The home-based care staffing environment will always be a challenge for providers, but things look far better now than they did two years ago in the wake of the pandemic. However, one area that remains a lingering problem for providers is nurses, and specifically nurses who are leveraging a worker shortage to maximize earning power. 

A confluence of factors made recruiting and retaining home-based care workers from 2020 to the beginning of 2023 a major headache.

Increased government aid kept a large amount of workers on the sidelines, for extended periods of time. Meanwhile, many clinical professionals either retired or exited the industry after being burnt out by pandemic-related pressure.

Most of that has abated, but home health providers have told me that one issue definitively remains, and that’s bringing on – and hanging onto – nurses.

“If I had 200 nurses show up in my parking lot, I would hire them all without interviewing them,” Bill English, president and CEO of Accurate Home Care, told me in jest at the Continuum conference last year.

English’s joke was layered with some truth, however. Home health providers are desperate for nurses, and affordable ones. Without them, it’s tough to grow – or in some cases, to even survive.

In May of 2023, Adam Holton – then the chief people officer at Amedisys (Nasdaq: AMED) – told me that nurses jumping ship to collect sign-on bonuses was one of the company’s gravest concerns.

He and many other leaders hoped that particular issue would subside as the public health emergency was put further into the rearview, but recent conversations I’ve had suggest that it hasn’t.

In this week’s exclusive, members-only HHCN+ Update, I take a closer look at one of the most pressing issues facing the home health industry, which is a widespread inability to sustainably hang onto a vital workforce.

Home health care’s nursing problem

In May 2023, when I chatted with Holton, Amedisys had some of the best data on home-based care workers in the industry. Its applicant tracking system, specifically, was one of the company tools he was touting.

And that’s also why he was so sure of this problem with home health nurses, or nurses in general.

“When there’s a severe shortage, you expect some of this,” Holton said. “But there’s ample evidence that there is still a contingent of nurses who are really taking advantage of going from one sign-on bonus to another.”

Jeff Knapp, the chief people officer at Bayada, was also a part of that conversation. He agreed, and called Bayada’s nursing woes not a sourcing issue, but a retention issue.

For certain, there are ways to keep the less financially inclined nurses onboard. Those include good company culture, solid training, proper recognition, bonuses and, in general, competitive compensation.

But the average home health provider doesn’t have time to waste and money to blow. And when they are hiring nurses who then turn around and leave in short order, that amounts to a significant financial loss. The recruiting and training costs add up, with little return on investment.

In April 2022, an analysis in Health Affairs showed that the total supply of registered nurses decreased by more than 100,000 from 2020 to 2021, which was the largest decrease in supply in the last 40 years.

Another analysis, published by the Health Resources and Services Administration in November 2022, projected a U.S. shortage of close to 80,000 nurses in 2025, a problem that’s expected to continue – and even exacerbate – throughout the decade.

Specifically within home health care, a study published in the National Library of Medicine in 2021 found over 30% of full-time registered nurses and about 25% of licensed practical nurses left their position in a large home health care agency “over the course of a year.”

To make matters worse, health systems – which compete with home health agencies for nurses – often have more financial resources. At the same time, skilled nursing facilities (SNFs) are soon to be subject to a minimum staffing mandate, which could also increase competition over a small pool of nurses.

And the issue Holton brought to my attention nearly a year and a half ago hasn’t gone away.

For instance, in Care Advantage’s case, nurses are actually declining sign-on bonuses that may tie them to the company for a longer period of time. They’re doing that, in many cases, so they can eventually jump ship for other offers.

“All the big companies are paying high retention bonuses and sign-on bonuses,” Joe Navarro, the chief people officer at Care Advantage, told me this week during Home Health Care News’ Staffing Summit. “It’s to the point that, when I’m interviewing and hiring nurses, when I offer a sign-on bonus, they say they don’t need one. Because they want to be able to jump three months from now, four months from now, for better compensation.”

For large home health providers, that’s an issue. For smaller providers, it’s hard to even enter the competition.

Care Advantage has a large regional presence. Still, nurses jumping ship has become one of its biggest challenges.

“It’s very hard to attract and retain nurses at this point,” Navarro said. “And I think that’s one of the biggest challenges that there is in the industry.”

A costly turnover problem is also magnified in light of the current payment environment in home health care.

It costs far more now to hire and retain a nurse, but all the while, the Centers for Medicare & Medicaid Services (CMS) is reducing home health payment. The agency has cut core payments the past two years, and proposed a third straight cut for 2025.

On the other side of payment, Medicare Advantage (MA) plans are often paying rates for home health care that fall below the cost of care.

Navarro suggested one solution, which was to ensure nurses fall in love with the company culture shortly after joining.

Home health providers could also employ strategies to get a better sense of which nurses are more likely to stay for the long haul.

Having a nurse on staff is better than not having him or her on staff. But if that nurse is set to leave fewer than 90 days in, the economics on that hire could turn upside down.

The post The Home Health Nursing Problem That Isn’t Going Away appeared first on Home Health Care News.

While certain leaders may have celebrated the FTC’s vote to ban non-competes across the country, home care providers were concerned over what the ban would mean for non-solicitation agreements.

Broadly, non-solicitation agreements keep home care clients from cutting out the agency and hiring their assigned caregiver directly.

In the event that a non-compete ban came to fruition, however, those non-solicitation agreements may have been rendered unenforceable in certain states.

“The rulings and the positions are going beyond just the traditional non-compete agreement into client service agreements that have direct-hire provisions or penalty provisions not allowing the client to hire the caregiver away,” Angelo Spinola, the home health, home care and hospice chair at the law firm Polsinelli, previously told Home Health Care News. “That’s a big concern with what the FTC is doing – that they’re going to take that position and apply the term non-compete very broadly. If you look at the language of the final rule, it absolutely suggests that’s going to be their enforcement position.”

U.S. District Judge Ada Brown said the FTC did not have the ability to enforce such a ban. The agency originally voted to ban non-competes in May.

“The Commission’s lack of evidence as to why they chose to impose such a sweeping prohibition, … instead of targeting specific, harmful non-competes, renders the rule arbitrary and capricious,” Brown wrote.

The FTC is considering challenging the ruling, and expressed its disappointment Wednesday. Meanwhile, the U.S. Chamber of Commerce celebrated the judge’s decision.

“This decision is a significant win in the Chamber’s fight against government micromanagement of business decisions,” U.S. Chamber of Commerce President and CEO Suzanne Clark said in a statement. “A sweeping prohibition of noncompete agreements by the FTC was an unlawful extension of power that would have put American workers, businesses, and our economy at a competitive disadvantage.”

In states like California and Connecticut – which already have strict laws against non-competes – non-solicitation agreements are already under fire.

Home care providers across the country see those agreements as a must-have for sustainable home care businesses, particularly due to the training and resources they pour into their caregiver workforces.

“I know that those are things that we responsibly have in our agreements, especially for private pay,” Care Advantage CEO Tim Hanold previously told HHCN. “That is something that could create some issues for certain, considering how much time and energy we put into our professional caregiver workforce.”

The post In Win For Home Care Providers, US Judge Strikes Down Non-Compete Ban appeared first on Home Health Care News.

A U.S. judge decided not to block the Federal Trade Commission’s (FTC) ban on non-compete agreements this week, continuing an ongoing saga that home care providers are paying close attention to.

Broadly, the ban on non-competes is seen as generally positive for home care leaders, who can now freely move on to better career opportunities. It likely won’t affect caregivers much, as many already work for more than one agency.

Where it will likely have an effect, however, is in non-solicitation agreements. Those keep clients from using home care agency caregivers, and then ultimately hiring those caregivers directly and cutting out the agency. A non-solicitation is different from a non-compete, of course, but some states are already viewing them in the same light, which could be a major threat to home care operators.

The FTC in April banned non-competes in a 3-2 vote. It was a major change in direction, specifically because non-compete laws were historically handled on a state level. Some states – like California and Connecticut – already had very strict laws against non-compete agreements. Other states were less strict.

But this ban comes from the federal level.

“The rulings and the positions are going beyond just the traditional non-compete agreement into client service agreements that have direct-hire provisions or penalty provisions not allowing the client to hire the caregiver away,” Angelo Spinola, the home health, home care and hospice chair at the law firm Polsinelli, recently told Home Health Care News. “That’s a big concern with what the FTC is doing – that they’re going to take that position and apply the term non-compete very broadly. If you look at the language of the final rule, it absolutely suggests that’s going to be their enforcement position.”

The aforementioned challenge to the non-compete ban was from a tree-trimming company. U.S. District Judge Kelley Hodge in Philadelphia wrote in a decision that the FTC has the power to ban practices that it deems anticompetitive.

Anticompetitive business practices – in M&A and otherwise – have been a major focus for the Biden administration.

In Medicare-certified home health care, the ban could also have significant effects.

