This article is part of the HHCN+ membership
As patients remain hospitalized, the home care landscape is evolving rapidly as they often have more complex and keen needs as they leave the hospital faster. This shift is changing the dynamic shape between non-health home health and home health services. Providers respond to increasing pressures to diversify the challenges in the way two industries collaborate and navigate the challenges.
These changing tides have also led some companies to consider diverging through service lines or acquisitions, while others have doubled their collaboration with complementary service providers.
“There are actually two different approaches,” Rich Paul, Chief Operating Officer of Synergy HomeCare, told Home Health Care News. “One is trying to bring these different service lines under one umbrella and create adjustments for those services, while the other is really focused and doubled on what we do best as an organization.
Based in Tempe, Arizona, Synergy HomeCare offers non-medical, home-based services, including personal care, companion care, memory care and specialized care services, with over 240 franchises operating in 550 locations across 43 states. The company was acquired in January by Levine Leichtman Capital Partners (LLCP).
Paul said that the partnership between home health care and home care providers is “natural,” and collaboration helps improve the quality of care and patient safety. Home care supports at-home health by following a aftercare plan, taking medication, and reaching doctor appointments for services that don't always occur in the home, such as dialysis.
However, there are several challenges regarding how home health and home care providers work together.
“Home hygiene often receives Medicare reimbursements, and home care is not,” Paul said. “Whether a patient is a veteran and considers a veteran-home care, Medicaid, or private pay, you need to look for alternative funds. But in many cases there are situations where reimbursements are not consistent, especially if you need home care but have no way to pay for it, which can pose a challenge.”
Paul believes that the line of communication between the caregiver and the home health provider is effective, while others see opportunities for improvement.
Josh Klein, co-founder and CEO of home care provider Emertest, told HHCN that the two types of home care types are “still operated on silos.”
“The industry has a way to match the two to get the best night for your money from your home health aide,” Klein said.
Personally held, Emerest offers skilled home therapy and non-medical care services. The company serves metro areas in Connecticut, New Jersey, Pennsylvania, Missouri and New York City.
Diversification of service lines
Changing patient trends, difficulty working with other service providers, or cost pressures have led to home care companies updating services.
“There's more reimbursement pressure than other years,” Leslie Levinson, co-chair of healthcare transaction practices at Robinson + Cole LLP, told HHCN. “When we combine that with labor shortages and rising costs, we say, “Well, we may need to diversify our service delivery and make it a little more defensive, but we may need to provide a wide range of potential services to our customers and our customer base.”
Paul identified increasingly shorter hospital stays and the need for more severe home services. This change prompted Synergy to build an additional offering: Concierge Care. This service line addresses coordination of care and daily life activities (ADL) to ensure a strong discharge plan and support the patient's needs at the time of discharge.
Emerest began with home care spaces before expanding into home care spaces, prompted by complaints with other home care and physiotherapy providers.
“There was a lot of investment,” Klein said. “Trial and error was extremely difficult. We learned the current structure of federal changes, ropes of changes like PGDM, and constant changes, value-based purchases. …It took millions of dollars to get where we are, but here we are in a home health space with a 5-star rating. We have many great results.”
Not all providers are interested in diverging into another home care sector. Paul did not predict changes in cross-sector M&A trends, saying the synergy would focus on partnerships and business collaborations with different types of care providers.
“We have really focused on the importance of partnerships with home hygiene, both at the national and local level,” Paul said. “We can provide marketing and sales materials to support our franchisees and have conversations with our home health providers about the benefits of home care and how home care can be an effective partner in the care continuum.”
Paul said he appreciates partnerships and business collaborations with other care providers as being just as important as providing excellent home care services.
The role of trading and value-based care
Home-based care M&A landscapes are changing. Trends include prioritizing density for vast geographical expansion and increasing cross-sector acquisition.
Industry experts predict that “premiums” will be placed on multiple service lines driven in part by rising alternative payment structures that reward multidisciplinary care.
Levinson expects sector transactions to rise in the coming months, anecdotes that personal wage personal care companies of “some size” have found “a tremendous” interest from potential acquirers.
“Maybe it's a trait of investors trying to find the right place to put their dollars. Maybe… that's a bit of the way the pack thinks. “It was a bit of it. Not surprising, but it's just eye-catching.”
Levinson said he would not be surprised to see trades across sectors of a certain size announced in the coming months, saying that the invested parties should look into whether these transactions will come true. These could include platform trading and private equity investments, Levinson said.
Cross-sector acquisitions require companies to have the skillset needed to run both types of businesses, Levinson said, and home health care providers may have easier time than easy to handle home care companies. Some investors may not feel that they understand the dynamics needed to invest in another type of business.
Still, continued reimbursement, wages and labor supply pressures are driving providers to diversify revenue flows and types of risk. According to Levinson, providers interested in expanding the sector should start with an objective assessment of their business.
“Look at the business, see where it is and see how it is managed,” he said. “Have you managed to get through some of the industry-specific ups and downseasonal cycles? If you're looking at the stability and looking at growth patterns, I think this will be an interesting and very interesting investment opportunity for providers and investors who weren't in this space.”
For Klein, value-based care is the only way to ensure improved collaboration between the two industries.
“Each side of the aisle is valuable care,” Klein said. “If an entity that only provides caregivers or paraprofessional care has to provide value, then the only way they can do it is clearly to prove its value, and their home health assistance has made that difference,” Klein said. “The only way this can be achieved and better results is when ecosystems change.”
