Tension Between Demand Growth, Rate Pressure Shape At-Home Care Playbooks

Today’s tumultuous legislative environment, including the proposed rule for 2026 home health care and the One Big Beautiful Bill Act (OBBBA), is challenging home-based care providers’ financial bottom lines. However, most home health care leaders see hope on the horizon and predict a positive outlook for 2025 – with some strategic adjustments.

A common theme in the Q2 2025 earnings reports I reviewed this season was balancing strong patient demand and increasing service volumes against ongoing reimbursement rate pressures and workforce shortages. Companies are responding by streamlining operations, overhauling growth strategies and diversifying their payer mix.

Some have also taken more drastic measures and closed branches.

Several organizations reported significant volume growth but also noted ongoing pressure from reimbursement cuts and payer dynamics.

In this week’s exclusive, members-only HHCN+ Update, I’ll share my thoughts on the current financial landscape in the at-home care industry and discuss the decisions some organizations are being forced to make to ensure a stable future for their workforce and patients. I will provide analysis and key takeaways, including: 

• That publicly traded home-based care companies’ revenues are rising despite struggles
• How M&A will change due to the proposed 2026 home health rate cut
• The changes some organizations are implementing to stay afloat

Rising challenges despite rising revenue

One common theme during the Q2 earnings calls of some of the biggest providers in the industry is that although reimbursement challenges haven’t fully manifested yet, the warning signals are ringing, and it’s time to brace for the worst but stay hopeful for the best.

Enhabit Inc. (NYSE: EHAB) experienced a decline in its home health revenue year-over-year, partly due to a decrease in Medicare patient volumes. This resulted in the closure or consolidation of 11 branches, with at least two more planned by the end of the year, along with a voluntary early retirement program. The company also saw the departure of its CEO, Barb Jacobsmeyer.

With this in mind, I was surprised when the company reported total revenue of $266.1 million and plans to open 10 new locations by year’s end. One key to Enhabit’s success during this financially tough period has been its payer strategy, according to Jacobsmeyer, which I address later in this Update.

Other organizations are confident in their ability to withstand the storm.

The Pennant Group (Nasdaq: PNTG), for example, stated that Medicare accounts for only a small part of its home health revenue, so the proposed home health rule should have a limited effect. Despite anticipating only a small impact from the cut, the company has taken an unprecedented approach to its advocacy work, demonstrating that the potential cut is a significant concern.

It also announced plans to build a “center of strength” by acquiring home health and hospice agencies divested by Amedisys (Nasdaq: AMED) and UnitedHealth Group (NYSE: UNH), in addition to its purchase of GrandCare Home Health in Los Angeles, Orange and Riverside counties in California. Pennant leaders told HHCN that the home health rule would not impact its planned acquisition.

To address labor shortages and increasing costs, providers are making strategic investments in their workforce and leveraging technology to enhance operations.

Addus HomeCare (Nasdaq: ADUS) and Aveanna Healthcare (Nasdaq: AVAH) are investing in caregiver wages and using technology such as caregiver applications to support recruitment and retention efforts.

Aveanna reported a nearly 94% increase in its EBITDA to $88.4 million, partly due to operational efficiencies.

Despite the challenges, most home health providers remain optimistic about growth by focusing on high-demand services and favorable payer relationships.

Moderated M&A expectations

Home-based care organizations are continuing to expand their footprints, especially in hospice care. Enhabit, Pennant and Addus all reported robust hospice growth in Q2. The private-duty services segment was also a major driver of growth for Aveanna.

Even so, providers are showing signs of strain due to the proposed 2026 home health payment rule.

Aveanna CEO Jeff Shaner highlighted “continued positive momentum in all three operating divisions” as the company moves through its third year of strategic transformation. The company acquired Thrive Skilled Pediatric Care in April, and Shaner mentioned that the acquisition demonstrates Aveanna’s dedication to investing in current markets and expanding into new ones to support growth.

Aveanna Healthcare, headquartered in Atlanta, provides pediatric and adult health care services, including nursing, rehabilitation, occupational therapy, therapy services, day treatment centers, and home health and hospice care. The company operates 327 locations across 34 states.

While spotlighting its recent acquisition, Shaner also mentioned during Aveanna’s Q2 earnings call that the company has paused plans to acquire another home health business later this year until the results of the proposed home health care rule cut are finalized.

This aligns with predictions from Mertz Taggart. In its Q2 M&A report, the firm highlighted several reasons for home care dealmaking to rise, while predicting that the proposed Medicare home health rule would cause some deals currently in progress to falter.