Chip Kahn, the president and CEO of the Federation of American Hospitals, explained the health care impact shortly after the ban was voted on by the FTC. He did so through a hospital lens, but the sentiment also could apply to home health agencies.

“This final rule is a double whammy,” Kahn said. “The ban makes it more difficult to recruit and retain caregivers, while at the same time creating an anti-competitive, unlevel playing field between tax-paying and tax-exempt hospitals – a result the FTC rule precisely intended to prevent.”

Non-solicitations

Client service agreements – or non-solicitation agreements – are an essential part of home care.

Agencies pour money and resources into their caregivers to train them, upskill them and find them the right clients. Logically, it’s not right then for a client to be able to cut the agency out and hire them on their own.

But that’s already happening in certain areas. In California, for instance, agencies are having to tell clients they are no longer restricted by these agreements, according to Spinola. If agencies don’t do so, they could be fined thousands of dollars – per agreement.

“The point around direct hire clauses, that would, for me, probably be more so a concern that’s less controllable,” Care Advantage CEO Tim Hanold recently told Home Health Care News. “I know that those are things that we responsibly have in our agreements, especially for private pay. That is something that could create some issues for certain, considering how much time and energy we put into our professional caregiver workforce.”

Because of how big of a deal the non-compete ban is, it’s likely there will be a bevy of challenges to it across the country in the near-term future.

Ultimately, Spinola still believes that the ban will be done away with, or at least altered, given the history of states controlling this particular issue.

“This is state domain, not federal domain,” Spinola said. “If it were federal domain, it’s so significant that it should be something that goes through Congress, and through actual rulemaking and legislation, not through a branch where there’s really no way to stop them from doing what they want to do, other than this litigation.”

The post US Judge Elects Not To Block Non-Compete Ban, Spelling Trouble For Home Care Providers appeared first on Home Health Care News.

Home care providers are navigating headwinds that include, but are not limited to, the 80/20 provision, the FTC ban on non-competes and increased workplace violence. Arguably, there are more legal considerations for leaders now than there were even during the COVID-19 pandemic. 

Home Health Care News recently caught up with home care insiders Angelo Spinola and Tim Hanold to talk through these issues.

Spinola serves as the home health, home care and hospice chair at the law firm Polsinelli, and Hanold is the CEO of Care Advantage, a home-based care company with more than 45 locations across America’s Mid-Atlantic region.

Highlights from the conversation are included below.

HHCN: Tim, let’s start with some background on yourself and your company for anyone that may not be in the know. Also, I assume there’s been some updates at your company since the last time people heard from you.

Hanold: I have the honor of leading Care Advantage. We’re a home care company and also a skilled home health company serving the middle-Atlantic area. That contains Virginia, DC, Maryland, Delaware, and also North Carolina.

We have a pretty balanced payer portfolio — Medicaid, private pay, we serve our vets, the VA community, and a number of specialty programs throughout the Commonwealth of Virginia and elsewhere. We also have adult day in Northern Virginia. I’ve been here for six and a half years. We are backed by Searchlight Capital Partners.

Angelo, how about yourself?

Spinola: I am an attorney. Don’t hold it against me. I work with a lot of the folks on this call, including Tim. I specialize in home care. I personally am an employment lawyer. I’ve been doing this for a couple of decades now. My firm is Polsinelli. We’re a full-service firm, we do a lot of transactional work and health care regulatory and national practice. It is an honor of mine to work with Tim and the others on the calls, good to see you all, and to be able to support the industry.

Tim, let’s start with you. From a provider perspective, it seems like there’s more legal and regulatory issues than there have been in a while, certainly since I’ve been covering the industry. Obviously, during COVID there was a lot related to the vaccine, but a lot of different things are going on right now. What are the most pressing ones to you? What is top of mind for Care Advantage?

Hanold: I believe that there’s a number of these that, if you’ve been in the business for a while, these things are going to be present and a spectrum from some things that are more operational to other things that feel like regulatory shocks that create a different pathway. Whenever it comes to most pressing, I’d go back to just the spirit of the CMS access rule. It’s really something for us to collectively think about and to understand.

The rules final, I know we’ll probably end up spending some time to talk about this later in the conversation, but I think it’s an important moment that there’s continued added scrutiny and thinking around what should be the profitability of a Medicaid home care provider, with at this point, a firm federal view with that 80/20. The conversation is oxygen. We, as an industry, and leaders, need to understand what that means. An industry with reimbursement from the government by tax dollars, there should be a responsibility and certainly vigilance around fraud, waste, and abuse. That being said, for good actors, if there’s no margin, there’s no mission.

We need a manageable gross profit spread where we can be stable, healthy, and have funds to provide high-quality care. This gross profit spread or percentage is really, it’s very market-specific. We know that’s a fundamental issue with the CMS access rule. This lends itself to this general narrative that we need to prove our value to the state and the health care system, pay us for being the safety net in the community and for the quality outcomes that we provide.

Angelo, am I correct in the fact that there seems to be a lot of different things going on right now if you’re a home care provider? Tim mentioned the 80/20 rule. There’s a lot of non-specific regulation that can affect the home care industry going on right now as well. Am I right in that estimation, or is it just par for the course?

Spinola: No, you definitely are. I think historically what we have seen over the last several years are the states, both states and cities, getting into the game and passing legislation and law really at an all-time high rate. At least, the federal government was relatively gridlocked. You didn’t see a lot happening at a federal level. Now, you have all three of those things kicking.

You’ve got federal law changes and largely using the executive branch to do that, like with the FTC ban on non-competes, the DOL salary increases, the changes to independent contractor rules, the National Labor Relations Board has been very active in scrutinizing handbooks and bringing charges against employers. Their joint employment rule right now is in litigation.

You have the federal government going wild. Tim mentioned the 80/20 [rule]. Then on top of that, you still have the states and the cities doing quite a bit. This is about the time of year to this time in January where the laws change. July 1st and January 1st are basically the two places where the law changes. We’re seeing so much happening at a state level, some of which is industry-specific, like the California health care minimum wage increases, the New Jersey Domestic Worker Bill of Rights that goes into effect in a couple of days.

Then some of it is, like you mentioned, generic that applies to everybody. A big one is workplace safety right now. There’s several new state level laws that impact the home care industry, as well as other industries, that require workplace safety plans and things like that. There is quite a bit going on.

Do you mind diving into that for just a brief moment? What’s going on, in terms of workplace safety, because that’s not something that I’m not as aware of.

Spinola: There have been some really significant changes, and I don’t know if it’s something in the water. My guess is that it has to do with some of the mental health issues that resulted from COVID and the quarantines and the isolation. There have been so many incidences of caregiver violence, caregiver or client violence, something happening in the home, significant things like murder suicides. Things that are hitting the news and creating PR nightmares for lots of providers. Like I said, I’ve been doing this for a couple of decades, and I’ve never seen anything like this. I’ve seen incidents occur, but at the frequency in which this is happening, is at the highest level I’ve ever seen.

We’re getting calls. It’s not always something that’s extreme, but guns in the home, some type of harassment. There was that whole Papa issue, that exposé on them, where there were caregivers doing things to clients, clients doing things to caregivers, and nobody really supervising any of that. Even at the W-2 agency level, there have just been a lot of incidences.

You’re seeing California has a new law. The state of Washington all have laws that require implementation of programs and policies and training and things like that for home care agencies to put their caregivers through incident responses, to try to avoid some of these issues. We’re seeing the government, the state OSHAs, like Cal/OSHA, get pretty active in enforcing their standards. I think that’s going to be a trend that we continue to see for the end of ’24 and well into ’25 where other states are going to do the same thing.

Tim, is this a trend that you’ve noticed at Care Advantage? Is there more client violence issues around that? If so, or even not, how do you deal with that proactively?

Tim: Fortunately at this point, we haven’t necessarily seen a bump or something that would be beyond the general probability of that. I would say that there’s probably a higher level of just conversation that we’re having in our branches around just mental health, and also just ensuring that our caregivers are safe going into all of these different environments.

That initial assessment up front is really important. It’s not just an assessment for the family and for the client, the member, if you will, but also for our caregivers. Certainly, on a weekly basis, there are cases that we will need to turn away from. We pride ourselves on taking rigor, if you will, on figuring out all the different puzzles and situations.

There are some cases where we’ll either state that, ‘Hey, this is something that needs a high level of care, something that we can provide if we have X, Y, and Z in place,’ and those things need to be paid for, or it’s something that may not be appropriate for care in the home. If you think about Maslow’s hierarchy of needs, safety comes first. If one of our caregivers doesn’t feel safe in the home, then that’s not a place for them.

Angelo, what do you find clients are bringing to your attention or calling you about the most these days? What’s something that maybe is on your wide range of clients’ minds, but not something maybe we’re writing about enough, or something that maybe everyone across the country knows is that big of a deal?

