Why 2025 Will Be Pivotal Year for Private Equity Investment In At-Home Care

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If recent headlines are any indication, 2025 will be a pivotal year for setting the course of private equity investment in health care provider companies, including home-based care organizations.

In the first month of the year, these were among the PE-related stories that generated headlines:

  • A new bipartisan report from the U.S. Senate Budget Committee – titled “Profits Over Patients” – blasted PE investment in health care, particularly in hospitals
  • Research published in JAMA showed the patient care experience eroded at hospitals following acquisition by private equity firms
  • Research published in Health Policy detailed which home health agency performance metrics tend to excel and which to lag under PE ownership
  • Lower middle-market private equity firm Renovus Capital Partners announced its acquisition of Superior Health Holdings, a large provider of home health and hospice in Louisiana
  • Private equity firm Levine Leichtman Capital Partners announced its acquisition of SYNERGY HomeCare, with a portfolio of more than 240 franchises

These developments point to both the ongoing PE investment in the at-home care sector and the increasing calls for restrictions or guardrails on private equity’s involvement in health care.

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This issue is not new but is particularly charged at the beginning of this year. That’s due to expectations that PE investment could surge in the months ahead, as well as uncertainty about how much the Trump administration will differ from the Biden White House in terms of policy and rhetoric around this subject.

In this week’s exclusive, members-only HHCN+ Update, I analyze the recent news and offer some key takeaways, including:

  • The dynamics that will shape Trump-era policies on private equity investment in health care
  • Why PE investment in at-home care is poised to surge this year
  • Lessons that PE investors should learn from recent research and investigations

PE in the Trump era

The “Profits Over Patients” report is just the latest example of federal lawmakers taking aim at private equity’s role in the U.S. health care system.

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Back in early 2022, the Biden administration unveiled a comprehensive package of nursing home reforms, including provisions taking aim at private equity ownership. The White House used the “profits over people” language in its fact sheet delineating the proposed reforms, and also cited PE investment in home care as part of the troubling trend:

“Private-equity ownership in the health care industry has ballooned, with approximately $750 billion in deals between 2010 and 2020 – in sectors including, but not limited to, physician practices, nursing homes, hospices, home care, autism treatment and travel nursing. Too often, aggressive profiteering by private equity-owned practices can lead to higher patient costs and lower quality care.”

Shortly after the announcement of his nursing home reform agenda, Biden in his 2022 State of the Union Address blasted “Wall Street firms” investing in nursing homes, saying that quality deteriorates under their ownership. Carrying out aspects of Biden’s reform package, the Centers for Medicare & Medicaid Services (CMS) subsequently finalized some rules increasing transparency around nursing home ownership. And in 2023, CMS announced ownership data for all Medicare-certified home health and hospice agencies also would become publicly accessible.

In 2024, the bankruptcy of PE-backed hospital operator Steward Health Care added momentum to federal lawmakers’ efforts to rein in private equity in this sector. Democratic Rep. Pramila Jayapal of Washington and Democratic Sen. Edward Markey of Massachusetts in July 2024 introduced the latest draft of the “Health Over Wealth Act,” which would impose various requirements on private equity firms regarding transparency and accountability for care quality. But the pushback has been bipartisan, with the Steward crisis being the primary impetus behind Capitol Hill hearings that resulted in the Senate Budget Committee “Profits Over Patients” report issued jointly by the committee’s Republican and Democratic leaders.

Leaders with health care providers, PE firms and industry associations have pushed back on some of these measures and characterizations of private equity’s role and influence. They’ve pointed out that the definition of private equity has been imprecise, and they’ve emphasized the differences between the largest global PE firms versus smaller firms or private capital flowing into the market through channels such as family offices.

And contradictory findings have raised questions about just how much private equity money is invested in health care. PE-backed providers account for only 3.3% of the U.S. health care provider ecosystem by revenue, with current deal activity in the hospital and SNF sectors near zero, according to a July 2024 analysis from Pitchbook.

This is the backdrop as Donald Trump takes office for his second presidential term. The conventional wisdom is that Trump will be friendlier than Biden to business interests, including in health care, and will ease up on antitrust enforcement and otherwise pave the way for more consolidation, whether driven by private equity or other types of investors. Case in point: Expectations in some quarters that the UnitedHealth Group (NYSE: UHG) acquisition of Amedisys (Nasdaq: AMED) will be consummated, despite the current Department of Justice suit to block the deal.

And on the private equity issue specifically, the obvious prediction is that a Trump White House will reverse Biden-era policies wherever possible through executive action and will certainly cease the harsh rhetoric against PE firms – after all, Trump’s own former CMS chief, Seema Verma, was a sharp critic of Biden’s focus on private equity in the nursing home sector, calling it a “colossal waste of time.”

But in addition to the current bipartisan castigation of PE in health care, the country’s deep dissatisfaction – even rage – with the health care system has been recently ignited. This might soon subside as the status quo gradually asserts itself again, but if the current atmosphere holds or is exacerbated, Trump’s populist tendencies might start to grind against his pro-business inclinations when it comes to policymaking, including on the PE issue.

Such friction could lead to some unexpected actions to constrain private equity. And policies might not matter in this Trump administration any more than they did under Biden, if investors perceive that popular sentiment against their involvement in health care – particularly in sectors like at-home care – has made such ventures too risky to undertake. Rebecca Springer’s Pitchbook analysis of 2024 might continue to hold in 2025 and beyond:

“The key effect of the Biden administration’s scrutiny of PE in health care is not direct antitrust risk, but headline risk. We have been struck by the sudden change in tone among investors on this topic. While the interest-rate environment remains the most important driver of the pace of dealmaking, we also believe sponsors will be somewhat more cautious in 2024 about entering any provider categories that primarily serve vulnerable populations, including home-based care, post-acute care, high-acuity behavioral health, intellectual & developmental disabilities (IDD) care and autism treatment.”

