“It’s like not letting banks fail,” says Mike Moran, co-founder of M&A Healthcare Advisors of Calabasas, Calif. The government offered Small Business Administration loans as part of the Paycheck Protection Program that helped agencies keep employees on the payroll during the COVID-19 crisis. Those loans were all forgiven, which attracted the interest of investors who see the home health industry in a new light now.
A nonprofit watchdog group is raising a red flag over private equity’s growing role in home health and hospice services. In a recent report, the Private Equity Stakeholder Project said for-profit home health and hospice agencies have been linked to lower standards of care, fewer patient visits, higher hospitalization rates and poorer pay than their nonprofit counterparts.
“Private equity’s increased involvement in for-profit home healthcare and hospice companies may exacerbate the aforementioned issues due to the industry’s focus on profit maximization — sometimes at the expense of good stewardship —and therefore should garner more scrutiny by those concerned about the quality of our healthcare system,” the report noted.
by: Annmarie Sarsfield Edwards
Apr 7, 2022
Investors watching the effects of the pandemic within the home health space have heightened interest in buying thanks in part to the strong federal support the health care sector received during the pandemic while other industries were struggling and failing.
“It’s like not letting banks fail,” says Mike Moran, co-founder of M&A Healthcare Advisors of Calabasas, Calif. The government offered Small Business Administration loans as part of the Paycheck Protection Program that helped agencies keep employees on the payroll during the COVID-19 crisis. Those loans were all forgiven, which attracted the interest of investors who see the home health industry in a new light now.
These events have caught the attention of the financial world that wants to be a part of this resilient health care market, Moran says.
Also, publicly traded companies have done well, says Cory Mertz, managing partner at Mertz Taggart in Ft. Myers, Fla. “It’s still the case now. That’s why private equity groups have gotten interested in the space.”
For companies that have grown by acquisitions and are thinking about going public, “the investment community will reward them with a high multiple of EBITDA (earnings before interest taxes depreciation and amortization) cash flow,” Mertz says.
