Top health care executives foresee strong home health growth in 2020, despite the upcoming Patient-Driven Groupings Model (PDGM) and other regulatory headwinds. Behavioral health and hospice are likewise poised for a bullish year.
That’s according to Capital One’s annual health care services executive survey, released Wednesday. More than 123 senior health care executives from across the sector participated in the survey.
Overall, 19% of surveyed execs cited home health and hospice as leading spaces for growth in 2020.
Another 16% pointed to behavioral health as a hot area, while a whopping 39% cited physician practice management as the segment with the most growth potential.
On the M&A front, about one-third of executives polled by Capital One predicted M&A activity increasing in the year ahead, though at a somewhat slower rate compared to 2019.
Just 14% anticipate a slowdown in M&A action in 2020.
Many home health leaders anticipate a serious ramping up of dealmaking next year, especially as small and mid-sized providers look to exit the market — or are forced out due to financial constraints. LHC Group (Nasdaq: LHCG) Chairman and CEO Keith Myers addressed the topic Thursday during his company’s third-quarter earnings call.
“Combined with the two 30-day payment periods under PDGM, the elimination of the RAP should lead to more consolidation within the industry than we’ve experienced in the last two decades,” Myers said during the call. “It will hit cash flows hard for the smaller agencies, but for the larger agencies — such as LHC Group — we would expect a minimal impact.”
Of the health care executives surveyed by Capital One, 34% cited regulation and reimbursement changes as key challenges in 2020. Another 30% pointed to political factors, more broadly.
“The health care services sector continues to show strength even as external forces create a bit more caution in the industry,” David Varhol, senior managing director for Capital One Healthcare, said in a statement. “The uptick in executives looking to update existing offerings as a means for growth may indicate that the industry is already adjusting to these pressures.”
When asked to name the preferred business growth strategy for 2020, 41% of executives pointed to buying or merging with an existing business, according to the Capital One survey.