The Aging Administration predicts that the number of Americans aged 65 and over will grow to 80.8 million by 2040, creating significant demand for the home care delivery model in the United States.
To meet this demand, strategies, payers, and private equity rely on mergers and acquisitions to build economies of scale. These efficiencies can solve chronic problems such as staffing shortages, meet the reimbursement requirements for Medicare and Medicaid value-based care, and satisfy patients’ desire to receive care at home.
Focus on results
The shift to value-based care reimbursement models by Centers for Medicare and Medicaid Services will continue to drive investment in the home health sector. To understand this trend, it is important to consider some of the investment themes they are deploying strategically to expand their value-based care capabilities.
In general, these themes lead to specific outcomes, such as improving healthcare outcomes, controlling costs, or improving the patient experience.
To achieve these goals, payers are relying on M&A activity to build economies of scale that offer a breadth and depth of integrated capabilities, including home care delivery models, telemedicine, remote wearable devices, and more.
As M&A activity touches on specific themes such as improving healthcare outcomes, payers and strategists need to resolve chronic issues such as staffing shortages. According to the World Health Organization, there will be a global shortage of 10 million health workers in this sector by 2030.
In this environment, the need to fill staffing shortages, fund and develop new technologies, and create a range of services within core markets is driving consolidation and strategic investments.
Integration for efficiency
Disparate healthcare providers struggle to develop economies of scale that allow them to better utilize their resources, organizational knowledge, and personnel. Many healthcare leaders see integration and private investment as a pragmatic response to the problem. Solving the labor shortage inevitably promotes M&A as a prerequisite for growth.
Under a similar investment theme, health systems are looking to partner with home health providers through joint ventures and strategic home health partnerships. The reasons for forming joint ventures and strategic partnerships vary, but often include gaining access to new technologies, expanding the line of care, and reducing patient readmissions.
The latter point is particularly important for hospitals understanding how value-based measures of care take into account avoidable readmissions. As such, the health system sees an expanding continuum of care as a pathway for managing a wide range of health issues, both in traditional hospital settings as well as home-based options.
desire for home care
Additionally, Covid-19 has further shifted consumer desires towards the home healthcare delivery model. This growing preference aligns with her two key factors creating a tailwind for continued growth. By 2030, all baby boomers will be 65 and older, and the home care delivery model will move her CMS, the largest single payer of health care, from the hospital to the patient’s home.
This trend means, among other things, that an aging population with increasingly complex healthcare needs will maintain continued growth among home health care and hospice providers. Strategists and payers may be well-positioned to deploy dry powder to address the lifestyle choices and preferences of aging populations who want complex care via home care delivery models. there is.
Labor shortages are likely to continue, and an aging population will continue to demand novelty in healthcare delivery models, with more people receiving care at home. Value-based care is also gaining momentum towards strategic integration and investment.
The number of multi-billion dollar mega-deals, such as UnitedHealth Group’s acquisition of LHC Group and CVS Health’s acquisition of Signify Health, may decline or return to pre-pandemic levels in 2023, but market will continue to drive M&A activity in the home healthcare sector. .
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., publishers of Bloomberg Law and Bloomberg Tax, or their owners.
Ken Marlowe He is a partner at K&L Gates, co-leader of the firm’s Global Healthcare and FDA practices, and a member of its corporate practice.
Wells Beckett III A partner of K&L Gates and a member of Healthcare, FDA and Corporate Practices.
Dean J. Burres He is an associate at K&L Gates and a member of the M&A, Healthcare and FDA practice.
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