Based in Dallas, VitalCaring provides home health and hospice care to patients in the Southern U.S., covering Texas, Oklahoma, Louisiana, Mississippi, Alabama and Florida.

Constant Therapy is a digital health company. Its technology enhances the effectiveness of cognitive, speech and language therapy while also increasing access to and reducing the cost of these therapies, according to the company.

The Constant Therapy app uses AI technology to offer personalized exercises that aid in rebuilding cognitive and speech function for individuals recovering from stroke or traumatic brain injury, as well as those living with aphasia, dementia or other neurological conditions. A team of neuroscientists at Boston University developed the app.

“The pilot program was launched to harness the power of technology to elevate the quality of in-home therapy and alleviate the burden on families and caregivers of patients with cognitive disorders,” Janice Riggins, VitalCaring’s chief clinical officer, told Home Health Care News. “The initiative was driven by several key objectives, including enhancing cognitive abilities to improve physical functioning, enabling patients to age in place more effectively, collecting data to support medical necessity and tailor interventions more precisely, and expediting the patient’s journey toward regaining independence safely within their homes.”

The pilot took place from October 2023 to May 2024 and involved 52 patients aged 54 to 92. The patients had various primary diagnoses, including cerebral infarction, brain tumors, dementia (including Alzheimer’s disease), Parkinson’s disease, encephalitis, encephalopathy and mild cognitive impairment (MCI). Patient performance was assessed using the Montreal Cognitive Assessment/MoCA and the Saint Louis University Mental Status/SLUMS cognitive screening.

The program included various exercises to improve auditory and visual memory, reading comprehension, speech, attention, problem-solving and visuospatial processing.

“While the primary goal for patients with chronic diseases is often to maintain cognitive function or slow its decline, we observed more gains in functional cognition, and caregivers reported more social and physical activity gains than anticipated,” Riggins said.

Patients in the program showed statistically significant cognitive improvements, including improvement by at least one cognitive level and achievement of normal cognitive function by discharge, according to Riggins.

“Success in the program required both the patient and caregiver to demonstrate a willingness and ability to comply with the recommended regimen,” she said. “Ideally, patients had access to a device compatible with the app to maximize results during and beyond therapy visits, ensuring continued progress post-discharge.”

Patients’ ability to independently access Constant Therapy’s therapeutic exercises at home has proven valuable to clinician-supervised therapy, Riggins noted. The VitalCaring Cognitive Care pilot program aimed to determine how additional therapy tools could speed up recovery and maximize cognitive functioning for VitalCaring patients with dementia-related diseases and those recovering from stroke or other brain injuries. On average, each patient in the pilot could access an additional 11 hours of digital therapy independently.

“This program equips our clinicians with an additional resource to complement their skilled interventions, maximizing patient success,” Riggins said. “It enables us to support our patients longer in their goal to age in place.”

Following the pilot, VitalCaring plans to explore more opportunities to expand this initiative across its network.

“We’ve already begun training clinicians throughout our organization and are committed to providing this valuable resource to all patients who can benefit from it,” she said.

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It’s the interest rate, stupid.

Home health, home care and hospice industry voices – including myself – have regularly pointed toward internal factors affecting M&A over the last two and a half years. In the end, the overarching, main headwind was always the extremely high interest rates that were put forth by the Federal Reserve to combat inflation.

Those internal factors had an effect on the specific M&A that did occur, and they will have a major effect on the M&A activity that occurs moving forward.

But searching for internal reasons to find out why M&A had cooled since early 2022 was largely a fool’s errand.

In March of 2022, the Fed started moving historically low interest rates up a notch. Specifically, on March 17, 2022, the federal interest rate moved from near-zero to 0.50%. Then, those hikes continued on a consistent basis, up until July 26, 2023, when the federal interest rate hit 5.50%. 

On Wednesday, the Fed announced a half-percentage point cut to the interest rate, in what is expected to be the first of a few cuts as it now turns its eyes toward other problems outside of inflation.

Meanwhile, the trend line for home-based care M&A ran diametrically opposed to the interest rates. As interest rates rose, home-based care M&A fell, besides a few small spikes in a quarter or two.

“I believe the interest rate environment has really been more significant than perhaps people have acknowledged,” Les Levinson, partner and co-chair of the Transactional Health Law Group at Robinson + Cole, told me this week on a webinar. “When you were doing deals in 2021 and 2022 – at what was functionally equivalent to a zero interest rate environment – you needed a lot less equity to do a deal. And the risk in that transaction was being basically covered by debt coverage. That evaporated as interest rates shot up.”

In this week’s exclusive, HHCN+ Update, I’ll dive into the interest rate cut and what it will mean for the home-based care M&A market in the near-term future.

Rate cut kickstart

All signs point to Wednesday’s rate cut being the first of a few, as the Fed begins to focus more on unemployment and less on inflation.

Based on the last couple of years, that would suggest that we’ll see far more transactions in home-based care in the near-term future.

After that first hike in March 2022, things changed in the formerly robust M&A landscape.

In Q3 and Q4 of 2020 alone, there were 95 total transactions in home health, home care and hospice, according to the M&A firm Mertz Taggart. Over the same time period in 2021, there were 106 transactions.

Then, in 2022, after the first rate cut, Q3 and Q4 saw 50 total transactions, an over 50% decrease compared to the year prior.

Outside of a few quarters with modest spikes, M&A has stayed historically down, up until present day.

Private equity-sponsored deal counts, too, were historically low.

Now that the interest rate trend line is on the other side of the mountain, expect home-based care activity – and PE-backed activity – to pick up.

