The stars are aligning for home health agency owners. After years of disruption, uncertainty, and countless challenges, 2025 is shaping up to be a great year for home health care providers, especially those planning to sell their companies this year. there is.
Here are seven reasons why we're optimistic about 2025.
1. We are entering a seller's market.
Several factors point to why 2025 could be a strong seller's market for home health agency owners.
Private equity firms are eager to buy. Private equity trading volume has nearly bottomed out over the past two years. Private equity firms are trying to make up for lost time and volume of acquisitions. Private equity firms have a lot of money. Combine that with a decline in the number of deals with private equity firms that have continued to raise funds and build up cash reserves over the past few years, and you have more money sitting on the sidelines than we've probably ever seen. There will be. This money has to go somewhere, and home health care is becoming a more attractive industry (more on why below). There will be more buyers than sellers. Given the attractiveness of home health care, the acquisition appetite of private equity firms and strategic buyers, and the large amounts of capital available for acquisitions, there will likely be more competition for home health agencies entering the market. Increasing competition is leading to higher valuations and selling prices, with further rate cuts on the horizon. The US Federal Reserve is expected to cut rates further in 2025. The question is not whether the Federal Reserve will cut interest rates, but how many and how large they will be. Lower interest rates mean it's cheaper to borrow money, and buyers have the peace of mind to access more funds to pursue and complete a deal. 2. Years of disruption are becoming a thing of the past.
The past few years have been chaotic, primarily due to the COVID-19 pandemic and its profound impact on every aspect of our lives and businesses. Everything from rising inflation, which contributes to rising interest rates, to staffing shortages and rapidly evolving regulatory requirements, creates volatility, and unpredictability can be a challenge when it comes to running a home health business or completing a transaction. I don't like it.
The good news is that 2025 is finally shaping up to be the year of normalcy. While challenges in areas such as staffing and the regulatory environment will remain, they are likely to be less significant than in the past, and home health care providers have largely adapted successfully to these obstacles and their impact. There will be further stabilization after the 2024 elections. Buyers and sellers who have been waiting for a calmer, more stable market to pursue deals should get their wish come true in the new year.
3. Value-based care models are expanding.
As the Centers for Medicare and Medicaid Services and private insurers increasingly focus on lowering health care costs and improving patient outcomes, home health agencies are stepping up to play a larger role in overall care. We see the national rollout of value-based purchasing for home health care gaining further momentum in 2024 and into 2025. This model rewards participating home health agencies for providing quality care and improving patient outcomes.
Many government agencies are maximizing these reimbursement opportunities by leveraging new tools to measure and improve outcomes. Advances in data analytics and digital platforms have made it easier for home health care providers to track patient progress and report on key metrics. These insights can improve care strategies and increase the likelihood of higher reimbursement. As home health agencies become increasingly integral to value-based care, buyers want to get involved early to take advantage of growth in this sector.
Smaller agencies and agencies with fewer resources face the challenge of making the financial and operational investments needed to meet new value-based reporting standards. This creates opportunities for investors, and it creates opportunities for home health agencies. Agencies that are open to financial or strategic partnerships will have access to the capital they need to make these investments and remain competitive.
4. There is increasing attention to aging.
The desire of older adults to remain in their homes as they age is becoming a key goal for families, policy makers, and payers. Home health agencies are essential to achieving this goal, and federal and private payers recognize this need. Medicare Advantage plans continue to grow in popularity, and many include expanded benefits for home services such as in-home support, personal care assistance, and home improvements. With an increasing proportion of seniors choosing these plans, home health agencies are expected to see an increase in demand for their aging support services, making them even more attractive to potential partners.
We are also seeing innovation and greater acceptance of remote patient monitoring (RPM) to better support home care and aging. RPM tools such as blood pressure cuffs, glucose meters, pulse oximeters, scales, smartwatches, and smart rings are becoming increasingly sophisticated, allowing patients to be continuously monitored from home. Continued growth in 2024 The adoption of RPM technology is likely to become widespread across the industry, enabling home health agencies to manage chronic conditions more efficiently and cost-effectively. Buyers will be attracted to this combination of increased service and revenue and reduced costs.