Spinola: I was trying to think about this because we get a lot of 80/20 calls. The salary level increase has gotten some folks spooked. I’m trying to figure out how to manage that. It’s all the things that we talked about, we get calls on, but the most common call really is a reactive one, because the government has been very active in investigation. It’s DOL investigations, union organizing, false claims issues or anti-kickback stuff, overpayment issues with the VA or Medicaid.

I can say that the Department of Labor, there’s a clear uptick in their audits and investigations. In these other realms, I’m relatively new to that, because I didn’t work at a firm where we handled those kinds of matters before. It’s only been the last three years or so.

It seems anecdotally, there’s a lot more scrutiny. You hear about that from the associations from NAHC and HCAOA, a lot more fraud investigations into hospices that are all in the same location. 100 hospices in the same place, and in LA and things like that. It seems like there’s a spotlight on our industry from a government perspective more than what we’ve historically seen.

I do want to get specific with each issue. I think we’ll start with DOL’s new overtime rule that’s increased the salary threshold that’s necessary for an individual to be exempt from overtime under the Fair Labor Standards Act. Tim, on your end, have you had to adjust things operationally at Care Advantage to deal with this?

Hanold: Nothing, I’d say, reactive at this moment, but things that we’ve adapted to over many years. Generally, we have a career ladder and really a tiered approach for our office personnel with respect to job description. Different tiers of role and responsibility, and then the compensation that goes along with it, and the compensation structure. There’s a knowledge and job test for salary positions. Consistency is really important. Angelo could speak to that, I’m sure.

For example, our senior care coordinators are salaried employees because of the expectations that go with that role and what it takes to get there. Across the company, we have both hourly and salaried employees. Many times, actually, you can see it with geographic trends. When it comes to hourly, you have to be really smart around managing OT. If there’s companies out there that are moving the threshold early of July 1st, it’s 44K. I’m rounding. January 1st, it’s 59K.

For those that may be moving to something hourly, be really smart on managing OT. It’s not just managing OT for your caregivers, but the entire office. Because you’ve got to ensure that work gets done and taken care of the clients and caregivers the right way, but also while being really efficient. Possibly one recommendation here is, what operators are using whenever it comes to daily and weekly KPIs to be managing the workforce.

Angelo, what are you telling your clients about how to get ready for this, about how to be prepared, how to make sure that you’re both not violating any rules, but also being efficient and making sure that you’re not putting in a payment system that’s ultimately going to hurt your bottom line?

Spinola: I think most providers are not having a problem with the July hike, which, as Tim mentioned, is about $44,000. It’s January where you’re going up to almost $59,000 and then it will adjust every three years after that. The numbers are going to keep going. Tim runs a really compliant shop, and very sophisticated, as you can hear from this conversation. There’s a lot of providers that don’t understand that there is a duties element to the salary exemptions.

You can pay the required minimum salary, but if the individual isn’t performing exempt duties, they’re not exempt. Doesn’t matter what their salary is. There are a lot of misclassification issues in the industry. We’re actually using this as an opportunity to clean some of that up. We’re seeing, I’d say, the Southeast is most impacted. The providers in the Southeast impacted from a financial perspective of what the salaries are. What we’re doing is using it as an opportunity to take care coordinators that shouldn’t be treated as exempt, or schedulers who shouldn’t be exempt in the first place, and cleaning that up.

Then it also impacts the pay-per-visit models because the way pay-per-visit works in the home health environment, there are flat rates that are paid that are supposed to be the equivalent of the salary threshold if you were to prorate the salary over a 40-hour work week. A lot of those clinicians, the way that works, they may ultimately make more than $60,000. If any individual visit amounts to less than that equivalent, they lose the exemption.

We’re seeing, and this has been a trend for the last few years, but in home health, a lot of the full-time clinicians, the RNs, PTs, OTs are moving to a different salary-plus model rather than pay-per-visit, which I think puts their exemption at risk. A lot of work around analyzing the workforce, determining whether it makes sense.

One other thing I’ll say is the employees do not like being moved to hourly. They do not like it. They see it as a demotion, even though the hourly rate is the salary equivalent of just reengineering the salary into an hourly rate. They feel micromanaged when they have to clock in and out, and things like that. Some of our clients are moving to a salary non-exempt type model where they’re still paid a salary, but they can also earn overtime if they work beyond that 40-hour threshold, and that’s been preferable.

For some, it’s more semantics than anything. It doesn’t really change the bottom line financially. I think Tim is absolutely correct that the key to all of this is how you communicate it to your employees and then really managing it on the back end. We saw this happen when the live-in and companionship exemptions went away and none of the EMRs were set up to record time, the time that wasn’t with the client.

It was only client time, so you didn’t have travel time and orientation and preparation time, and there were just a slew of lawsuits that continue to this day around personal care overtime because the providers were very slow to respond and start tracking all that time. The DOL says that when they conduct an investigation, 90% of the time, the home care providers are out of compliance. There’s some backwage component to the investigation. The concern of moving exempt people to non-exempt status is their behavior has to change, and the way we manage them has to change as well.

Angelo, also non-competes, something you and I have talked about a lot, and not just the non-compete ban, but how it could affect the similar language and non-solicitations that are very common in home care. What’s the update here? First, let’s just talk about the non-compete ban at large and legal challenges, and then maybe we’ll dive deeper into other aspects of it.

Spinola: Basically, what’s happened is the FTC, the Federal Trade Commission, has issued a ban on non-competes. This was a Biden initiative. He’s been talking about it for a long time. I honestly didn’t think it was going to happen, so you have to take my prediction with a grain of salt as well. I thought the FTC would punt on this. They punted last year on the vote till April of this year.

I thought they would punt again and wait until the election because I think they took a real political risk in trying to do something so sweeping as ban non-competes, effectively, for everyone other than highly compensated executives retroactively in an area where this is the state’s domain. The states have always addressed non-compete law, and never the federal government, and we’re seeing more of that. CMS is looking at doing that, as well for facilities where they’re receiving government funds to eliminate what they call TRAPS, trading repayment agreement provisions, I think is what that stands for.

When you look at the FTC language, you look at enforcement provisions in, say California, Connecticut at a state level, the rulings and the positions are going beyond just the traditional non-compete agreement into client service agreements that have direct hire provisions or penalty provisions not allowing the client to hire the caregiver away. That’s a big concern about what the FTC is doing is that they’re going to take that position and apply the term non-compete very broadly. If you look at the language of the final rule, it absolutely suggests that’s going to be their enforcement position.

The good news, as you mentioned, is there is some litigation challenge to the FTC. It seems to me, and again, take it with a grain of salt, I haven’t read or seen many lawyers that are willing to predict what they think is going to happen. We know this, it’s going to happen really, really soon because the judge in the litigation that’s challenging the FTC has said that before July 3rd, there will be a decision on whether or not the rule be enjoined, at least at the district court level.

If it’s enjoined, that means that it doesn’t apply to anybody until the litigation is concluded. Normally, when something is enjoined, that’s a real suggestion that at least at that level, that court is going to invalidate the rule.

My view is that that’s probably what’s going to happen for a couple of reasons. No.1, this is state domain, not federal domain. If it were federal domain, it’s so significant that it should be something that goes through Congress, and actual rulemaking and legislation, not through a branch where there’s really no way to stop them from doing what they want to do, other than this litigation.

My view is that it gets enjoined, it gets stricken at the district court level, and then it gets appealed by the FTC. It may turn out just like some of the prior Obama initiatives, like the salary increase. If you remember, the salary levels were going to increase to $47,000 many years ago. We actually brought litigation on behalf of several associations to challenge it.

At the district court level, we were successful. The Department of Labor appealed that, and then Trump won the election and they withdrew their appeal. Eventually they split the baby and moved salaries up to what they are today, 35 and change. Now, they’re at it again under Biden. I think with all the things that we’re looking at and talking about, there’s litigation in nearly every arena around independent contracting, salary level increases, joint employment. There’s litigation challenging just about all of it. Nothing yet on 80/20, but I would expect that may be coming. It’ll be interesting to see, if we do see a change in administration, how many of those initiatives continue, or are they withdrawn for some other less obtrusive option. That’s my thought of what happens at the FTC stage, at the district court stage with the non-compete ban.

Tim, I’m curious, are you more concerned about executives and how they could leave, jump to other agencies, or are you more concerned about those direct hire clauses?

Hanold: Sure. I think Angelo approached the question well and the topic well. It is something that, for example, it was that the FTC voted three to two, so along party lines. We’ll see what happens here by July 3rd.

I’ll start with maybe the first piece, in regards to executive senior leadership.

When I think about execs jumping, and we’ll see a forecast, a spike of that, I don’t believe so. Regardless of the covenant, I just think people are attracted to, and want to pursue purpose-driven work in settings that are conducive to do it.

We’re in a place where, especially when talking about leaders, executive leaders, senior leading teams that essentially strike the right balance on some motivation and accountability. If an exec is solely staying at a job because they’re tethered to a non-compete, I can’t imagine that’s a really productive situation for either party, the company, or the employee.