“We’re at the tail end of an almost five-year cycle that started with COVID and the Fed stimulating the economy,” Mertz Taggart Managing Partner Cory Mertz told me on the webinar. “Interest rates went to about zero. Sellers were burned out. They wanted to get out early before the election and a new administration increased the capital gains tax rate. It was really a perfect storm of activity, and it was, quite frankly, a bubble. The Fed raised fund rates at a pretty healthy clip starting in 2022, and that really slowed everything down for a couple of years. But now, we’re starting to see signs of life.”

The Fed was expected to lower rates Wednesday, and most were waiting to see whether it was by a quarter or half of a percentage. Its decision to go the latter route will open things up even further than previously expected.

Over the next year or two, it’s likely the rate will continue to tick down toward around 3%.

During the quiet period, demand for quality home-based care assets has not been down, according to Mertz. Instead, the market conditions have kept transaction levels down. Those market conditions also include the fact that, with near-zero interest rates and a rush toward home-based care during the pandemic, multiples climbed significantly.

Since then, buyers have waited for the multiple expectations to normalize.

“These same buyers have still been hungry for quality deals,” Mertz said. “They don’t want to, and they’re not willing to, pay a premium for deals that don’t warrant a premium [price]. Now, premiums today compared to premiums in 2021 or 2022 are down a little bit, but not a whole lot. For a quality agency, at least. That’s my experience.”

As multiple expectations are balanced out, though, it’s likely that demand finally rises up and brings deals to fruition.

But active, quality home health agencies – in particular – have become more scarce over the last few years.

“A quality home health asset, I think, is the premium in post-acute care,” Choice Health at Home CEO David Jackson told me on the webinar. “Hospices have a really nice base. Home care [agencies] have really steady valuations, much more steady than the others. They don’t go up and down as much as a premium home health care asset that is doing well from a compliance, quality and financial perspective. Those are becoming more and more rare every day, and that’s because it’s a very difficult industry.”

Based in Tyler, Texas, Choice Health at Home provides a wide range of services in the home, including home health care, home care and hospice. Backed by Coltala Holdings and Trive Capital, the company has executed over 20 transactions in the last four years. In addition to Texas, it has a presence in Nevada, Utah, Colorado, Arizona, Oklahoma and Kansas.

In home health care, buyers generally prefer executing deals in the back half of the year anyway, and particularly in Q4. That’s because, after the Centers for Medicare & Medicaid Services (CMS) releases the final home health rule in October or November, there’s generally more certainty around payment.

A lot has changed

While deals have been put on ice, a lot has changed under the surface.

As buyers and sellers get back to the table, they’ll be discussing home-based care sectors that don’t look like they did three to four years ago.

In home health care, CMS has proposed three cuts to payment, and finalized two. More than 50% of Medicare beneficiaries are now underneath a Medicare Advantage (MA) plan, too. MA plans tend to be far less for home health services than traditional Medicare.

Home health providers – even the quality ones – are struggling to adjust to a world with a less certain payer landscape. They are dealing with CMS cuts to traditional Medicare, while also vying for higher rates from MA plans. Some have even cut ties with MA plans to prove a point, and also to allocate their resources to better payers.

In home care, the finalized Medicaid Access Rule included the 80-20 provision, which would mandate that 80% of reimbursement for home- and community-based services (HCBS) go to workers. That provision won’t be implemented for another nearly six years, but it is still likely to affect M&A.

For instance, on one end, many providers believe that scale is necessary to sustain business performance under such a provision. Addus Homecare Corp. (Nasdaq: ADUS) has stated this regularly and has also been a very active acquirer of late.

Outside parties, however, may see the provision as a reason to avoid HCBS – for now.

Addus has also benefited from the M&A downturn itself. While interest rates have been high, Addus has significantly expanded its home health and home care footprints.

“Realistically, over the last 12 to 18 months, we’ve not seen a lot of competition out there,” Addus CEO Dirk Allison recently said. “There’s been the occasional smaller strategic player that’s bought a few deals on a localized basis. From a PE standpoint, it’s really been very slow as far as competition for the last bit. Now, obviously, if rates come down in September, as everybody’s expecting, there’ll be a point where PE will come back in and that’s fine. It’s been a market in which up until the last year or so, we’ve always operated with competition from those folks.”

VitalCaring President Luke James also told me earlier this year that there were advantages to growing during an M&A and payment downturn. His company also recently agreed to acquire divested assets of Amedisys (Nasdaq: AMED), but that deal is contingent on the Optum-Amedisys deal closing first.

Either way, if the Fed continues on the path it set out on this week, times are changing.

When M&A ticks back up, buyers will have different factors to consider. But the buyers – the formerly dormant strategics and private equity players – will be back.

The home health and home care sectors have been labeled as ripe for consolidation over the last decade. But consolidation has not come as quickly as many believed it would.

Now that the dust is settling, however, M&A has the chance – again – to reshape the face of home-based care.

The post ‘Signs Of Life’: With Interest Rates Ticking Downward, Home-Based Care M&A Is Looking Up appeared first on Home Health Care News.

The company released its second-quarter earnings on Wednesday, without an accompanying call. It has not held an official earnings call since UnitedHealth Group (NYSE: UNH) agreed to acquire it in June of 2023, which is customary.

Home health revenue checked in at $377.4 million in the second quarter, reflecting a nearly 8% year-over-year increase. Hospice revenue checked in at $204 million, reflecting an over 2% year-over-year increase.

Amedisys’ non-Medicare home health revenue grew significantly once again, to $161.3 million in the quarter. That represents a 24% year-over-year increase.

