“Investors continue to see healthcare services companies as great places to put their money,” Andre Ulloa, partner with M&A Healthcare Advisors, told McKnight’s Home Care Daily Pulse. “In these volatile times, finding a point of certainty is extremely valuable.”
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.
McKnight’s | Diane Eastabrook
Investors on the prowl for home care and hospice properties are encountering two somewhat unfamiliar obstacles: rising inflation and interest rates — the likes of which the industry hasn’t seen in 40 years.
“We’re not in uncharted waters with inflation, but the charts are so old they may have dragons on them,” Tom Lillis, a partner in M&A advisory firm Stoneridge Partners, said jokingly to McKnight’s Home Care Daily Pulse.
Recent developments present a sobering reality. On Wednesday, the Federal Reserve Board hiked short-term interest rates a quarter of a percentage point and is expected to hike them at least six more times this year. The Fed’s move followed February’s 0.8% rise in the Consumer Price Index, which is up 7.9% in the past 12 months.
Rising interest rates make borrowing more expensive and that can derail mergers and acquisitions. However, M&A experts say that might not necessarily happen for the home care and hospice industry, which has enjoyed back-to-back blockbuster years for deals.
Attractive segment
A number of factors, including an aging demographic, growing demand for home-based care and legislation supporting home care, such as the Choose Home Care Act, continue to make investing in home care and hospice attractive.
“Investors continue to see healthcare services companies as great places to put their money,” Andre Ulloa, partner with M&A Healthcare Advisors, told McKnight’s Home Care Daily Pulse. “In these volatile times, finding a point of certainty is extremely valuable.”