There are certain covenants whenever it comes to the selling of a business and some of those things and maybe the quantum that goes along with that, where these things will have, even regardless of what happens here, real durability.

The point around direct hire clauses, that would, for me, probably be more so a concern that’s less controllable. I know that those are things that we responsibly have in our agreements, especially for private pay. That is something that could

create some issues for certain, considering how much time and energy we put into our professional caregiver workforce. I’ll be intently watching to see what happens there, but there’s a time training development that goes into our caregivers. I think we should be able to retain that value.

Angelo, do you want to jump in and add anything to that?

Spinola: I think that hit the nail on the head. Regardless of what happens with the FTC, we continue to see more and more regulation into the ability to use non-competes, and restrictive type agreements with employees. The analysis that the courts typically take is the design to protect your business. If it’s to protect your business, your trade secrets and confidential information, your pricing, things like that, and you’re simply protecting that and the employee can’t take those things to a competitor, that’s in-bounds.

If the restriction is on the individual’s ability to have a career in the area that they know, in the industry that they know or the place that they live, there’s more and more scrutiny into those agreements, however they look. I think it’s insane to try to apply that to a client service agreement when you’re the agency, you’re vetting the worker, training them, doing the background screening, you have all the costs for marketing, and you put caregiver and client together, and then the client can just hire that caregiver away.

That’s the position right now in California and the Department of Justice is out fining businesses for enforcing those provisions, or even having those provisions in their client service agreement, which is crazy. You’ve got providers taking those out. In some cases, notifying clients, ‘Hey, you had this provision in your agreement, it doesn’t apply to you,’ because they don’t want to be fined by the DOJ, which by the way could be up to $5,000 per term in an agreement. If you got 100 agreements, you do the math. It’s a lot of money.

We’re seeing naturally, as you would expect, clients taking the caregiver away and there being no remedy. That makes no sense to me. There’s some work to be done there. I would expect that that California position is going to be challenged before too long. In general, I think that the philosophy of an agency should be — make your platform so attractive that people don’t want to leave because the ability to restrict them is becoming less and less of an option for you.

Tim, across state lines, do you have to be more sensitive with this subject, in one state versus another right now, or is that something that you haven’t seen materialize yet?

Hanold: We have not. I guess just whenever it comes to running the business, our covenants for leaders are consistent. We’re also, I guess fortunate to be in a pretty tight geographic region. We don’t have those swings. We do not provide care in California.

Spinola: Tim is absolutely right that the rule and in general, these laws do not protect an individual who’s selling their business. When it’s an arm’s length sale, you can utilize those type of restrictive covenants. I know there’s a lot of acquisitive folks on this call. That’s an exception to the rule. We’re really talking about agreements with employees, independent of a sale of a business.

Moving back to 80/20, Tim, knowing that there’s six years before implementation, and knowing that people like Angelo are telling us there’s most likely going to be legal challenges, how do you prioritize getting ready for the 80/20?

Hanold: It does seem like something that is pretty far out on the horizon. That being said, I think just generally, I touched on this a little bit earlier, but whenever it comes to the 80/20, it is about the scrutiny of the profitability of a home care provider.

Then also, just in general, there’s things I agree or disagree with, but in general, it’s just progressively running a smarter business. Whether we’re talking about home care, or any other industry, you’re going to have these pressures. For example, the way we run our business is whenever the 80/20 rule came out, and then whenever the final came out, it did not change the course about how we’re going about our business plan. For me, that’s volume, rate, and OPEX. Volume, really the 80/20, if anything, underscores the need for density in your core markets and to pursue expansion, at least for us and our appetite around M&A and de novo.

Scale is a must. Volume, that then tags to 0.3 OPEX, which I’ll touch on in a second. Then rates have to be really good. There’s a number of groups within the home care landscape that do that really well, but everyone has to have a voice on this. You can point to keeping states honest on access to care. According to the rule, CMS is requiring states to report out on waiting lists in regards to the 1915(c) waiver.

Those are things that we can arm ourselves. When we’re talking to the General Assembly at the state level and the administrations and governors, it’s like this is something that is coming and something that we have to ensure that we’ve got a place where we can afford stability, and not just that, but also we can do things that are innovative because we are the safety net for the community — for the frail, for the elderly, for the disabled. We can keep people safe and happy at home.

Then third, what I was talking about is OPEX. It’s like an MLR for an MCO, this is equivalent for home care. I spent time whenever I was working at Humana, and the way that we went about just managing those cost structures, that type of thinking is also, we’re going to have to bring to the way that we operationalize our business. Obviously, it’s the membership and the census volumes can be very different there that goes back to point one, you got to go scale, you got to go be of size, but also look for where are things that we’re doing manually right now, we can automate, and then leveraging technology to support and enable those consumer facing.

Tim, you said safety net for the community. Do you think that those safety nets may go away, particularly in states where there isn’t rate adequacy and smaller providers don’t have that scale?

Hanold: That’s a real potential consequence anywhere. 100%, the safety net is essentially only as durable as the rate adequacy that goes with it.

Essentially, it creates both a number of different points, or issues for a general assembly or who’s looking at funding or where those dollars go to. You’re not funding the safety net of HCBS, then you’re going to have to build some more nursing homes.

Absolutely. Angelo, anything to add there before we move on?

Spinola: Only that I think that the fact that 80/20 has a six-year window has gotten some folks complacent. It reminds me of a show on Netflix called Three-Body Problem, where these aliens are coming and they’re 400 years away. It’s like, do you care? Some people care, some people don’t care. I’ll be dead by then. My kids will be dead by then.

I think that some folks, they’ve taken their foot off the gas. We’ve seen changes already in 80/20 from what was proposed and what was final. For example, training, the cost of training and supervision was at one point in that 20%, and now it’s excluded from it. That needs to continue for us to be effective. We have to speak with one voice. Everybody’s got to get involved. I do think that if we do that, and handle our business, where we end up and what is actually implemented is going to be very different, hopefully, than what we see today.

Let’s move on to dealmaking. There’s a lot of scrutiny around dealmaking. What’s your take on the environment for M&A right now? Obviously, it’s been down for a couple of years now. Do you think that has to do with the scrutiny, and do you think that’s going to ease up at a certain point?

Spinola: I think that’s probably a factor, but not a significant one. You’re talking about the mega deal. Even there, I think that is more of a nuisance. Amedisys Inc. (Nasdaq: AMED) will probably have to divest some of their offices. I think we’ll see that in the news sometime in the near future. At the end of the day, United already has 10% of home health car. e That’s about what it would be with this deal. To me, that’s not the news. There are headwinds in every arena.

For personal care, it’s the increased labor costs. With home health, the reimbursement cuts. For each area, you’ve got an issue. You’ve got the 80/20 issues for the Medicaid group. What we’ve seen is that a lot of our clients are yin-ying when others are yang-ying and wanting to take advantage of some of that disruption. The main thing is the interest rates. That’s what most folks will tell you.

Then the white-hot 2021 and those multiples, I think sellers are just now sort of readjusting to the new world. That we’re not in ’21 anymore. What I’ve heard is from the banks and those who are closer to the ground, there’s a lot more prep activity with sellers, getting their house in order, and those types of things. We’ve seen a few things break in the last few months. HouseWorks acquired AccordCare’s personal care division in Connecticut. We just saw Addus HomeCare Corp. (Nasdaq: ADUS) get Gentiva’s personal care division.

There’s been some pretty significant movement, and that’s what I think will happen towards the end here of ’24 that we’ll see the market return, not to ’21 numbers, ’20 numbers, but a certain uptick. That normally happens towards the end of the year anyway. The back half is always more active than the first half. There has been a little bit of a lull, but I don’t anticipate that lasting much longer.

The other thing I think that has to be addressed, and maybe Tim can talk about this, is you may want to do a deal, but who’s available to you? When you look at the type of transaction that the bigger providers and the strategics and the PE firms would like, what they’re targeting, there’s not a ton of that inventory that’s available where you’ve got a $10 million revenue agency that actually wants to sell. I think everybody’s seeing the same tailwinds. We’ve talked a lot today about headwinds, but everybody is also seeing where our industry is going and the need for what it is that we do, and understanding that it’s only going to get better and better.

As you continue to invest in your own business, it will continue to grow and become more valuable as our population ages. There’s a lot of desire for a lot of our clients on the sell side to hold and wait, let’s hold out and grow it back after COVID, and exceed where we were prior to the COVID years, and then think about maybe an exit strategy.

Tim, I know one thing that Care Advantage does is arrange different sorts of agreements with sellers to make them feel comfortable coming on board now and getting creative. One seller may want this, one may want a completely different thing to make them feel comfortable. Can you explain how you’ve gone about that, especially over the last few years?

