The home health sector has faced a few hurdles since the beginning of 2017. Publicly announced home health M&A activity proved lackluster in the first and second quarter of the year, as the industry continues to reel from regulation overload from the Centers for Medicare & Medicaid Services (CMS).
Despite these challenges, investors are still drawn to the industry, even as valuations for in-home care services providers have reached “all-time highs.” The sky-high valuations across the in-home care services landscape may be the new normal for the market, marked by big deals on the home care franchise side of the industry and high valuations within home health, according to Jim Moskal, partner and global healthcare practice leader at M&A firm Livingstone Partners. He recently spoke at the Home Health Care News Summit in Chicago.
These platform deals are typically being undertaken by private equity groups purchasing franchisors or are strategic acquisitions on the home health side worth $50 million or more, according to Moskal. Included among them is the acquisition of Infinity HomeCare by Baton Rouge, Louisiana-based Amedisys, Inc. (Nasdaq:AMED) for $63 million early last year.
“You have strategic acquirers really going after these [assets] and it just creates a lot of demand [and] drives valuations higher because people are recognizing that [home health] is the low-cost setting, [as the industry] moves towards value-based reimbursement and more managed care,” said Moskal. “The home is going to be a bigger part of that and acquirers want to gobble up those assets when they’re available.”