High-acuity care revenue, meanwhile, checked in at $9.8 million, reflecting a 145% year-over-year increase. Amedisys acquired Contessa Health – an at-home, high-acuity care provider – in 2021 for $250 million. Admissions in that line of business were up 57% year over year, according to Amedisys. It now has 9 joint ventures contributing to growth, as well as 33 referring hospitals.

Overall, the Baton Rouge, Louisiana-based Amedisys has 519 care centers across 37 states and the District of Columbia.

It has been over a year since UnitedHealth Group’s Optum agreed to acquire Amedisys for $3.3 billion. Amedisys recently agreed to divest a number of locations to VitalCaring, the home health provider led by April Anthony.

That divestment is contingent on the UnitedHealth Group-Amedisys deal going through. In all likelihood, the divestment is being made to ease antitrust concerns regarding the deal. Optum already owns LHC Group, another one of the largest home health providers in the country.

The post Amedisys’ High-Acuity, Non-Medicare Revenue Skyrockets As It Waits For UnitedHealth Group Deal To Close appeared first on Home Health Care News.

The deal will only come to fruition if the UnitedHealth Group-Amedisys deal goes through. But there is speculation that UnitedHealth Group and Amedisys worked with the Department of Justice (DOJ) on the divestment locations.

“While it’s still difficult to predict how the DOJ acts on the pending AMED sale, the divestiture agreement helps increase the likelihood of the AMED deal closing,” an analyst note from Jefferies read. “While we recognize that scrutiny of UNH’s deals is high and that the DOJ could still move to sue to block its acquisition of AMED, our belief is that the composition of the portfolio of assets that AMED/UNH are selling to VitalCaring was determined through multiple conversations with the DOJ over the last few months. For this reason, we believe that the divestiture agreement announced on Friday, technically, addresses anti-trust concerns, which should meaningfully increase the likelihood of the AMED deal closing in the next few months.”

UnitedHealth Group acquired LHC Group – one of the largest home health providers in the country – last February for $5.4 billion. A few months later, it agreed to acquire Amedisys for $3.3 billion.

Combining LHC Group and Amedisys’ footprints under Optum – UnitedHealth Group’s provider arm – raised concerns from antitrust regulators. That led to the divestment package that is now materializing. 

A location count related to the divestment has not yet been disclosed, but initial reports suggested that Amedisys was prepared to offload over 100 locations to the buyer.

If VitalCaring were to gain 100 or more locations from Amedisys, that would turn it into one of the largest home health providers in the country. Currently, the company has about 65 locations, mostly in the Southeastern U.S.

The Amedisys deal would more than double VitalCaring’s current footprint, also expanding it further across the U.S.

With 150+ locations, VitalCaring will supersede the location total of some of the larger, private home health providers. The deal would put it in the ballpark of others like Compassus, Elara Caring and AccentCare.

Backed by The Vistria Group and Nautic Partners, VitalCaring is led by April Anthony, the former CEO of Encompass Home Health & Hospice. Encompass Home Health & Hospice eventually spun off of Encompass Health (NYSE: EHC), becoming its own public entity – Enhabit Inc. (NYSE: EHAB). Anthony left the company before its spinoff.

When the Dallas-based VitalCaring first launched a couple of years ago, it was a smaller, regional provider. Anthony told Home Health Care News that, after establishing a culture, the goal was to gain more scale.

She also mentioned a void she saw in the home health market, one that she felt she and VitalCaring could step into reasonably soon.

“If you think about five years ago, you had all these founder-owned, founder-ran businesses,” Anthony said last September. “The people who were around the table leading home health businesses were lifers. They were people who were passionate about home health care. Now, that’s not necessarily [the case]. There’s this void in the market that I’m super excited about stepping into. We have the opportunity to bring the heart back to home health care.”

Anthony, if the deal closes, will again be at the helm of one of the largest home health companies in the country. It will also help with operational struggles like negotiating with Medicare Advantage (MA) plans.

The deal is expected to close at some point before year end.

Luke James – the president of VitalCaring, and also an Encompass veteran – said at Home Health Care News’ Capital + Strategy conference that he thought now was actually a good time to grow as a home health company.

“If you have a long-term vision, and your sponsors aren’t looking to exit tomorrow, then you’ve got the patience to be able to buy when it’s tough and be really well positioned when they’re looking to exit,” James said.

A VitalCaring spokesperson told HHCN that the company could not provide specific details on a pending transaction, but did offer that “this represents our ongoing commitment to grow VitalCaring in pursuit of our mission to transform lives and foster hope through genuine caring to patients nationwide.”

The post What An Amedisys-VitalCaring Deal Would Mean For Each Company appeared first on Home Health Care News.

The divestiture was a way for Amedisys to avoid further antitrust concerns from regulators prior to it joining UnitedHealth Group (NYSE: UNH).

UnitedHealth Group’s Optum agreed to purchase Amedisys last June for a purchase price of $3.3 billion. Optum already owns LHC Group, another one of the largest home health companies in the country.

The Baton Rouge, Louisiana-based Amedisys has 521 care centers in 37 states and the District of Columbia. It offers home health, hospice, palliative and home-based high-acuity care.

In May, a report surfaced that UnitedHealth Group and Amedisys were working with regulators on a divestment package over “over 100 locations.”

A short time after, a “private equity-backed” buyer for those locations emerged. Home Health Care News reported that buyer was VitalCaring, the Dallas-based home health and hospice company led by April Anthony. VitalCaring is backed by The Vistria Group and Nautic Partners.

VitalCaring then reportedly backed away from the deal, due to disagreements over the worth of those locations once they left the Amedisys network, sources told HHCN.

HHCN also reported at the time that it was likely both parties would come back to the table. VitalCaring is one of the few growing home health providers with enough capital backing to pull off an acquisition of this magnitude.

