activity from matching 2015 levels, according to PwC.

Health care M&A has momentum heading into 2017 but Trump administration policies and governmental review of certain large mergers could be complicating factors, PwC U.S. Health Services Deal Leader Thad Kresho said in the report.

Written by Tim Mullaney

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Tim Mullaney
If he’s not in the newsroom, Tim likes to be on the tennis court or traveling to a new destination. Recent highlights include Sri Lanka and Iceland.