Hanold: There’s different strategic reasons for investing in different types of home care companies, whether it’s the team that comes with it, the leadership team, the geographic presence, different types of contracts and agreements and specialty arrangements, pay for performance, you name it. Anyway, it’s a mosaic of different things that equates to the value of a company.

That can be different from one buyer to the next. This is something, and again, it’s not just in home care, but whenever it comes to M&A and acquisitions, companies that bring real distinct value have run their shop the right way, really tight on compliance, have a very durable, organic engine. You can see that both on client, and caregiver acquisition, those companies will get paid appropriately.

Then for other companies where maybe it was a difficulty going through COVID, and maybe a slower time getting volume back and showing those organics or just being able to deliver on good caregiver retention and some interesting programs that go along that within your business, those are ones that are probably taking time to tighten things together, stitch things together the right way, and then being able to come back later and go to market. We’re not in the era of ZIRP anymore, the zero interest rates. Good, smart money is going to be really diligent at how they go out, and about and use it.

To your question, what is the motivation of the seller matching that up? Culture matters a lot. Then from a financial perspective, to get people where they need to be, there’s earnouts and there’s other different types of mechanics and mechanisms that ensure that with performance, that people get paid appropriately.

Just to end this call, on a brighter note, we’ve talked about a lot of the headwinds. Is there a tailwind, is there a regulatory piece or legislative piece that you’re really happy about?

Angelo: I’m very excited to see, hopefully, some PAGA reform, Private Attorney General Act reform in California. That has been an absolute nightmare for providers in California. Governor Newsom has been working with some of the business leaders and associations in California to create some regulatory modifications that will make this significantly better for employers.

There are literally thousands of these PAGA suits. It’s basically an end around class actions. You can avoid class actions in any state with an arbitration provision, the right arbitration agreement, certain kinds of class actions like wage-hour class actions, which are so prevalent in our industry, except for in California, because of these PAGA claims. There was a ballot measure on the docket that we didn’t think was going to pass, but it looks like instead of that, we’re going to see some legislative reform, which is very, very much needed.

Hanold: I’ll just say in general, any type of legislation that is something that, essentially, takes a look at fraud, waste, and abuse, and continues to prune out bad actors is excellent for the industry. 99 out of 100 providers that you’ll have a conversation with are really doing this thing for the right reason, purpose-driven, going about this the right way, and really doing something special.

Anyway, when regulation design helps with that, and helps to elevate the state of good actors and companies are going about doing it the right way, I’m all for it.

Anything else, I’d say it’s around whenever these things come through, like the CMS access rule, just be smart, be really as efficient as possible in your service delivery, be innovative outside of regular reimbursement streams, whether it’s paid for performance, value-based care, whether that’s direct to a payer or CMS 2030, that vision is risk-bearing entities like ACOs and so forth. I feel really bullish on our industry because the outcomes are there, the data proves it out.

Now, let’s just continue to make sure that we’re providing it, and selling that with a really comprehensive and smart approach.

The post Analyzing The Wide Range Of Legal Issues Currently Affecting Home Care appeared first on Home Health Care News.

Brad Harris has been appointed CEO of Home Health Care Solutions.

Part of Miller’s Health System, Home Health Care Solutions is a diversified in-home care provider that delivers services across the majority of Indiana. The company’s offerings include traditional home health services, along with behavioral health care, telehealth monitoring and more.

Harris replaced Home Health Care Solutions founding CEO Mahmood Iqbal on June 1, according to a local news report. Iqbal had served in the CEO role for more than a decade before handing over the reins to Harris.

As CEO, Harris will oversee the strategic direction and operations of Home Health Care Solutions on a statewide basis.

“Brad’s extensive background in health care administration and his established understanding of the organization’s values make him well-suited for this leadership role,” Patrick Boyle, president and CEO of Miller’s Health Systems, said in a press release. “Brad has been an integral part of our business lines inside of Miller’s Health Systems, and we have confidence Brad will guide our Home Health Care Division forward in each of the communities we serve throughout the state of Indiana.”

Harris began his career at Miller’s Health Systems in 1987.

“Home Health Care plays a crucial role in helping patients recover and maintain their well-being,” Harris said in the release. “I look forward to working closely with our talented team to deliver exceptional services to our patients and their families.”

Dina appoints new president

Chicago-based digital health care company Dina has named Sherman Sanchez as its new president.

Dina is a provider of digital network management and coordination solutions to help health plans and providers improve access to home-centric care. The company has raised millions of dollars since its formation, most recently closing a $7 million round at the start of 2024, led by venture capital investor First Analysis.

Sanchez has help leadership positions for health care technology firms including Pager, Cotiviti, HMS, BioIQ, NextHealth Technologies and MedeAnalytics. Prior to those roles, Dina’s new president also held business development positions at Health Data Management Solutions and Mercer.

“Sherman has a clear understanding of our market and extensive experience working with payers and providers that want to leverage digital solutions to improve home-based care,” Dina CEO Ashish V. Shah said in a press release. “He will be a valuable leader as we embark on the next phase of our growth journey, and we’re thrilled to welcome him to the team.”

Tim Coulter, who served as Dina’s interim president and chief operating officer, remains in his role as COO.

SCAN Group – parent company of SCAN Health Plan, one of the nation’s largest not-for-profit Medicare Advantage (MA) organizations – is also an investor in Dina.

Home health vet Tony Strange joins Care Advantage’s board

Tony Strange – the long-time home health veteran who most recently served as CEO of Aveanna Healthcare Holdings Inc. (Nasdaq: AVAH) – has joined Care Advantage’s board.

Strange’s home-based care background also includes founding Healthfield Inc. and serving as the top executive for Gentiva Health Services.

“Tony has shown himself to be an exceptional leader in the health care field through his unwavering dedication and relentless passion for growing health care organizations,” Care Advantage wrote in a company LinkedIn post.

Care Advantage is a home-based care company with more than 45 locations across America’s Mid-Atlantic region. The provider is one of the most active buyers in the home-based care market, having closed close to two dozen deals over the past six years.

After Strange left Aveanna, he was replaced by former COO Jeff Shaner.

“[Strange] leaves an enduring legacy of building one of the nation’s largest home care companies in America during an unprecedented pandemic,” Aveanna Chairman Rod Windley said at the time. “Tony’s steady and stable leadership was a welcome gift during troubled waters within our industry. It has been an honor working side by side with Tony at Aveanna and the many other companies during our career together.”

24 Hour Home Care’s Simon Close lands aging-in-place leadership role

Simon Close, the president of community supports for California-based 24 Hour Home Care – will serve on the National Aging in Place Council.

The five-person board, according to a 24 Hour Home Care press release, oversees the senior support network that connects service providers with older homeowners, their families and caretakers. The organization itself has 10 local chapters in the U.S., with members being various types of aging-in-place stakeholders.

“Serving on the National Aging in Place Council Board is an opportunity to extend the impact of the core mission and values we have at 24 Hour Home Care – reaching more lives and supporting vulnerable populations on a broader scale,” Close said in a statement.

In his role, Close oversees 24 Hour Home Care’s Community Supports Division, which prioritizes care for seniors and underserved communities by providing access to in-home care for Medi-Cal recipients and other low-income people.

Close joined 24 Hour Home Care in 2020 as VP of senior care.

The post Home Health Care Solutions Names New CEO; Care Advantage Adds To Board appeared first on Home Health Care News.

Now that the Medicaid Access Rule has been finalized, home-based care’s company leaders have had time to digest it, and consider what it means for the future of the space. 

While some acknowledge the good in the Centers for Medicare & Medicaid Services’ (CMS) reform efforts, others are facing the grim realities tied to the 80-20 provision.

Home Health Care News recently caught up with these leaders to learn their in-depth thoughts about the Medicaid Access Rule. Here’s what six of them had to say.

***

The finalization of the Medicaid Access Rule presents significant challenges for family-owned and family-operated home care agencies like ours. The rule includes a six-year implementation window and requires that 80% of Medicaid payments be directed toward caregiver compensation. This restricts our ability to cover essential operational costs, as CMS excludes costs such as training, travel and personal protective equipment for direct care workers. Also excluded are all the other costs that come with running a home care agency.

For a small agency with a single location, these provisions are unsustainable. The lack of capacity to absorb these costs like larger agencies might pose a risk to our ability to continue providing care to this vulnerable population.

Moreover, the current fee-for-service model does not allow us to adopt innovative approaches such as value-based care, which could benefit our clients and align with the services provided by our home health partners. This outdated system fails to account for potential savings and quality improvements achievable through alternative care models.

While the Medicaid Access Rule aims to improve care quality, I believe it misses the mark, by leaving smaller home care agencies like ours struggling to survive. We urge policymakers to consider more flexible and sustainable approaches to enable us to continue serving this community and contribute to its well-being.