Now, the deal is agreed upon between the two parties, though details are minimal. A purchase price was not listed in Amedisys’ 8-K filing, nor was the number of locations.

According to the financial filing, the divestment agreement being finalized is dependent on the UnitedHealth Group deal going through.

“Consummation of the Divestiture is contingent on a number of conditions, including the consummation of the previously announced merger transaction (the “Merger Transaction”) contemplated under the Agreement and Plan of Merger, dated June 26, 2023 (the “Merger Agreement”), by and among UnitedHealth Group, Aurora Holdings Merger Sub Inc., a wholly owned subsidiary of UnitedHealth Group (“Merger Sub”), and Amedisys, pursuant to which Merger Sub will merge with and into Amedisys (the “Merger”) upon the terms and subject to the conditions set forth in the Merger Agreement, with Amedisys surviving the Merger as a wholly owned subsidiary of UnitedHealth Group,” the filing states.

The transaction is expected to close in the second half of 2024.

The post Amedisys To Divest Certain Home Health Locations To VitalCaring, Clearing Path For UnitedHealth Group Deal appeared first on Home Health Care News.

The Centers for Medicare & Medicaid Services’ (CMS) proposed home health payment rule, released Wednesday, included significant cuts for the third straight year. Those cuts, among other proposed changes, raise questions over the stability of the industry in the coming years.

It has providers asking themselves and others the question: “Why us?”

For an industry that demonstrably saves money for the larger health care ecosystem, such harsh and continued cuts seem to be contradictory, home health stakeholders believe.

“These cuts are nothing short of draconian,” Stacey Smith, the vice president of public policy at AccentCare, said Wednesday.

On top of those cuts is the threat of CMS clawbacks for what the agency believes to be overpayments to home health agencies over the last five years. That clawback number has risen to $4.55 billion in total – more than $966 million than CMS previously estimated. And it will keep growing until further, temporary cuts are implemented.

CMS has expressed that it doesn’t want to put multiple cuts – of the permanent and temporary variety – on top of each other. But some providers see more cuts, for more years, that will keep them in payment purgatory. They would rather rip the Band-Aid off.

“CMS is not proposing the implementation of temporary adjustments, now estimated at a truly bewildering $4.5 billion,” Stephens wrote in an analyst’s note yesterday.

“Bewildering” and “draconian” feel like two descriptors of the 2025 proposed rule that most providers and advocates would agree with.

In this week’s exclusive, members-only HHCN+ Update, I’ll dive deeper into the cuts, but also consider a few other noteworthy proposals included in the rule, including changes to the Home Health Value-Based Purchasing (HHVBP) model, the Conditions of Participation (CoPs) and more.

Predictably unsustainable

In 2022, CMS proposed a 4.2%, or $810 million, decrease to aggregate payments for 2023. It ultimately finalized a permanent behavioral adjustment cut to the Patient-Driven Groupings Model (PDGM), but also finalized a 0.7%, or $125 million, increase.

In 2023, CMS proposed a 2.2%, or $375 million, decrease to aggregate home health payments for 2024. It finalized a 0.8%, or $140 million, increase compared to 2023 aggregate payments, while again implementing permanent cuts.

Wednesday, it proposed a 1.7%, or $280 million, decrease to aggregate home health payments for 2025.

The final rule is expected in late October or November, but the jig is up. Providers believe CMS, to push its cost-cutting agenda, lessens the blow in the final rule to get provider and advocate heat off its back.

And with that, it’s time to evoke the Paul Kusserow quote that I revisit when proposed and final payment rules are released.

“My concern is the game that we play with CMS,” Kusserow – then the CEO of Amedisys Inc. (Nasdaq: AMED) – told me two winters ago. “It’s a long, exhausting game. They come up with a proposed significant cut. The whole industry gets all worked up about it and runs to Washington. I’ve done this, and everybody in our business has. We lobby, lobby lobby, they get a lot of pressure, and then they come back with something that is just mediocre. It’s not enough for us to get Congress all worked up about it to pass legislation. But it’s enough to keep us in purgatory. We have to get through this dribbling sense of inadequate reimbursement.”

While providers have become acutely aware of this game, it appears CMS will continue to play it.

In this game, though, CMS still slides in permanent cuts that will have long-lasting effects on the home health industry. And what’s most disheartening about that for providers is the fact that home health care is one of the only industries that is both future-facing and cost-saving.

“Home health care is a proven, efficient spend in that it reduces the total health care cost for the entire system,” Choice Health at Home CEO David Jackson told me. “It continues to be frustrating that we are looked at in a silo, and not seen for the significant value that we bring. … It’s frustrating for providers, who are seeing an increased difficulty in retaining and maintaining staffing levels that are sufficient to serve the public.”

Indeed, home health care does save health care systems and health care payers money. It’s why private payers want more home health services for their members, not less.

It’s also why HHVBP saved Medicare hundreds of millions during its demonstration period, and why it is expected to save Medicare billions more over the coming years. It’s important to note that the home health-focused HHVBP is among the few CMS Innovation Hub initiatives that has produced savings – a fact that recently led to its head, Elizabeth Fowler, having to testify in front of Congress.

During that hearing, Republican Chair of Energy and Commerce Cathy McMorris Rodgers (R-Wash.) said she has “a hard time believing any objective observer could look at the results thus far and describe CMMI as a success.”

What’s more, though more home health care is good for the overall system, Medicare fee-for-service cuts almost guarantee there will be less services to go around for an aging population moving forward. That’s particularly the case because of Medicare Advantage (MA) penetration, with MA plans already paying far less for services than traditional Medicare.

It is not CMS’ job – it has asserted – to consider MA payments for home health services. Because of that, an incomplete picture of home health agency profits are often painted by the Medicare Payment Advisory Commission (MedPAC) and others.

