Private Equity, Government Investments Are Elevating The Pediatric Home Health Care Market

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From the American Rescue Plan Act to the Biden administration’s budget plans for the future, the U.S. government has placed an emphasis on investing in Medicaid home- and community-based services (HCBS). 

Those efforts have helped providers that care for older adults, but they’ve also aided pediatric home health organizations.

The issues that plague the senior home health care market – staffing shortages and a tough payment rate environment – have dragged down pediatric home health care providers for years.


Private equity still dominates the space

The pediatric home health market largely consists of two broader buckets, according to Eugene Goldenberg, managing director at health care investment bank Edgemont Partners.

“One is private-duty nursing, a roughly $10 billion market, and you also have therapy, which is roughly a $5 or $6 billion market,” he told Home Health Care News. “Now, depending on how broadly it’s defined, some of the ABA therapy and autism would also fall into that spectrum.”

In general, the pediatric home health market has always been much smaller in comparison to its senior care counterpart.


“The adult Medicaid market is significantly larger, whether it’s skilled, unskilled or hospice,” Goldenberg said.

Despite this, there has been a meaningful uptick in private equity interest in the pediatric space, according to Goldenberg.

“In general, it’s a fairly protected, insulated population, so that is certainly driving levels of investment,” he said.

Source: Edgemont Partners

Goldenberg noted that one of the largest players in the space is Aveanna Healthcare Holdings Inc. (Nasdaq: AVAH). The Atlanta-based company provides home health and hospice services to senior and pediatric populations across 33 states.

Aveanna is the result of two large PE-backed platforms combining. In 2017, Epic Health Services — which was one of the nation’s largest pediatric-focused home-based care companies — merged with PSA Healthcare.

Since then, Edgemont Partners has seen about a dozen PE investments in the pediatric home health space.

Most recently, PE firm Court Square Capital Partners made a strategic investment in Team Select Home Care, a company that provides care primarily to pediatric patient populations.

It’s still rare to see payer interest in the space in terms of M&A.

“Unlike skilled home health, or non-medical home care where you’re seeing some of the more non-traditional payers looking at these assets – for example, Optum’s offer for Amedisys Inc. (Nasdaq: AMED) or them buying LHC Group – the predominant exit for pediatric home care businesses has been private equity,” Goldenberg said.

Looking ahead, Goldenberg believes that there will be a continuation of consolidation in the market.

“We certainly expect to see more consolidation in the pediatric space as some of the more recently established platforms look to gain scale in various geographies, and as new private equity players look to get into the sector,” he said.

Government efforts reach pediatric care providers

In 2021, President Joe Biden signed the American Rescue Plan, a COVID-19 relief package into law. The $1.9 trillion American Rescue Plan created a pathway for state Medicaid programs to receive an increase in funding for vital HCBS.

In 2022, the U.S. Department of Health and Human Services (HHS) – through the U.S Centers for Medicare & Medicaid Services (CMS) — pushed the deadline for use of the funds from the American Rescue Plan. This gave providers an extra year.

As part of its 2024 proposed budget, the Biden administration also allocated $150 billion for HCBS to be dispersed over a decade.

Many Medicaid home-based care providers working in the senior care space have seen the benefits of the American Rescue Plan fund. This has been the case for pediatric care providers as well.

At Solace Pediatric Home Healthcare, American Rescue Plan funds have been earmarked to improve the company’s staffing situation, especially in states that didn’t place a heavy restriction on what providers were allowed to do with the money.

“Solace really focused on increasing our rates to our providers,” Solace CEO Darcie Peacock told HHCN. “We’ve seen a tremendous increase in demand for our services, so all of our ARPA funds were used to meet that demand, increase retention of our current team, and to recruit new clinicians to meet that need.”

PE-backed Solace currently offers in-home, clinic-based and school-based pediatric services in Colorado, Texas, Arizona, Oregon, Washington, California and Wyoming. It provides occupational, physical and speech therapy services to children from birth to 21 years old.

“The demand is through the roof, there are so many children in need of services, and just not enough providers,” Peacock said. “For example, in Colorado, we’re the largest employer of pediatric therapists. We still have about 900 children that have been referred to us that we’re unable to see. That’s in one state, in one market.”

In states like Arizona that had greater restrictions around how American Rescue Plan funds could be spent, Solace saw some limitations.

“While it helped with recruitment efforts, the way the funds were required to be spent for current team members really tied our hands, and wasn’t as useful for retention, or increasing capacity within our current team,” Peacock said.

In Arizona, 80% of the funds had to be spent on direct care staff, while only 20% could be spent on the business in its entirety.

“We wanted to improve the technology that the staff was using to make their documentation smoother, their drive time shorter, and improve the efficiency so that we could serve more patients with our current team, but we weren’t allowed to use the funds in that way,” Peacock said.

Ultimately, Peacock believes that there needs to be more efforts to address pediatric home health more directly. This is because of the state-to-state disparity when it comes to availability of care.

“In some states, you’ll find a really fantastic environment that allows providers the opportunity to serve kids,” she said. “In the vast majority of states, home health is not an option — you’re going to the clinic. Whereas Medicare services really span the entire country, and you’re gonna get a similar care trajectory, if you’re senior in Colorado, or if you’re in Idaho, it’s completely different in pediatrics.”

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