— Bob Roth, managing partner at Cypress HomeCare Solutions

***

It’s hard to imagine anything more overly prescriptive than the 80-20 provision. It’s as if there was no math taken into consideration in terms of considering what 80% of incredibly low reimbursement rates actually looks like. When you begin to consider the states and regions where minimum wage is the prevailing wage, where are small agencies supposed to source the additional financial resources to comply from a pay rate perspective?

The simple answer to that question is to stop delivering Medicaid-funded service immediately and either A) pivot to a private-pay focused strategy or B) exit the industry via dissolution or desperation acquisition activity. It’s difficult to understand how either of those scenarios yield the net positive return for the workforce or for the home care network at large.

The only bright spot I can potentially glean is that the private-pay market will experience a glut of new, or newly refocused, home care agencies competing for the “middle-class” dollar. As a result, an increased number of players in this space could potentially create a competitive scenario whereby billing rates and pricing are at least temporarily decreased in an effort to gain market share.

— Kevin Smith, CEO of Best of Care

***

As a provider of home care services, we support the stated goal of HHS to expand access to services like ours for Medicaid beneficiaries while providing for a stable ongoing workforce. We were disappointed that HHS elected to keep the 80% payment threshold in place, despite over 2,000 comment letters to HHS from our industry and trade groups over the past year, which pointed out the significant challenges implementing such a provision would create. We believe a nationwide “one size fits all” minimum threshold is contradictory to the goal of ensuring access to Medicaid services, given the wide variance in state waiver programs, which directly affects the administrative burden in individual states.

It is very difficult to project what, if any, impact this requirement would have on our business and even more so now that the implementation date has been pushed out another two years. We will continuously be evaluating the states in which we provide care to determine our ability to continue operations. Those evaluations are based on many factors including the rate of reimbursement, volume of business and programmatic requirements as well as the cost to meet those requirements. All of those factors will likely change over the course of six years. We will also be monitoring legislative action and legal challenges either of which could block implementation of the provision.

— Darby Anderson, executive vice president & chief government relations officer at Addus HomeCare Corp. (Nasdaq: ADUS)

***

I believe the Medicaid Access Rule is a step in the right direction for many of our beneficiaries, especially here in Michigan, where waiting lists for home and community-based services (HCBS) could be lengthy at times. With 13% of Michigan residents living at or below the poverty level, and Detroit facing a staggering 30% poverty rate and 43% child poverty rate, the need for accessible HCBS programs for disabled and senior populations is paramount.

However, I have concerns about the 80-20 rule, as it does not make direct concessions for much-needed increases in Medicaid reimbursements. Most home care agencies operate with 60%-75% overhead costs for payroll and wages, making it challenging to provide services sustainably under the current Medicaid rates. At AAHC, we plan to diversify our offerings into service lines with higher margins, such as hospice, palliative, and ancillary care, to help offset the impact of this ruling.

Despite these challenges, I firmly support our workforce and recognize the realities of the care worker shortage. Ensuring that our home health aides and CNAs earn a livable wage is not only a moral imperative, but also essential for attracting and retaining talented caregivers to meet the growing demand for HCBS in Michigan and the Detroit area.

While the Medicaid Access Rule may not be perfect, it is a positive development for beneficiaries. I hope that continued advocacy efforts will lead to further policy changes and Medicaid rate adjustments that better support HCBS providers and their dedicated workforce.

As a board member of Michigan Home Care and Hospice Association (MHHA), I know that it is one of our top priorities and pushes. By working together, with the states and CMS, I hope we can ensure that vulnerable populations in Michigan and across the country have access to the high-quality home care services they need and deserve.

— Cleamon Moorer Jr., president of American Advantage Home Care

***

Care Advantage shares CMS’ concern with the health of the HCBS workforce, and in particular the need for more sustainable approaches to DCW compensation, especially given the current inflationary environment and rate inadequacy in many state Medicaid programs. That said, we believe the Medicaid Access Rule’s 80% mandate is likely to create a number of unintended consequences, all of which will reduce access to care and quality of care for Medicaid beneficiaries, especially amongst smaller providers and rural communities. Disciplined resource allocation and ROI considerations will need to be an even more important part of an operator’s weekly calculus.

We will continue to significantly scale our business, partner with the payer community through innovative value-based care programs and advocate for increased reimbursement for HCBS. Care Advantage is committed to this public-private partnership, improving health outcomes, and maximizing the value of the HCBS model for the communities we serve.

— Tim Hanold, CEO of Care Advantage Inc.

***

Above all, Help at Home appreciates CMS’ efforts to professionalize Medicaid-funded home- and community-based care, particularly those services that allow elderly and physically disabled individuals to receive care in their homes, as well as the acknowledgement of states’ historic investment in home-based care. We particularly appreciate the allowance for more time for states to prepare for proper data collection, allowances for states to obtain hardship exemptions based on impacts on providers. Additionally, changes to threshold definitions were important to recognize the fact that good, quality home care includes additional direct worker supports such as training and clinical supervision and travel reimbursement to facilitate access to clients, particularly in non-urban settings.

While we acknowledge this is just the beginning of a complex effort to reform HCBS, we’re encouraged by many of the modifications made to the rule based on stakeholder input. Like CMS, we remain committed to our belief that home care workers must be treated as professionals, receive appropriate compensation, and receive care supports that add value to the client/caregiver relationship, helping to coordinate care and connect health care to home care. We will continue to advocate for higher quality, higher accountability and better support for clients and caregivers who provide essential home-based services for our population of Medicaid beneficiaries.

— Tim O’Rourke, president of home care at Help at Home

The post 6 Company Leaders On What The Medicaid Access Rule Means For The Future Of Home Care appeared first on Home Health Care News.

All three companies are doing unique things to maintain growth in 2024, however.

Firstly, over the last few years, there has been a vast chasm between buyers and sellers. That gap may be beginning to close, however.

“That gap between expectation, and what buyers are willing to pay, has closed considerably,” Cameron Cordts, corporate development manager at PurposeCare, said during a panel discussion at Home Health Care News’ Capital + Strategy conference. “I think PurposeCare found more success on the proprietary lead side as well.”

Cordts noted that the majority of PurposeCare’s growth has come from harvesting these proprietary leads.

Backed by the health care-focused private equity firm Lorient Capital, PurposeCare delivers both clinical and non-clinical home-based care. The company has been very bullish when it comes to M&A. Since the PurposeCare’s launch in 2021, the company has completed 14 acquisitions, mostly, across the Midwest.

On its end, HouseWorks self-sourced eight of its last ten deals, according to CEO Mike Trigilio.

The InTandem Capital-backed HouseWorks has earned a reputation for being one of the most active buyers in the home-based care space — ballooning it into a $400 million company. HouseWorks delivers in-home care and has meal delivery and laundry businesses. The company is also involved in the adult day space.

“We are trying to be a solution provider for the payer versus just delivering home care,” Trigilio said during the discussion.

Over the last six years, Care Advantage has closed 21 deals. When it comes to acquisition targets, the company has focused on personal care and other complementary services.

“How can we do some of those things that aren’t a hop, skip and jump away from [personal care], but a step away from that?” Jaron Clay, VP of integrations at Care Advantage, also said. “So we’ve also dipped our toes into adult day. We’re focusing on companies that really target non-English speaking populations, who are otherwise excluded from the care continuum. That has proven to be a very sticky, and profitable business for us, but most importantly, a really rewarding one.”

Richmond, Virginia-based Care Advantage is a home-based care company that has more than 45 locations throughout Virginia, Maryland, Delaware, Washington, D.C., and North Carolina. The company offers both personal care and home health care services.

Clay knows that a potential acquisition target is a good fit when the company aligns with Care Advantage’s drive to grow.

“Do they have that same attitude?” he said. “Are they happy with exactly how their company is today, or are they chomping at the bit to grow, and have the tools they need to make their company bigger to plug into our power grid? We’ve absolutely walked away from deals that looked excellent on paper because that attitude was not there when we went to meet that leadership team that was going to stay on.”

Though HouseWorks typically avoids acquisition targets that could be categorized as distressed, the company sees an opportunity in its ability to streamline an organization.

“We do like looking at those businesses and saying, ‘What’s wrong?’” Trigilio said. “‘What are the pieces that we can fix?’ A lot of it revolves around our technology and our solutions that we put into play, basically day of close. Some of those things can be mitigated very quickly.”

Similarly, Care Advantage has been able to help acquisition targets solve key challenges.

“There are companies that have been able to identify a problem, and we felt we had a quick solution for them, particularly around talent acquisition,” Clay said. “That is just what we hear over and over again, ‘It’s so hard to get caregivers.’ We’ve done a lot of investments around that at Care Advantage. We think we have a better mousetrap, so we’re open to companies that need a little help, but don’t have a litany of problems.”

At PurposeCare, a strong org chart and a company with aggressive growth goals is the main identifier for if an acquisition target is a cultural fit for the company, Cordts noted.

Looking ahead, HouseWorks M&A focus is fixed on the Medicaid space, and finding opportunities to add auxiliary services to its overall offerings.