“The transaction volume we are seeing in home health doesn’t match demand,” Cory Mertz, Mertz Taggart managing partner, said in a statement. “Buyers are eager to deploy cash into quality, skilled home health assets, but are mandated to do it in a more strategic, disciplined manner than in years past.”

Accordingly, Addus HomeCare CEO Dirk Allison stated the company is proceeding with M&A cautiously after its $21 million acquisition of home-based care provider Helping Hands Home Care Services.

Addus’ plans for dealmaking have not stopped, with Allison saying on the company’s Q2 earnings call that it would continue evaluating clinical and personal care transactions – though he limited potential acquisitions to “smaller” providers.

Addus, based in Frisco, Texas, provides home-based care services including personal care, hospice and home health to approximately 62,000 patients and clients through 260 locations across 23 states.

Addus might be in a stronger position for expansion than Aveanna because of its recent acquisition of Gentiva’s personal care operations, which increased the company’s organic growth by over 7% in the second quarter. Addus’ personal care segment makes up more than 77% of its business.

BrightSpring Health Services stressed rapid growth across all business units on its Q2 earnings call, which surprised me, as not all companies are showing the same bullishness.

Jon Rousseau, chairman, president and CEO, said that BrightSpring’s approach to home health has been “steady but measured growth.” He also mentioned that while it is not a “massive home health provider today,” it has been expanding into the space over time, and he believes it is an “interesting time to be a provider who is growing into the space.”

I would agree with that sentiment, which also feels like an understatement.

Based in Louisville, Kentucky, BrightSpring Health Services provides integrated home- and community-based pharmacy and health care solutions for complex populations needing specialized or ongoing care. The company operates across all 50 states.

Based on the executives’ perspectives on Q2 calls, home-based care dealmaking will not screech to a halt any time soon – but it may stutter. Time will tell if providers who stay committed to growing via acquisition in 2025 played their hand best, or if those proceeding with more caution will benefit most.

Evolving provider–payer dynamics

Finally, companies are concentrating on partnering with payers to reduce costs and deliver value.

Aveanna has expanded its preferred payer agreements, allowing for greater investment in its workforce.

Enhabit has strengthened its position by reviewing its payer strategy, according to Jacobsmeyer, and renegotiated several contracts while securing episodic reimbursement agreements with most of its payer partners.

The company has successfully renegotiated several contracts and secured episodic reimbursement agreements with most of its payer partners, although it recently faced a “disruption” with one payer relationship. Additionally, the company’s size, scale and technological investments lead its executives to believe they can withstand reimbursement cuts.

Insurers also reported increased use of home health services, signaling growing demand among payers, according to Mertz Taggart.

From its perspective, Humana Inc. (NYSE: HUM) revised its full-year projections for 2025 to show greater confidence in higher revenue for the rest of the year and highlighted “solid” Q2 results. The company stressed a multi-year transformation focused on scalable growth, cost reduction and technology integration during its Q2 earnings call.

By combining providers’ payer strategies and the growing demand for services, the payoff from evolving payer strategies and increased demand for services demonstrates the resilience of the industry. Patients still prefer care at home, and providers can innovate to withstand headwinds – though likely not without some permanent scars in the form of closures or other structural shifts.

United for a cause

Across the board, the home health care industry is uniting to express concerns to the Centers for Medicare and Medicaid Services (CMS), emphasizing the harmful effects of payment cuts on patient access to care and advocating for payment adjustments that reflect their overall financial situation and the increasing shift of health care into the home.

On this quarter’s earnings calls, leaders emphasized the severe financial strain caused by the cuts and the disproportionate burden on providers compared to other payers, as well as the risk that home health agencies may close, ultimately harming Medicare beneficiaries.

Home health organizations, such as the National Alliance for Care at Home (the Alliance), have submitted public comments opposing the payment cuts. Industry groups are also urging CMS to adopt a more comprehensive approach to payment adjustments, taking into account the broader payer landscape, which includes inadequate reimbursement from MA and Medicaid, not just traditional Medicare.

Midterm elections might influence a shift in these rate cuts if the outcome at the voting booths doesn’t go as lawmakers expect. At the very least, I hope the efforts of the home-based care industry are not overlooked and that legislators are willing to work with providers for the benefit of the growing aging population, or we may see more drastic moves from home-based care providers next quarter.

As Jacobsmeyer said on Enhabit’s earnings call: “It goes without saying, if CMS does not change its extreme position, something will have to give.”