The home health and home care markets have a lot of tailwinds working in their favor. In the health care sector at large, however, CFOs foresee strong financial pressures ahead.
That’s according to a recent survey from BDO, a Chicago-based accounting, tax, financial advisory and consulting organization. Released in January, the survey includes the responses of 100 CFOs at U.S. health care organizations, including home health providers, with revenues ranging from $250 million to $3 billion.
Overall, 55% of surveyed executives expect to see a recession in the next year or two, and 23% of executives are concerned about risks related to government reimbursement.
For home health providers, this means navigating the challenges surrounding the Patient-Driven Groupings Model (PDGM), which began on Jan.1. Besides changing therapy reimbursement and creating a more complex case-mix system, PDGM also comes with potential cash flow disruptions.
More than three-quarters of surveyed CFOs say they have 60 days or less cash on hand.
In response to liquidity concerns, providers are considering outside investment, with 25% of CFOs citing specialty financing as the source.
“When health care organizations pursue specialty financing, it can mean that they’ve reached their traditional credit limit and are in a distressed situation, and/or they’re considering a different type of transaction or investment structure with needed industry expertise from their lenders,” Patrick Pilch, senior managing director and national leader of The BDO Center for Healthcare Excellence & Innovation, wrote in the survey report.
Private equity (14%), joint ventures (13%) and working with a REIT to monetize stranded assets (10%) round out the top four sources of external investment CFOs may pursue on behalf of their organizations.
“Health care CFOs’ focus here demonstrates the increasing complexity of the environment under which health care organizations operate, and how the appropriate capital infusion is needed, aligned with shifting operating models,” Pilch wrote.
Another takeaway from the survey: As U.S. health care continues moving toward a more value-based system, home care emerges as a key investment area. In fact, 43% of surveyed executives identified home care as a priority investment.
Additionally, 45% identified virtual health — namely telemedicine and remote patient monitoring tools — as a priority investment.
“Home health providers that can cultivate important brand markers by providing care that aligns human experience, operations, technology and space will be the ones that thrive,” Pilch told Home Health Care News in an email statement. “Tools like wearables and sensors, mobile health monitoring applications and virtual reality can help them do it.”
In addition to the above topics, the survey also dug into revenue expectations for the next 12 months.
Despite anticipating financial pressure, 87% of surveyed CFOs expect their organization’s revenue to increase in the year ahead. Meanwhile, the vast majority also expect their organization’s profitability to rise.
BDO’s survey was conducted by Rabin Research Company, an independent marketing research firm.