These 8 Deals from 2021 Will Shape the Future of Home-Based Care

With all eyes focused on the home, it’s no exaggeration to say there were dozens of blockbuster in-home care acquisitions last year. But while all transactions directly impact the buyers and sellers, only a handful help shape the trajectory of an entire market.

As I started to think about my own home health and home care predictions for 2022, I kept circling back to the same eight deals – not because they were the biggest in terms of purchase price or annualized revenue, but because they’re frankly just really, really interesting.

I dug into these eight deals, listed below, as part of this week’s exclusive, members-only HHCN+ Update. For each, my analysis includes a recap of the basic transaction details, a summary of its immediate significance and a breakdown of how the deal will shape the future of home-based care.

Honor acquires Home Instead

The details: In August, Honor announced it was acquiring Home Instead Senior Care for an undisclosed sum. The transaction was fueled by a $140 million Series D round led by T. Rowe Price and Baillie Gifford just a few months prior.

“That round was actually intended to just let us go super big because the whole system was working,” Honor co-founder and CEO Seth Sternberg told me during an HHCN+ TALKS conversation. “The technology is working super well, and we were scaling really fast. For that round, one of the points of it was, ‘Hey, we can now go do mergers and acquisitions if we want to.’”

Immediate significance: The combined Honor-Home Instead enterprise instantly created one of the largest non-medical home care networks in the world, with operations in the U.S. and several other countries. At the time the deal was announced, Home Instead alone had over 90,000 caregivers and 1,200 franchise locations.

Future implications: By dramatically adding to its size and scale, Honor says it’s able to better leverage its proprietary technologies designed to create an improved job experience for in-home care professionals. That includes, according to the company, better scheduling to fit the needs of caregivers and clients alike.

Home Instead actually wasn’t for sale, but its board and owner Paul Hogan were convinced that Honor’s platform could help the organization gain an edge in the home care staffing battle. If that turns out to be true, it could set off a technology arms race where more home care giants look to build, buy or partner with Honor-like platforms of their own.

“Every other industry has been completely turned upside down [by technology],” Home Instead CEO Jeff Huber told me during the same TALKS conversation. “Realizing that, we’ve been working very hard for the last, I don’t know, five to six years, trying to really disrupt ourselves.”

Alternatively, Honor-Home Instead success could establish a new precedent for home care startups, which don’t have a great track record. Instead of launching and going it alone, they could launch with the intent of building off an early acquisition or merger target.

Also worth mentioning: With Home Instead in the mix, Sternberg previously said that Honor plans to triple its R&D spend to further build out its capabilities.

Amedisys inks Contessa Health

The details: Home health, hospice and personal care providers have typically stayed within those three lines. Amedisys Inc. (Nasdaq: AMED) broke that pattern in June, when it unveiled plans to acquire Contessa Health – a company that helps health systems and other partners shift higher-acuity care into the home – for $250 million.

Immediate significance: Acquiring Contessa, led by CEO Travis Messina, increased Amedisys’ total addressable market from an estimated $44 billion to $73 billion. Equally important, the deal added to Amedisys’ partnership portfolio, thanks to Contessa’s several established relationships.

Future implications: Amedisys has set a new standard for what a “home health company” can ultimately look like. Supported by Contessa, Amedisys can now dive deeper into hospital-at-home models, in-home palliative care and more. This will be important as the U.S. health care system continues to migrate toward the home.

“We’re taking home health to new places,” Amedisys Chairman and CEO Paul Kusserow told me in July. “That’s always been our ambition.”

In the future, home-based care players will be expected to manage populations on a longitudinal basis, coordinating or delivering services from “low” to “high” acuity levels. Other companies will look to Amedisys-Contessa as a template to follow as they develop capabilities of their own.

For now, 2022 will be a year for Amedisys and Contessa to really fine-tune how they best fit together.

Humana doubles down on Kindred at Home

The details: In 2017, Kindred Healthcare was sold to a consortium of Humana Inc. (NYSE: HUM), TPG Capital and Welsh, Carson, Anderson & Stowe (WCAS) for about $4.1 billion, with Kindred at Home separated into its own company. Humana walked away with 40% of that business, with TPG and WCAS owning the remainder.

Humana announced it was acquiring 100% of Kindred at Home in April for $5.7 billion.

Immediate significance: Humana secured full ownership of the largest home health provider in the nation. At the time of the deal, Kindred at Home had locations in 40 states and employed roughly 43,000 caregivers.

Future implications: Sure, this deal is interesting because of its price tag and all the parties involved. I personally find it really interesting, though, due to what Humana has said following the April news.

First of all, Humana has publicly talked about disrupting the traditional fee-for-service home health model through a more value-based care approach under Medicare Advantage (MA). Executives have said they’ll continue to support Kindred at Home’s core fee-for-service business, but the company also wants to have half its MA population in a value-based home health model within the next five years.

“Our efforts to transform home health to a value-based model come at a pivotal time for the industry,” Humana CEO and President Bruce Broussard said in November.

On top of that, Humana has said it plans to separate Kindred’s hospice and personal care services offerings. That will be an important story to follow in 2022, and I can see other major home health players interested in acquiring those divested assets.

Advocate Aurora Enterprises buys Senior Helpers

The details: Advocate Aurora Enterprises acquired in-home care franchise company Senior Helpers in April. Advocate’s deal valued Senior Helpers at around $180 million, or roughly 14 times the franchiser’s 2020 EBITDA, according to reports from PE Hub.

