Home health and hospice agencies – especially quality ones – remain highly valuable assets. But thus far, through nearly all of 2023, M&A trends have not reflected that.
There were only two transactions in hospice in the third quarter, and just four in home health care. Those were both record low totals, according to a new report from the M&A firm Mertz Taggart.
M&A has been slow throughout the year, but industry insiders expected things to tick back up. In quarter two, they did a little bit, but the third quarter was an undeniably slow one.
There were just six home health transactions in Q1, too, but 16 in Q2.
It’s possible that waiting for the arrival of the home health payment rule – which resulted in a meager 0.8% aggregate payment increase – played a part in the slow quarter. Whether the final rule was a positive one or not, buyers like to have some certainty moving forward.
That can put deals in “wait and see” mode, Mertz Taggart Managing Partner Cory Mertz said.
“Demand remains historically high for cashflow-positive home-based care companies,” Mertz told Home Health Care News in July. “That’s driven by scarcity of supply and insatiable private equity demand for add-on acquisitions, caused by a substantial decline in PE exits.”
Speaking of private equity, that’s part of the problem. PE activity remains extremely slow across all health care sectors.
A lot of that has to do with macro economic factors affecting the market right now. Still, PE buyers being sidelined has shaken up the home health and hospice sectors.
“The drop-off in home health & hospice deal activity, which started in late 2022 and has continued into 2023, is unprecedented since the start of our dataset in 2017,” Rebecca Springer, lead health care analyst at Pitchbook, wrote in a recent report.