Predicting 2025

While all the pushback and policy uncertainty are creating interesting dynamics – and could gain enough traction to constrain dealmaking – I do still think that 2025 is going to be a big year for PE investment in home-based care and other types of health care providers.

That’s largely because the dealmaking environment was unfavorable in 2022 and 2023, as inflation spiked, bank failures disrupted the capital markets, and the Federal Reserve initiated interest rate hikes; during that time, private equity retreated, and now these firms are under intense pressure from limited partners to deploy their dry powder.

“Private equity needs to buy, and they need to buy fast,” Dexter Braff, founder and president of health care M&A advisory firm The Braff Group, said at WTWH’s INVEST Conference in August 2024. “It’s very likely that 2025 is going to be a big spike.”

Home-based care deals will contribute to that spike. Investors see the growing demand for home-based services as the population ages – and many leaders of home-based care companies themselves are aging and looking for an exit, Braff Group Senior Managing Partner Mark Kulik said on a November 2024 webinar.

“Everything is lining up and pointing in the direction of an active 12 to 18 months coming up,” Kulik said. “If you’re thinking of exiting, the next 12 to 18 months is a good time to do it.”

Mertz Taggart Managing Partner Cory Mertz shares a similar perspective, as HHCN reported this week:

“We expect activity to pick up in 2025 relative to 2024,” Mertz said. “There is too much demand from private equity, driven by aging dry powder. These are committed funds from their investors that they have not yet been able to invest. Leaving committed funds uninvested can make raising their next fund more of a challenge, so there is an impetus to invest now. We also expect more activity by sponsor-backed portfolio companies seeking an exit.”

So, the recent Renovus acquisition of Superior and Levine Leichtman acquisition of SYNERGY could be harbingers of many similar announcements in the coming months. If a PE buying spree materializes and the atmosphere in D.C. turns friendlier, the current outcry against private equity in health care could quickly recede. And it’s true that several PE firms have a track record in the at-home care space. Levine Leichtman, in announcing the SYNERGY deal, touted its history of investment in other home care franchises such as Senior Helpers and Caring Brands.

Still, I think that PE investors and other stakeholders involved in such deals would be wise to heed lessons contained in the findings of recent investigations and laid bare through catastrophes like the Steward debacle.

While there are many such lessons, these are two that captured my attention as I reviewed the most recent reports:

Tie incentives to quality: If financial goals are the only north star for a health care provider organization, the organization will likely drift off course – and possibly go badly astray. The “Profits Over Patients” report highlighted this issue in describing PE firm LGP’s ownership of hospital operator Prospect Medical Holdings (PMH). The report states: “LGP and PMH’s primary focus was on financial goals rather than quality of care at their hospitals, leading to multiple health and safety violations as well as understaffing and the closure of several hospitals.”

This is a common theme among reports that are critical of PE in health care, including a Private Equity Stakeholder Project report on at-home care, which highlighted the incentive plan at one PE-backed home health care company being 90% dependent on earnings growth, patient care hours and cash collection, with only 5% tied to customer satisfaction and clinical outcomes. And the findings newly published in Health Policy underscored this theme of financial incentives in PE potentially compromising long-term quality outcomes, despite other beneficial aspects of PE ownership.

“PE-owned agencies performed better in star ratings, timely care and patient mobility improvements, suggesting a focus on efficiency,” researcher Mohammad Ishtiaque Rahman, an assistant professor of computer information systems at Thomas More University, told Home Health Care News. “However, higher preventable readmission rates and lower discharge-to-community rates raise concerns about long-term patient care. The higher Medicare spending per episode also suggests different financial strategies. Overall, PE ownership brings benefits and challenges, improving some aspects of care while raising questions about patient recovery and financial incentives.”

Invest in people: Paring staff down to cut costs is another of the most common criticisms of PE ownership. In their recently published JAMA study, researchers noted that previous studies tied PE acquisition of hospitals to reduced staffing and increased net income, and their focus was on evaluating whether reduced staffing compromised the patient experience. They found, in analyzing 73 PE-acquired hospitals and 239 matched control hospitals, that patient-reported staff responsiveness did decline after a PE acquisition.

Understaffing also was a theme of the “Profits Over Patients” report; however, what struck me was that the staffing issues highlighted in that report reflected the staffing issues that we report on regularly, and that seem to affect providers regardless of their ownership structure. The report included some comments from employees at a PE-owned hospital, and I’ve heard nearly identical complaints from workers in home care companies, nursing homes, and senior living communities of all kinds. For example: “We are constantly understaffed, underpaid, have to work crazy hours, and deal with multiple patients.” Or: “CNAs all quit. I’m doing my job & CNA job (only get my salary though doing 2 people’s jobs at once each day). People say I do a good job, but I’m exhausted & frustrated & receive really no reward for all the extra work.” The private equity model might indeed increase the risk of understaffing, but the inescapable reality seems to be that the entire health care sector is facing an increasingly dire workforce crisis. Private equity, like all ownership groups, have to recognize this and be ready to dedicate dollars and sweat equity to building a solid workforce at their organizations.

Private equity has become ubiquitous across the global economy and does hold the potential to bring transformative amounts of capital to bear in the health care sector – but as we’re on the cusp of another surge in PE activity, I hope that these firms act not only in their self-interest but can engage in self-reflection, and pursue business practices that result in sustainable success.

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