Immediate significance: Advocate Aurora Enterprises kicked off a wave of M&A activity around home care franchise organizations when it bought Senior Helpers – the biggest in years, in fact. For Senior Helpers, the deal provided a new strategic partner to help it “control the continuum.”

Future implications: Private equity buyers have dominated home care dealmaking activity for quite some time. This deal was interesting because it demonstrated that strategic entities are willing to enter the fray when the price and fit are both right.

“We realize there’s a whole range of things outside of medical care itself that contributes to a person’s health, wellness and well-being,” Advocate Aurora Enterprises President Scott Powder told me the day the Senior Helpers deal was announced. “We want to more actively participate in that whole ecosystem, hence the creation of Advocate Aurora Enterprises, which is a vehicle to do that.”

I expect more well-connected strategic buyers to make plays on home care businesses in 2022 and beyond.

Brookdale sells bulk of home health, hospice business

The details: Last February, Brookdale Senior Living Inc. (NYSE: BKD) revealed plans to sell 80% of its home health and hospice arm – Brookdale Health Services Inc. – to the Nashville, Tennessee-based HCA Healthcare (NYSE: HCA) for a purchase price of $400 million.

Immediate significance: The deal immediately changed who the major players were in the home health market, as Brookdale previously ranked as one of the top-10 largest home health providers in the nation.

Future implications: There are plenty of senior living and skilled nursing facility (SNF) operators with sizable home health service lines. Both groups have had to survive harsh occupancy losses since the spring of 2020 and the start of the COVID-19 pandemic.

With this deal, Brookdale expressed a desire to shift priorities to its core senior living business while maintaining a close tie to an in-home care component. I see the joint venture or partnership strategy becoming more popular moving forward, as running a home health segment has gotten far too complex to realistically be a side business.

Alternatively, some senior living or SNF operators may look to realize the value of their home health arms through a full sale.

“The health and well-being of our residents is at the core of Brookdale’s mission,” Lucinda Baier, Brookdale’s president and CEO, said when the HCA deal was announced. “Today’s partnership with HCA Healthcare will continue the high quality services delivered to our residents and patients, strengthen our liquidity position and provide meaningful opportunities for growth through better integration of services across the entire care continuum.”

Of course, this deal is also interesting because it raises the question: What will HCA do with Brookdale’s vast home health and hospice network? So far, it appears the hospital system will internally leverage it in markets where there’s existing HCA overlap while exploring sales elsewhere – similar to what it did with LHC Group Inc. (Nasdaq: LHCG) in September.

Walgreens jump-starts ‘Walgreens Health’

The details: Walgreens Boots Alliance (Nasdaq: WBA) announced two major investments in home-based care in October as part of the launch of “Walgreens Health.” They included a $5.2 billion investment in VillageMD and a $330 million investment in CareCentrix.

Immediate significance: It’s clear that Walgreens liked what it saw out of an initial investment in VillageMD, which takes a home-focused approach to primary care and has a dedicated “Village Medical at Home” division. Walgreens Health doubled down on that while gaining a stake in the home-based care network CareCentrix.

Future implications: The formation of Walgreens Health reflects how all corners of the business world are following the “shift to home” and taking concrete action to capitalize on it. CVS Health (NYSE: CVS), for example, has similarly detailed plans to build out “home health hubs” for seniors as part of its strategy beyond the COVID-19 pandemic. Amazon (Nasdaq: AMZN) has set a goal to expand Amazon Care – its home and virtual services line – to 20 additional cities by the end of 2022.

In the future, expect these retailers to be intimately involved in home-based care, both in their own operations and through advocacy. The question remains, however, whether they will act more as disruptors or partners to traditional in-home care providers.

Mayo Clinic, Kaiser Permanente invest in Medically Home

The details: Health systems Mayo Clinic and Kaiser Permanente teamed up in May to invest $100 million into hospital-at-home enabler Medically Home. The startup – launched in 2016 – had previously raised more than $64 million up until that point.

Immediate significance: The infusion of capital gave Medically Home more firepower to develop its hospital-at-home model. And as part of the investment, Kaiser Permanente made hospital-at-home services available to patients in some of its markets, a move which later triggered backlash from a top nurse-advocacy group.

Future implications: As of Dec. 22, there were 85 health systems and 190 hospitals in 34 states offering hospital-level care at home under a special waiver from the U.S. Centers for Medicare & Medicaid Services (CMS). Several additional organizations have been delivering in-home acute care in the MA environment.

Mayo and Kaiser are two of the premier health systems in the nation. Their investment in Medically Home reinforces the staying power of the hospital-at-home model and highlights it’s long-term role in the U.S. health care system, even after the COVID-19 pandemic.

In one survey of health care leaders, two-thirds said they expected 10% or more of their acute care in-patient volumes to eventually shift into the home.

Optum lands Landmark Health

The details: We actually don’t know too many details about this transaction. What we do know is that earlier last year, UnitedHealth Group’s (NYSE: UNH) Optum struck a deal for in-home medical group Landmark Health.

Immediate significance: Joining Optum allowed Landmark to accelerate its growth and expand its reach. The Huntington Beach, California-based company projects to double the number of patients it serves in 2022 while expanding its geographic footprint to 22 states.

Future implications: Home Health Care News has been writing about payers and health insurers becoming more provider-centric for a few years now. This deal was certainly in line with that trend.

To recap, just some of the home-focused assets acquired by insurers, or affiliated corporate entities, include: Landmark, Kindred at Home, naviHealth (also acquired by Optum) and myNEXUS. With so many off the table, it’s going to become increasingly difficult for payers to outright acquire in-home care capabilities, putting a premium on the remaining companies out there.

Additional analysis by Andrew Donlan.