“MedPAC needs to be instructed to include all Medicare reimbursements and related costs rather than just Part A,” VitalCaring President Luke James previously told HHCN. “Part C — or Medicare Advantage — now represents more than half of the Medicare beneficiaries in our country. Home health providers didn’t ask for this reality, nor did they cause it. But the industry is reeling from the numerous negative implications this reality has caused.”

Instead, providers are banking on higher rates from MA plans, as well as tech investments to reduce costs on the back end. But there’s no guarantee those measures alone will be enough, particularly for the thousands of providers without scale.

“Mom-and-pop agencies are a necessity for the delivery of care in the United States,” Jackson said. “They serve smaller communities, niche communities. I’m always fascinated at what a nurse in rural East Texas or West Texas has been able to do, that a big company just never would have done. … That is something I think we need to foster in the system.”

What else is in the proposed rule

Every year, in addition to the estimated decrease or increase in base payment, there are many other elements of a proposed rule to consider.

The now-nationwide HHVBP model could change. CMS is accepting comments for consideration around future performance measure concepts. In the past, some providers argued that certain HHVBP measures were out of home health providers’ control. For instance, patients in extremely poor condition when received by home health agencies are sometimes unlikely to get better, no matter how exemplary the care they receive is.

In addition to that request for information, CMS is also considering how it could further embed health equity measures into HHVBP.

Jackson noted that cuts on their own have the chance to worsen health equity.

“Nurses are going to be magnetized to these more affluent markets,” Jackson said. “It’s going to hurt the ability to obtain talent in rural markets, in markets that have difficulty finding staff. That’s going to have a negative impact on health equity.”

That will likely be exacerbated by the minimum staffing level requirement in nursing homes, which will naturally make the competition for nurses more fierce in post-acute care.

CMS is also taking a greater look at home health access. In the past, MedPAC has viewed access based on how many agencies exist per U.S. county. But counties vary by size, as do home health agencies. Providers have argued that access is worse off than the agency-per-county metric would suggest.

“We are seeking public comments on factors that influence the services HHAs provide, the referral process, limitations on patients being able to obtain HHA service, such as rural location and availability of staff, plan of care development, and the HHA’s communication with patients’ ordering physicians and allowed practitioners,” the 250-page proposed rule read. “We ask the public for data, detailed analysis, academic studies, or any other information to support their comments that provide a direct link to patient health and safety.”

Outside of questions around initiation to care, CMS specifically wants to know the answer to this question: “What challenges, barriers, or other factors, such as workforce shortages, particularly in rural areas, impact rehabilitative therapists and nurses in meeting the needs of patients at the start of care and early in the plan of care?”

Of note is also that CMS seems to accept some industry data – for instance, regarding health equity – but not all. Last year, CMS scoffed at most of the data that the industry put forth around referral rejection rates and contemporary home health access.

CMS also proposed an “acceptance to service” policy, which it believes at least some home health agencies already have.

“This new standard would require the HHA to develop, implement, and maintain through an annual review a patient acceptance to service policy that addressed criteria related to the HHA’s capacity to provide patient care, including, but not limited to, anticipated needs of the referred prospective patient, case load and case mix of the HHA, staffing levels of the HHA, and competencies and skills of the HHA staff,” the proposal read. “In addition, we propose the HHA would have to make public accurate information about the services offered by the HHA and any limitations related to the types of specialty services, service duration and service frequency.”

The staffing-specific requirements could be the successor to the nursing homes’ minimum staffing level mandate. While it’s unlikely a similar mandate would come into home health care, given its one-to-one nature, a more stringent policy around staffing capabilities could come to fruition.

Potential mitigators

More lobbying efforts will follow this proposed rule. The Partnership for Quality Home Healthcare CEO Joanne Cunningham believes that this year being an election year will actually bode well for the industry.

Jackson said the same.

“In an election year, we need to be loud,” he said. “We need to be vocal.”

In the past, the industry has had no issue getting measures like The Preserving Access to Home Health Act introduced. The issue has been getting it to move after introductions in the House and Senate.

CMS may again reduce the cut by the time the rule is finalized. But it’s clear that the agency is not budging on its behavioral adjustment thesis.

Despite it being unlikely, Congressional action may be home health providers’ best bet in 2024.

The post ‘Draconian’ And ‘Bewildering’: Inside The 2025 Home Health Proposed Payment Rule appeared first on Home Health Care News.

As UnitedHealth Group (NYSE: UNH) and Amedisys (Nasdaq: AMED) work on a divestment strategy that will satisfy regulators, a lot hangs in the balance.

For one, UnitedHealth Group and Optum’s deal for the home health and hospice provider Amedisys is one of the largest deals in the industry’s history, only trailing Optum’s deal for Amedisys’ peer, LHC Group, last year. The former deal is worth $3.3 billion and still pending, while the other was worth $5.4 billion and is finalized.

Getting the deal done is important to both parties. UnitedHealth Group is banking on home-based health care for its value-based care strategy, but is under significant and widespread antitrust scrutiny. Amedisys, on the other hand, has a good deal in place – in this market – for its shareholders.

A Jefferies analyst note suggested that, if the deal were to fall through, Amedisys’ stock price would likely fall. The agreed-upon purchase price is $101 per share, but Jefferies sees that coming down to $74 per share without the deal getting done.

All the while, if Amedisys offloads 100-plus of its locations to avoid antitrust litigation, the buyer has the chance to bolster its footprint and capabilities considerably. A regional provider could become a nationwide one. A top-10 home health provider could become a top-5 provider.

