Home-Based Care Leaders See M&A, New Payment, Technology As Biggest Opportunities For 2025

Home health providers have lately been hamstrung by payment rate cuts, staffing woes and Medicare Advantage (MA) penetration. However, despite these obstacles, the industry still holds significant potential and numerous untapped opportunities.

Looking ahead to 2025, it is anticipated that M&A, updated payment models, and innovations in staffing and retention will be key themes. Additionally, home health providers are keenly interested in artificial intelligence (AI) and its potential impact on care.

Anticipating an uptick in transactions

Since 2023, there has been a significant decline in the volume of transactions in home health care. This decline has been primarily attributed to inflation, uncertainty surrounding Medicare payment changes, high interest rates, and sellers’ reluctance to accept valuations considerably lower than the unprecedented highs seen during the pandemic.

This decrease in transaction volume over the past couple of years has resulted in a backlog of home care agencies looking to sell in the coming year, according to The LTM Group CEO David Kerns.

The LTM Group, based in Dayton, Ohio, provides home health, personal care, hospice, and rehabilitation services through multiple locations. The organization collaborates with health care systems and payers to deliver care to patients in Indiana, Ohio, Michigan and Texas.

Another significant factor that could be creating acquisition opportunities is the retirement of home health operators. Every day, over 11,000 Americans are turning 65, according to the American Association of Retired Persons.

“It is estimated that over the next few years, we will see one of the most significant business shifts from one generation to the next as local home care agency owners retire after having spent their entire lives building companies,” Kerns told Home Health Care News. “They want to see their legacy continued and this often means a sale to a larger organization.”

Reimbursement changes could lead to a promising future

An increase in the number of Medicare Advantage (MA) participants could lead to significant changes in the upcoming year, according to William A. Dombi, president of the National Association for Home Care & Hospice (NAHC).

Currently, providers are experiencing financial losses due to reimbursement rates, as the number of patients enrolled in MA continues to rise.

“I believe we’re reaching a point where plans are starting to be more open-minded, intelligent and willing to do two things: Listen to data on value and consider trying more innovative [approaches],” Dombi told HHCN.

Dombi believes that to see more positives in home health care, there must be a shift to updated payment models, rather than the per-visit discounted rates providers have worked with for years.

“If we don’t see this opportunity materialize and be realized, we will have an incredibly challenging future,” he said. “You can’t survive when a growing portion of your patient census costs more money than you’re bringing in. However, signs indicate that companies are finally realizing that trying to cut costs leads to poor results.”

Dombi said that states are realizing that reimbursing providers at a discount isn’t effective for staff retention. As a result, some are increasing payment rates to enable care agencies to pay a more livable wage.

“An opportunity lies in the continued improvement of reimbursement rates from state Medicaid programs as well,” Dombi said. “This will, to some extent, address the workforce shortage crisis, especially in the personal care attendant and home care aide sectors.”

The rise of AI

As the population ages, people are seeking more home care, whether for healing, rehabilitation, or personal care. This calls for staff that is currently in short supply. Thus, many organizations are turning to artificial intelligence (AI) to provide efficiencies, allowing caregivers to spend more time with patients and less time with paperwork.

“When evaluating potential acquisitions, we employ the fax machine method,” Kerns said. “This involves identifying manual processes such as faxing, hand-entering orders and manual authorizations – areas where our organization can add significant value post-acquisition.”

Over the past five years, The LTM Group has focused on automating processes and enhancing technological capabilities, according to Kerns. These automations include everything from revenue cycle to documentation.

While AI can assist providers with documentation, it can also keep physicians updated on their patients.

“AI in home care elevates and enhances the level of care available to our clients as they seek to age in place,” Bruce McReynolds, the CEO of a Griswold home care location, told HHCN. “We can better implement preventative services to keep our clients at home longer and prevent significant events that negatively impact their quality of life. From a business perspective, AI helps us speak the language of our partners in acute care. We can better demonstrate value within the overall care continuum.”

Griswold Home Care is a large non-medical home care company. McReynolds operates a location in Greensboro, North Carolina.

“We must establish connections with primary care physicians and monitor patients more closely,” Bayada President and Chief Operating Officer Heather Helle told Home Health Care News. “Overall, [with using AI], we will see a greater integration and coordination of care within the home, which is crucial for providing the best care for clients.”

Bayada, headquartered in Moorestown, New Jersey, provides a full range of clinical care and support services in the home for children and adults including hospice, behavioral health, and rehabilitation.

Helle believes the home care industry will continue to see new services, some of which may not be hands-on care, but other tools and technologies that help people thrive and live comfortably, independently and with dignity in their homes.

“Home care is an exciting sector to be a part of,” she said. “I think there’s a lot of growth opportunity and I think we’ve got a lot of tailwinds. It’s a great place to be right now.”