Home Health, Hospice Dealmaking Drops, But Pending Payment Clarity May Fuel Future M&A

Dealmaking experts predicted health care M&A activity would drop in 2023 due to a number of headwinds. The first quarter of the year proved them right – and then some.

Overall, annualized transaction activity for 2023 is down 32% compared to 2022 levels. Home health, home care and hospice M&A activity was down on a year-over-year basis, though private equity investors and strategic buyers remain optimistic that the market will level itself out.

“A lot of those first quarter 2022 deals are holdovers from 2021, so you’ve got a situation where you’ve got so much volume that happened in 2021 that you just can’t keep up that kind of a pace,” Dexter Braff, president of the M&A advisory firm The Braff Group, told Home Health Care News. “Then you have all of those external market conditions: rising interest rates, inflation, increased wage rates, the ending of the public health emergency. Those variables are contributing to people saying, ‘Alright, we need to take a breath and regroup.’”


There were 21 deals for home health, home care and hospice assets in the first quarter, according to a report from The Braff Group report.

The home health care space was generally more active than the home care and hospice segments.

“Medicaid was the real stunner out of the group,” Mark Kulik, managing director at The Braff Group, told HHCN. “So far in 2023, there have been zero deals.”


While the deal is far from closing, it’s important to note that home and alternate-site infusion therapy provider Option Care Health (Nasdaq: OPCH) additionally announced plans to merge with Amedisys Inc. (Nasdaq: AMED) recently.

“That deal also reflects capitated agreements where you’re taking care of all of the needs of an individual, not offering services a la carte, if you will,” Braff said. “The combination of home health and infusion therapy goes into the notion that this combined entity can provide not only the nursing services, but also can provide the in-home infusion therapy services. What they’re doing is moving into a situation where they can bid on contracts with insurance companies or Medicare managed care to say, ‘We’ll take care of all that post-acute stuff that happens in the home.’”

Generally, the corner of the health care world with the most M&A action in Q1 was behavioral health, which includes mental health, substance use disorder (SUD), autism treatment and other services.

“Behavioral health is hot because it’s the last of the major health care service areas to consolidate,” Braff said. “There’s not only a substantial amount of opportunity, but the pandemic really focused people’s attention on mental health issues that regular people were experiencing. There was so much expectation for increased utilization and increased funding in behavioral health that people just said, ‘We’ve got to get into the space.’”

Still, there is plenty of remaining interest in home-based care.

“The underpinning demand, the forces for that demand haven’t changed,” Kulik said. “The same needs are out there for substance abuse, for autism and there’s really not been an abatement for demand.”

Private equity M&A

Private investors are beginning to pull back in home-based care.

In the first quarter, there were at least 200 PE-related health care transactions, according to PitchBook. Most of that activity came in the form of follow-on transactions, but overall PE-backed dealmaking was 21.5% lower than in 2021.

However, it was still 20.4% higher than the average quarter in 2018-2019.

The volume for PE-lead health care services deals fell for the fifth straight quarter, according to PitchBook’s Q1 report.

As both the Braff Group and PitchBook have pointed out, the industry is adjusting to a new normal.

“Home health, hospice and home care dealmaking really took a nosedive in Q3 of 2022,” PitchBook’s Rebecca Springer told HHCN. “I expected things to pick back up a little bit more than they have, so I’m a little bit surprised that we haven’t seen more activity in the home health space.”

Looking ahead

Despite the early outlook, there is still reason to be optimistic about the dealmaking landscape for the rest of 2023.

The Braff Group report notes there are sound reasons to anticipate an increase in activity toward the back end of the third quarter through the fourth quarter.

Some of those reasons include inflation rates continuing to fall, the post-public health emergency picture becoming clearer and the simple fact that — especially in the PE-backed space — capital needs to be used.

The U.S. Centers for Medicare & Medicaid Services (CMS) finalizing the payment rule for CY2024 will also likely increase activity.

“Even if those cuts, if any, are more than anticipated — within reason — the added market certainty should fuel an increase in deal flow in Q4,” the Braff report noted.

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