With news last week that the divestment strategy has hit a snag, there’s still a lot of dominos yet to fall.

What dominos need to fall, and where they may fall, is the topic of this week’s exclusive, members-only HHCN+ Update.

Divestment dynamics

To put things into perspective, about 1% of the entire home health market could change hands in the Amedisys divestment.

There were 11,353 active home health agencies in 2022, according to the Research Institute for Home Care (RIHC). That number has likely slightly dwindled since, due to Medicare Advantage (MA) penetration and Medicare fee-for-service rate cuts.

In a fragmented home health industry, over 100 locations changing ownership is no small deal. If the Optum-Amedisys deal is completed, Optum will become the largest provider of home health care with just about 10% of the market underneath its belt.

The divestment will likely decrease Amedisys’ footprint by about 20%. Currently, the company has 522 locations across 37 states and the District of Columbia.

Initially, Amedisys had what appeared to be a perfect partner for the divestment: a private equity-backed home health provider looking to scale.

Capitol Forum reported last week, however, that the partner had walked away from the Amedisys deal. Based on information I gathered from industry sources, I later reported that partner was, in all likelihood, the April Anthony-led Vital Caring.

The Vistria Group and Nautic Partners each own one-third of VitalCaring, with Anthony owning the final third.

VitalCaring President Luke James said earlier this year at HHCN’s Capital + Strategy conference that he thought now – despite the headwinds – was a great time to scale in home health care.

“If you have a long-term vision, and your sponsors aren’t looking to exit tomorrow, then you’ve got the patience to be able to buy when it’s tough and be really well positioned when they’re looking to exit,” he said.

Whether the divestment partner was VitalCaring or another entity, the change of heart is interesting for a couple reasons. Given how long it appears talks persisted, for example, it seems likely that the interested parties hit a snag later down the line in talks. So why is that?

One source told me that the buyer may have wanted assurance that the Amedisys referral sources that exist today would exist post-acquisition. Or, if that assurance wasn’t there, that the parties would come to an agreement on a lower price.

There’s also a lot that goes into this significant of a carve-out deal. The buyer would need to have the right leadership in place to integrate seamlessly – or risk the “snake eating an elephant” analogy.

Of course, acquiring a large home health footprint could also infuse leadership talent into the buyer’s organization.

James also mentioned the need for more home health talent at VitalCaring earlier this year.

“We’re not at a point yet where we feel like we have all the talent we need,” he said. “When we’re looking at deals that have real go-getters within, talented people that have a seat at the table within the organization – that adds a lot of value.”

If the Amedisys-divestment buyer does come back to the table, it’s likely they’ll have some leverage.

As of right now, it’s a tough time to solicit offers for around 100 home health and hospice locations. Private equity money mostly remains on the sideline. Payers – like UnitedHealth Group and Humana Inc. (NYSE: HUM) – have antitrust concerns. There aren’t a ton of home health providers who fit the bill as potential suitors, for a variety of reasons.

The locations could be split up, but the Capitol Forum did suggest Amedisys is still looking for a single buyer.

And that’s why, in my view, VitalCaring would have been perfect.

The post What The Amedisys Divestment Snag Means For The Home Health Industry appeared first on Home Health Care News.

Capitol Forum had previously reported that Amedisys was aiming to offload more than 100 of its locations to a “private equity-backed buyer.”

On Friday, Capitol Forum reported that the buyer had walked away from the deal, leaving Amedisys without a divestment partner. Amedisys stock dropped over 5% as of Friday afternoon, after the news surfaced.

“Amedisys shares were weak today after a report from Capitol Forum … suggesting that talks have fallen through between AMED/UNH and the PE-backed potential buyer of the company’s home health assets that need to be divested as part of their sale to UNH,” an analyst note from the investment banking firm Jefferies read. “While we are still assuming that the AMED sale at $101/sh gets finalized, we highlight how our downside scenario in a no-deal situation points to a valuation of $74/sh.”

It is unclear why the buyer walked away at this point. But multiple sources with knowledge of transaction talks told Home Health Care News that the April Anthony-led VitalCaring was the buyer.

VitalCaring and one of its private equity sponsors, Nautic Partners, did not respond to inquiries from HHCN Friday to confirm or deny that reporting. The Vistria Group elected not to comment, according to a spokesperson.

UnitedHealth Group’s Optum agreed to acquire Amedisys – one of the largest home health and hospice companies in the country – in a $3.3 billion all-cash deal last June. Since then, the U.S. Department of Justice (DOJ) has requested more information around the deal, and has also reportedly considered suing to block the deal. UnitedHealth Group is also under a DOJ antitrust investigation.

Optum already owns another one of the largest home health providers in the country in LHC Group, which it officially acquired at the beginning of 2023.

The divestment strategy was a way for Amedisys and UnitedHealth Group to mitigate those DOJ concerns. That strategy, however, has now seemed to hit a bump in the road. It’s likely that Amedisys wants to sell the locations to one buyer, rather than multiple.

VitalCaring – if it was the rumored private-equity buyer – would have become one of the largest home health providers in the country had it been the beneficiary of Amedisys’ divestment. Currently, it has close to 100 locations, mostly in the Southeastern U.S.

It’s likely that other parties would be interested in the Amedisys locations. But there may not be a lot of strategics willing – or able – to step in.

Humana’s (NYSE: HUM) CenterWell Home Health may also be concerned about antitrust scrutiny. Enhabit Inc. (NYSE: EHAB) just completed a strategic review. Addus HomeCare Corp. (Nasdaq: ADUS) still leans toward personal care more than it does home health care. That leaves only a few other large providers – of the public and private variety – that may or may not have interest.