On its end, PurposeCare is watching out for regulatory updates that could impact business, such as the Medicaid Access Rule and the upcoming home health proposed payment rule.

At Care Advantage, the focus remains on culture.

“It goes back to that culture — always,” Clay said. “Are you doing an excellent job lifting up your communities? Are you doing an excellent job for your clients? If not, this is probably not going to be a fit for us, because we’ve worked very hard to have the reputation and the outcomes that we do. We’re not willing to lose those for a quick win.”

The post The M&A Strategies Behind HouseWorks, Care Advantage And PurposeCare appeared first on Home Health Care News.

Transaction volume for home health, home care and other in-home care businesses dipped in 2023, with inflation, higher interest rates and global unrest contributing to the downturn.

Many home-based care stakeholders anticipated M&A to rebound in 2024, however, thanks to increased loan activity in January, greater buyer-seller consensus and private equity’s record-high levels of “mature” dry powder.

With 2024’s first quarter in the rear-view mirror, the home-based care dealmaking outlook still looks to be a bit of a question mark.

“Things can change in a short amount of time and have a profound impact on the marketplace,” Mark Kulik, senior managing director at M&A advisory firm The Braff Group, said last week at the Home Health Care News Capital + Strategy Conference in Washington, D.C.

While it may be too soon to call 2024 a bull or bear market for M&A, I am starting to notice a few interesting trends, many of which surfaced at the Capital + Strategy Conference. Some of those trends include:

– The 2024 forecast for home-based care transaction volume is cloudier than just a few weeks ago, with the Federal Reserve seemingly more wary of interest-rate cuts.

– Buyers and sellers are increasingly aligned, though some sellers are still holding out for 2020- and 2021-level valuations. Some are bridging the buyer-seller gap with earnout structures.

– Investors are more optimistic about the current in-home care staffing environment, with many seeing labor pressures alleviating compared to the historically challenging stretch coming out of the public health emergency.

– While some buyers remain focused on a particular care lane, others continue to pursue continuum and diversification strategies.

– More acquirers are touting their proprietary M&A strategies. Unsurprisingly, the No. 1 business characteristic buyers are targeting: quality.

In this week’s exclusive, members-only HHCN+ Update, I share some of my biggest takeaways from our conference.

Monetary-policy whiplash

Home-based care transaction volume plummeted in 2023, mirroring the broader global health care dealmaking trend. Some of the dip was a return to mean, with 2021 experiencing record M&A activity and 2022’s action robust as well.

The cost of capital was arguably the primary hindrance to dealmaking, with the Federal Reserve attempting to control inflation via its most impactful economic tool: interest-rate policy. From March 2022 through July 2023, the U.S. central bank has raised the fed funds rate by more than five percentage points, making no fewer than 11 individual hikes.

“This is akin to the Fed jamming the brakes on the monetary policy to help slow down the economy because inflation was occurring,” Kulik explained at the Capital + Strategy Conference.

Going into 2024, the Federal Reserve had signaled intentions to cut rates, with relief possible coming in the second or third quarter. That gave home-based care buyers and sellers reason for optimism.

That excitement has dissipated over the last week. As recently as Tuesday, officials explained that inflation remains more stubborn than they anticipated, meaning interest rate rates will likely stay high.

“Right now, given the strength of the labor market and progress on inflation so far, it’s appropriate to allow restrictive policy further time to work and let the data and the evolving outlook guide us,” Federal Reserve Chair Jerome Powell told a forum in Washington.

At the Capital + Strategy Conference, it felt like the discussions around the broader U.S. economic climate were giving buyers and sellers whiplash. In turn, I see buyers and investors operating with the same conservative mentality on display in 2023.

Still, one factor that could mitigate that is the ample dry powder that private investors are sitting on, according to Bain & Company data, which Kulik cited during a presentation at our event. With about 26% of global buyout dry powder now four years or older, some are feeling heightened urgency to get deals done.

“Investors gave them money to invest in buy, and they didn’t deploy it,” Kulik explained. “And there’s pressure on private equity to deploy that cash because investors want a return on their money. They don’t want to just let it park in a savings account in a bank.”

Narrowing the gap

Home-based care sellers in 2023 valued their businesses at 2020 and 2021 levels, when valuations for home health, home care and hospice providers were extremely high. There is still a gap between today’s more conservative buyers and hopeful sellers, but it’s beginning to shrink, multiple executives said at the Capital + Strategy Conference.

“I do feel like that gap between expectation and what buyers are willing to pay has come closer – considerably,” Cameron Cordts, corporate development manager for PurposeCare, said at the event.

Backed by Lorient Capital, PurposeCare is a home health and home care provider focused on building density in the Midwest. The provider has announced several acquisitions over the past couple years, including three at the start of 2024.

In some cases, the gap is closing because of segment-specific factors, such as fee-for-service Medicare rates or the looming 80/20 rule in Medicaid. These and similar industry-specific challenges become the final straw for some prospective sellers.

In others, sellers have finally come to realize that buyers aren’t willing to pay 2020 and 2021 terms. Having been on the market for an extended period, these sellers have now accepted their fate.

“It is starting to shift a little bit,” Mike Trigilio, CEO of HouseWorks, said at the Capital + Strategy Conference. “There are some [sellers] coming on the market in the last few months that probably waited through 2023, that weren’t around last year. We’re seeing tons of opportunity.”

The InTandem Capital-backed HouseWorks has been one of the most acquisitive home-based care companies since late 2021, with its purchases including the personal care division of Amedisys (Nasdaq: AMED), Elite Home Health Care and several others. Service and payer diversification have been two of the company’s core M&A pillars.

Some buyers are taking it upon themselves to bridge the divide between acquirers and sellers. One way to do so is through deal earnout structures.

Care Advantage – the home-based care company backed by Searchlight Capital – has been successful with this approach, according to Jaron Clay, the company’s VP of integrations. Care Advantage has completed close to two dozen transactions since 2018, with Nova Home Health Care one of its more recent acquisitions.

Four of its last five deals have included earnout structures, Clay noted.

“We’ve pushed a lot more toward doing earnout structures on a lot of our deals,” he said at the event. “That’s a way for us to have the certainty that we want around this business not falling off the cliff when the owner/operator leaves. But it also is a way for us to actually give that person more money – maybe not all on Day 1. They’re getting some of it 12 months or 24 months down the road.”

I do feel like that gap between expectation and what buyers are willing to pay has come closer – considerably.”

– Cameron Cordts, corporate development manager, PurposeCare

Staffing success paying off

Another frequent comment I heard during the Capital + Strategy Conference: Home-based care staffing challenges are leveling off.

“Across our portfolio, we’ve seen improvements,” Scott Plumridge, managing partner at the Halifax Group, said at the conference. “I think our operators would characterize it as easier, but still not easy.”

The Halifax Group in September acquired the worldwide home care division of Sodexo, including the Comfort Keepers brand.

Contextually, home health, home care and hospice agencies have long faced a staffing deficit. Demand for aging-in-place and end-of-life care services is increasing faster than supply – and that will remain true as baby boomers transition into their 65+ era.

But the overall labor market is improving, and home-based care providers are also getting better at attracting and retaining talent.

Altarum’s most recent Health Sector Economic Indicators brief supports this notion. In March, the seasonally adjusted change in employment was 8.5% for home health care services, up from the 24-month mark of 6.6%.

That’s among the strongest employment gains in all of health care.

Kenneth Hammond, the chief investment officer for Kaltroco, echoed Plumridge’s comments.

“2022 was the moment of the most intense [staffing] pressure,” said Hammond, whose organization is the investment partner of New Day Healthcare. “And certainly, the situation has gotten better.”

While overall labor-market improvement is helping the staffing situation stabilize, the provider-driven efforts making a dent include sign-on bonuses and other enhanced benefits, smarter scheduling, the automation of non-care functions and more.

The continuum of care

Although there are certainly still buyers that prefer to focus on one core service, forward-looking in-home care operators continue to build out a complete continuum of care. I view this strategy as a long-term trend propelled by value-based care and the consumerization of health care.

New Day is among the home-based care companies that consider the care continuum in M&A opportunities.

“We are open minded to good businesses across the board, from skilled home health, to Medicaid [personal care], to hospice,” Hammond said. “From a platform standpoint, as we enter new states, we like businesses that have begun to solve that [continuum] problem, right? We look for companies that have at least two of the three legs of the stool, so that we can deploy organic growth to go pursue that continuum strategy that we bring data into.”

Having a continuum of home-based care service lines allows providers to maintain longitudinal relationships with clients. An older adult may turn to non-medical home care for activities of daily living (ADL) support, but that could eventually turn into a home health or hospice relationship.

Payers also appreciate providers with diverse service offerings.

“Our goal is to create a continuum of care, primarily leading with home care on the non-skilled side, then supplementing with home health care,” Cordts said.