5. Artificial intelligence is poised to drive efficiency gains.
Technological innovation continues to reshape the home health care industry. Artificial intelligence (AI) and machine learning are playing a major role in optimizing care plans, managing workforce resources, and improving outcomes. Although AI-driven technology is still sophisticated and its use may come with risks (such as bias and hallucinations), there is every indication that AI-driven platforms could help with care coordination. This should improve communication between home health care providers, hospitals, and other health care providers.
Predictive analytics, on the other hand, can help identify patients at high risk of hospitalization or adverse events, allowing for more timely interventions. AI can help home health agencies schedule staff more efficiently, manage staff workloads, and reduce the negative impact of persistent staff shortages. AI should also help streamline documentation and participation in outcome and evaluation information sets.
Home health agencies that thoughtfully implement AI into their workflows are achieving the efficiencies and other improvements that buyers desire as acquisition targets.
As with meeting new or expanded reporting requirements, implementing AI and advanced technologies tends to require significant upfront investments in infrastructure and staff training, making it difficult for small or rural home health providers to can be a challenge. Working with a partner is one of the best, and sometimes only, ways to overcome these financial barriers and reap the benefits of new digital solutions.
6. Expect further integration of telemedicine and virtual care.
Telemedicine is being adopted at scale, and there are signs that 2025 will be the year this technology is fully integrated into home health care. Telehealth platforms are becoming increasingly easy to use, allowing patients to have regular virtual check-ins with clinicians, specialists, and even family caregivers. This technology can complement in-person care by providing real-time consultation and follow-up without the need for travel, reducing costs and improving access to services and support.
Expanding acceptance of telehealth and regulatory changes that make telehealth reimbursement permanent for certain services will help home health agencies provide care more efficiently and reach more people in need of their services. It becomes easier to provide.
7. Workforce challenges should continue to ease.
The workforce instability we have experienced has undoubtedly caused buyers to reduce trading activity and suspend some future trading. Advances in technology have made it possible to introduce greater efficiency and automation while reducing the need for as much staffing as was previously required. But staff will always be needed, and home health agencies looking to grow to attract more buyers will likely need more staff.
The good news is that 2025 is likely to be the tipping point in addressing the workforce shortages plaguing home health care (and essentially every other healthcare industry). We expect federal and state governments to continue investing in programs that support workforce development, including funding for medical apprenticeships, caregiver certification programs, and initiatives aimed at retaining and increasing the number of health care workers. has been done.
These investments should lead to a more stable and well-trained workforce in 2025, leading to improved patient care and employee retention. Home health agencies that can demonstrate high levels of staff retention will increase their appeal to buyers. Even for agencies that are struggling with recruitment and retention but are performing well in other aspects of their operations, especially for buyers with in-house or in-portfolio capabilities to strengthen recruitment and retention. We're sure you'll find it fascinating.
A buyer is considering a purchase. Are you ready to sell?
If you're looking to sell your home health agency, there's a good chance you'll find an interested buyer by 2025. How much interest you can generate depends on your current business and what you do to increase that interest in the interim. List your agency.
One of the best ways to position your agency for a successful higher-value sale is to work with a home health mergers and acquisitions (M&A) advisor. An advisor can help you by evaluating your agency's strengths and weaknesses and identifying opportunities for improvement to attract more qualified buyers willing to pay top dollar. We also help you establish your valuation range and provide guidance on strategic changes to secure sales at the high end of that range, ensuring you receive the most value from your agent.
Advisors will guide you through the steps necessary to properly prepare your agency for the market, highlighting specific areas to increase efficiency, optimize operations, and make you more appealing to deep-pocketed buyers. Masu.
You might find a buyer without doing a lot of prep work. The market in 2025 should be that strong for sellers. Working with an M&A advisor to enhance your practice and enhance your agency's appeal to potential partners can increase buyer interest and ultimately lead to better pay.