Other private equity groups could step in to form a new venture from the Amedisys divestment, but it’s also a tough buying environment currently, given the macroeconomic headwinds as well as the micro payment headwinds in home health care.

The Capitol Forum report suggested that Amedisys is currently looking for another single buyer for the assets.

The post Private Equity-Backed Buyer Drops Out Of Sweepstakes For Divested Amedisys Locations appeared first on Home Health Care News.

The Medicaid Access Rule has been finalized, with six years until the implementation of the 80-20 provision. There’s no time to rest for home-based care providers and advocates on the regulation front, however. Summer is near, and that means so is the home health proposed payment rule from the Centers for Medicare & Medicaid Services (CMS).

In 2022, a significant proposed cut to home health payment mostly took providers by surprise. In 2023, it was expected. And, unfortunately, the home health industry is expecting more of the same in the next proposal.

The counter to CMS’ rate cuts and attempted clawbacks remains the same in 2024, and it is all-encompassing: grassroots action from providers locally; a lawsuit against CMS and the U.S. Department of Health and Human Services (HHS); a push for Congressional support and direct pleas to CMS to rethink its methodologies.

In 2024, there’s already been a few major developments on those fronts.

For one, at the end of April, the National Association for Home Care & Hospice’s (NAHC) lawsuit against CMS – first filed in July of last year – was dismissed by a federal judge. Though an unfortunate update to the situation, NAHC President William A. Dombi proclaimed the legal battle far from over.

“We are disappointed with the court’s ruling,” Dombi said. “However, it is a minor setback that we can readily overcome. Often justice delayed is justice denied. Here, we will have our day in court. This battle is far from over.”

Meanwhile, last week, Sens. Debbie Stabenow (D-Mich.) and Susan Collins (R-Maine) sent a letter to CMS Administrator Chiquita Brooks-LaSure strongly advocating against further cuts to home health payment.

“We appreciate CMS’ commitment to helping people get the care they need, where they need it,” the senators wrote. “This must include home health services for people with Medicare. As CMS proceeds to develop Medicare home health payment rates for 2025, we urge you to consider the value home health care provides to the Medicare program and its beneficiaries.”

There’s a lot going on in Washington, D.C., this year. Providers and advocates will have to find a way to cut through the noise to get the attention of lawmakers with the ability to prevent further cuts.

This week’s members-only, HHCN+ Update focuses on the next five months in home health payment policy, and what the industry expects is ahead of them.

More cuts ahead

There’s not a provider I’ve talked to this year that expects anything but further proposed cuts in June or early July. That’s because CMS made it clear in last year’s final rule that there would be more to come on the cutting front.

Partnership for Quality Home Healthcare (PQHH) CEO Joanne Cunningham forecasted another “doomy, gloomy” home health policy landscape for 2024 in January.

But Cunningham also believes that 2024 being an election year works in the industry’s favor.

“We know that Congress in an election year is very keenly tuned into the needs of their constituents,” she told me. “We are very hopeful. With some of our Congressional advocates, we’re looking for solutions that could make their way into a package that Congress will undoubtedly be moving, dealing with Medicare provisions. Our goal is to make sure that home health is part of that.”

Previously, lawmakers have introduced the Preserving Access to Home Health Act. Similar bills were introduced in 2022 and 2023, both in the Senate and the House. The latest version would have mitigated cuts, and also forced The Medicare Payment Advisory Commission (MedPAC) to take a more holistic view at home health reimbursement by including Medicare Advantage (MA) payments.

After two years of cuts – a 2.890% cut last year, and a 3.925% cut the year before – providers would likely take any respite, but respite is not the goal.

CMS has proposed more severe cuts than it has finalized of late, allowing the overall aggregate payment adjustments to come in as slightly positive. But those positive adjustments are just positive on the surface, which is a story PQHH, NAHC and the provider community are trying to tell.

Since 2020, CMS has either implemented or announced over $19 billion in cuts through 2029, according to PQHH. As laid out on the chart above, these cuts will have a compounding effect over time.

CMS has dismissed providers’ access-to-care concerns over the last few years, and it has not wavered on its strategy.

“In working with folks from CMS, I find I’m generally very impressed with smart people trying to do good work,” Michael Johnson, the president of home health and hospice at Bayada, told me last year. “I always try to make sure I don’t vilify these folks, because I think they really are trying to do good work. But the primary tool they have is payment. All they have is a hammer. So, if you need a screw adjusted, you’re still using a hammer, and we know what the outcomes of that look like.”

Clawbacks

Providers are up against that hammer, and the result of it is the chart shown above.

But CMS is also attempting to claw back “overpayments” it made to providers in 2020-2022: $873 million in 2020, $1.2 billion in 2021 and $1.4 billion in 2022.

At this point, every year that the home health industry does not fully win its fight against CMS, the potential impact of cuts and clawbacks for future years gets worse.

VitalCaring President Luke James and I had a conversation about those clawbacks on stage last month at Home Health Care News’ Capital + Strategy conference.

“I hate to beat a dead horse, but this temporary payment adjustment, the longer it just sits out there and doesn’t get enacted – it’s just growing in terms of size,” James said. “I know we’ve been talking about it for three years. And I think we’ve become maybe somewhat numb to that. But the numbers are very large, and they’re like problems; they only get worse if they fester.”

I then asked if James would rather have those clawback cuts implemented now.

“I’d rather have them not implemented at all,” he continued. “I’d rather them see the failed logic that they’re applying. … But if they’re going to implement them, I think I’d rather take a rip-the-Band-Aid-off approach. Because a lack of certainty is what creates a really hard dealmaking market. Certainty – rather than a perpetuity of uncertainty – is a better place, in my opinion.”