At the Capital + Strategy Conference, it was evident to me that continuum and diversification strategies included far more than just home care, home health and hospice. Companies such as Care Advantage, for instance, are working to build care continuums for specific populations.

“We’ve really been focusing on being disciplined around what we’re very, very good at, which is personal care,” Clay said. “How can we do some of those things that aren’t a hop, skip and jump away from that, but a step away from that?”

An example: Care Advantage has acquired home care providers that specialize in certain cultural demographics. This creates strong provider-client relationships while also differentiating Care Advantage in those markets.

“That has proven to be a very sticky business, a very profitable business for us,” Clay continued. “But most importantly, a really rewarding one.”

We’ve really been focusing on being disciplined around what we’re very, very good at, which is personal care. How can we do some of those things that aren’t a hop, skip and jump away from that, but a step away from that?

– Jaron Clay, VP of integrations, Care Advantage

Active acquirers tout DIY M&A

The M&A process can be a taxing one, so it’s not a shock that many buyers and sellers enlist the help of an expert dealmaking facilitator. That’s not always the case, though, with even some of the largest in-home care providers in the country previously touting their internal M&A efforts.

While at the helm as the CEO of Amedisys, Paul Kusserow was always keen on highlighting the provider’s proprietary M&A process.

“We built our own proprietary M&A function that can find these assets,” Kusserow told me in 2018. “We bought [Compassionate Care Hospice] way below what the market has been trading at for these assets. Hopefully this will start a trend where people are not overpaying for these things because some of the prices that have been out there are ridiculous.”

At the Capital + Strategy Conference, it felt like more providers were making similar remarks.

At HouseWorks, a majority of the company’s previous 10 deals were sourced internally, Trigilio said. Quality is usually the starting point in those processes, he added.

“The key ingredients are compliance and quality,” he said. ”The care delivery is always at the beginning of all these transactions.”

The same holds true for PurposeCare, according to Cordts.

“They’re not as competitive, but typically involve maybe a little bit more time for my team, and myself, bringing that seller along in the process,” he said. “That’s been the majority of our growth in the last year or so – harvesting those proprietary leads and educating sellers on where the market is at, and what those expectations can lead to.”

The post ‘We’re Seeing Tons Of Opportunity’: Home-Based Care Buyers Deploy DIY M&A, Earnout Structures In 2024 Dealmaking Strategies appeared first on Home Health Care News.

After the release of the proposed “80-20 rule” last year for home- and community-based services (HCBS), providers had plenty of time to digest. Now, they’re formulating their plans of action ahead of the proposal’s potential finalization.

Broadly, the U.S. Centers for Medicare & Medicaid Services’ (CMS) proposed rule had several components, but the most controversial would result in roughly 80% of Medicaid payments for HCBS being put aside for payment for direct care workers.

The proposal has since received an unfavorable reception from many industry stakeholders, with the final rule expected sometime this Spring.

One of the most common objections is the belief that the rule would wreak havoc on smaller companies providing care. Many also believe that the rule doesn’t account for the different operating dynamics across all 50 states, nor does it account for other workforce investments like training.

Sara Wilson, president and CEO of Home Assist Health, believes that the proposal – if finalized – could impede care.

“I’m of the position that it was moving forward too fast, without research, or a state-by-state cost analysis,” she told Home Health Care News. “It compromises our network integrity for care at home. It makes me nervous, because it could affect our ability to care for the people who we are here to serve.”

Home Assist Health is a Phoenix-based home-based care provider that provides a variety of care services, such as personal care, housekeeping and respite care.

Care Advantage CEO Tim Hanold thinks that CMS has good intentions, but disagrees with the federal agency’s approach to what he considers a shared goal.

“Access to care is a shared goal, and so is increasing compensation for our caregivers,” he told HHCN. “I think we’re all aligned around that. The CMS rule started with good intentions, but certainly there’s going to be some unintended consequences if it comes out as written. Rate adequacy really continues to be the main driver for providing appropriate wages, and that is what I believe the administration should focus on to improve access to care.”

Richmond, Virginia-based Care Advantage is a home-based care company that has more than 45 locations throughout Virginia, Maryland, Delaware, Washington, D.C., and North Carolina. The company offers both personal care and home health care services.

Despite the largely negative response to the 80-20 proposed rule, there are some components of the rule that haven’t received any pushback.

“There are components of the 80-20 rule that we’re in agreement with — the timeliness of access, HCBS quality measures and the standardization of wait list reporting requirements,” Hanold said. “Those are all things that are necessary to keep the entire ecosystem responsible for delivering high-quality and timely care to the Medicaid population.”

While Hanold believes the rule will be finalized, he is less sure about what the final rule will look like.

“It’s not clear to me yet if it will be finalized as originally written, or how many variations of it will come across,” he said. “There are a number of components that will probably be pure play and work all the way through. Then there are others, like the 80-20 threshold, that created quite a bit of response from numerous states and from numerous organizations.”

Planning for the rule

Though providers are unsure of what the finalized rule will look like, this hasn’t stopped companies from being proactive. Many leaders have come up with a plan for the proposal, in its current form, being finalized.

At Home Assist Health, the plan is to work closely with the company’s state Medicaid management authority and lean into partnership strategies.

“We are staying close with our peers, and our Medicaid management authority to monitor progress, possible discussions on when the time comes on operationalizing it, so that we can adapt accordingly to preserve this very important vital service for those who rely on it,” Wilson said.

As a non-profit organization, Home Assist Health is also positioned to pursue grants and fundraising. Though Wilson notes that this is currently much more difficult than it has been in the past.

Additionally, the company plans to work closely with its state home-based care trade associations.

For Care Advantage, the plan is to be cognizant of how the company serves its different markets.

“It’s about resource allocation,” Hanold said. “We have to be smart about how we think about all of the regions and areas that we serve. We have to ensure that it still makes economic sense. In other words — no margin, no mission.”

In general, the company has spent a lot of time modeling out different scenarios when it comes to the 80-20 rule.

Hanold believes that there are three things here that will hold true for all businesses in the space.

“The first one is that you need to build volume and scale, possibly in a material way,” he said. “You have to think large, you have to think at scale for a business in a 80-20 world to really work. The second point is consistent healthy rate reimbursement. It’s critical that we’re voicing the case for rate adequacy. Our joint advocacy now is more important than ever. The third point is that you need to be really selective on how to deploy resources.”

The post Inside Home-Based Care Provider Strategies For Surviving Under The Looming 80-20 Rule appeared first on Home Health Care News.

In 2024, providers will need to prepare for a very different environment that does not include these financial buffers.

“We’ve had success in many states, over the last couple of years,” Dave Totaro, chief government affairs officer at Bayada Home Health Care, recently said during a Home Health Care News webinar. “Notably, [we saw] big increases in states like Missouri and Delaware, which hadn’t seen increases for over maybe one or two decades. Given the fact that these funds are drying up, on the federal level, [we expect that] states are going to begin to pull back.”

There might even be enough of a discrepancy between funding in different states that even large companies will consider leaving markets that make it difficult for providers to deliver care services.

Many providers are already having to deny upwards of 65% to 75% of their referrals, according to Totaro.

“Higher reimbursement states, like Massachusetts, Delaware, even New Jersey might be a bit better off, but eventually, if you can’t provide care because you’re losing money, you can’t provide quality care,” he said. “We’ll probably have to make those hard decisions. No health care provider ever wants to leave patients without health care.”

Lower reimbursement states such as Mississippi, and others, may see providers leave these markets.

Emmet O’Gara, CEO of Sandata, emphasized that most providers will try to face the unique challenges of each state before deciding to stop operating in a specific market.

“I think for the most part, we’ve seen folks positioning themselves to be as successful in the state they serve, as they can, versus wholesale, ‘I’m out of here,’” he said during the webinar. “Regulation can alter that path. Most of the folks that we work with are in this business because they are mission driven, economic realities, of course, can challenge that.”

Though some providers might be slow to exit a state entirely, this doesn’t mean that there won’t be some kind of fallout.

For example, a company may decide that they will keep operating in a state, but choose to pull out specific pockets in that market, Care Advantage CEO Tim Hanold said during the webinar.

“It might not be wholesale — folks moving out of a state — but its rural communities, it’s deep cultural pockets,” he said. “Areas without scale that don’t have density, and don’t have favorable economics. Those are the ones that will suffer.”

Further compounding challenges is Medicaid redetermination, which is happening in many states across the country. Totaro thinks this will make things even tougher for providers.

Even with rumors of additional funding, Totaro believes that it’s unlikely that this will actually result in more money being distributed.

“We do hear on the Hill that there is some talk, particularly among Democrats, for some additional funding in 2024, along the lines of the American Rescue Plan, but in reality they’re just generating headlines, and maybe some election year talking points for themselves,” he said. “I doubt we’re going to see any kind of reimbursement funding increases happen from the federal government.”

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