At this point in the game, morale is certainly a part of the equation, almost as much as the nuts and bolts relating to fighting cuts. Providers have fought tooth and nail to both survive and advocate for over two years now.

Stabenow and Collins’ letter to CMS is further evidence of the bipartisan support the industry has in Washington, D.C.

But if 2024 isn’t the year that things turn for the better for home health providers, it will be tough to convince smaller providers that the fight is still worth it – yet again.

The post ‘Perpetuity Of Uncertainty’: Home Health Providers Await Another Poor Payment Proposal While Left In Limbo On Massive Clawbacks appeared first on Home Health Care News.

As growing providers, each company has picked up what they believe to be the right assets, at the right time, over the last couple of years.

Now, their leaders are expecting seller expectations to finally normalize on a greater scale in 2024, paving the way for accelerated growth.

While New Day Healthcare has been quite acquisitive since it launched in 2020, VitalCaring – led by April Anthony – has been laying down the groundwork of its venture before really zeroing in on major acquisition targets.

“It took a lot just to come together, to rebrand, to get everyone on one system,” VitalCaring President Luke James said last month at Home Health Care News’ Capital + Strategy event. “All of that was really what I’ll call the foundation laying. And it’s really hard to feel confident about doing a lot of deals, or a big deal, when you’re laying on top of a foundation you don’t feel is really settled yet.”

Backed by Anthony herself, The Vistria Group and Nautic Partners, the Dallas-based VitalCaring is a home health and hospice provider with around 60 locations across Texas, Oklahoma, Louisiana, Mississippi, Alabama and Florida.

With its foundation built, James and VitalCaring have the confidence to begin layering on top of it in 2024 and beyond.

Similarly, New Day Healthcare has been establishing a footprint as an emerging, up-and-coming home health, home care and hospice provider since its founding in early 2020. While it has already completed at least nine acquisitions, the company also now has a basic foundation it feels confident building upon in a more major way.

In essence, it – like VitalCaring – is primed for some more big-game hunting in 2024.

“We have a good base to build off of now, you want to make sure that base is stable,” New Day Healthcare CEO G. Scott Herman also said at Capital + Strategy. “You’ve got to have your business intelligence in place for your ability to scale and grow, in an industrialized process. We’ve got that now. So we feel like we can be more aggressive in both scale and numbers of acquisitions now over the next year or two years.”

Also based in Texas and backed by Kaltroco, New Day has about 30 locations across Texas, Missouri, Kansas and Illinois. It serves nearly 110,000 patients annually and has about 7,000 team members.

Its service line base is personal care, which Herman feels is a good bedrock for a home-based care continuum. He also thinks five or six more deals in 2024 is a reasonable expectation for the company.

Getting to that ‘sweet spot’

Over the last few years, home health lifers have made note of the fact that there are less founder-run businesses in the mid- to large-sized market range.

VitalCaring, for one, is trying to fill that void.

“If you think about five years ago, you had all these founder-owned, founder-ran businesses,” Anthony, VitalCaring’s CEO, told HHCN last year. “The people who were around the table leading home health businesses were lifers. They were people who were passionate about home health care. Now, that’s not necessarily [the case]. There’s this void in the market that I’m super excited about stepping into. We have the opportunity to bring the heart back to home health care.”

With that in mind, both New Day and VitalCaring leaders see an opportunity to grow into a “sweet spot” – a place where there’s considerable scale behind them, but not necessarily a nationwide, public market-type footprint.

“We’re not looking to build a billion-dollar company, we’re looking to build something in that sweet spot for home care,” Herman said. “$300 million to $500 million in revenue, that’s perfect. You can still touch the company, you still reach things. A billion dollar company? What the heck are you going to do with that? It’s a mess.”

VitalCaring may have aspirations above that $500 million revenue mark, but plans to stay within a specific geography – at least for now.

A lot of states may make sense to enter into at some point for the company, but its near-term strategy is to grow contiguously from the Southeast states it is in right now.

For New Day, Herman said the first must-have when looking at a seller is culture alignment. The company is looking for solid leadership, stability and consistency, and is not interested in fixer-uppers.

James went deeper on that front, saying that part of the focus around VitalCaring’s growth right now is talent acquisition.

“We’re not at a point yet where we feel like we have all the talent we need,” James said. “When we’re looking at deals that have real go-getters within, talented people that have a seat at the table within the organization – that adds a lot of value.”

What a seller needs to look like

Culture, scale and geography are starting points for attractive assets, in James’ and Herman’s eyes.

Beneath that, there’s plenty more layers.

For VitalCaring, its leaders are uninterested in assets reliant on one specific thing – whatever it may be – to be successful.

“They have to be well rounded,” James said. “We’re going to say no pretty quickly if there’s a high level of referral source concentration, or if 80% of their admissions are coming in from one or two sales reps that are either going to hold you hostage because they can, or where you’ve got turnover risk if they leave. Then you’re losing a lot of the value that you just paid a lot of money for. … We want strong organic growth and a good payer mix.”

On New Day’s end, it’s also taking a closer look at compliance.

“If we don’t have a clear line of sight to resolution of compliance issues, we don’t do it,” Herman said. “Then we’ll jump into financial performance, which is where we assess the diversity of the business. The more diverse the business, and the more stable the payers that are feeding that business, the more we like it.”

Outside investors may see home-based care as an opportunity for long-term growth, but perhaps just not now. Even inside operators may see the present market as a poor time to grow.

Herman and James see things differently, with multiples coming down from 2020 and 2021 highs.

“If you have a long-term vision, and your sponsors aren’t looking to exit tomorrow, then you’ve got the patience to be able to buy when it’s tough and be really well positioned when they’re looking to exit,” James said.

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