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Home Health Blog – Industry Concerns Increase as Private Equity Firm Investment and Purchase of Home Health Agencies Nationwide Grows

Nationwide, the home health care industry is experiencing the highest level on record of private equity corporation assessment and appraisal of home health businesses. As a result, mergers and outright purchases of homecare and home health agencies have skyrocketed in recent months. With the large level of privately owned, for -profit equity capital firm activity, a growing wave of concern for the overall U.S. home health care sector is emerging as well. This concern extends not just to the business model itself as far as staff, caregivers, and management, but also the possible trickle-type down effect on patient care.

With the health care spectrum becoming more infiltrated by these types of firm whose sole purpose is to extend profits at any and all costs, the many detractors of the equity capital firm model , have openly expressed questions as to both the intent and endgame of these investments. The homecare sector inherently houses a certain “personal side” of its operation model, and the usual neglect of “money grab” based firms failing to equally balance profit with providing the best services, has many raising a red flag.

While home health care continues to experience record growth, even if saddled with a deficit of caregivers and qualified staff development and retention, the industry is not free from struggle particularly with smaller firms which possess less capital on hand and margin for error. Generally, financial analysts will agree that the instant infusion of cash that often descends upon a business is good for scaling operations, increasing efficiency, and investment in the tools necessary to sustain and compete in the market.

An official with a national alliance of physicians stated when questioned about the sudden surge, that his belief was that the firms were solely “in it for the money”, which he believes spells trouble for both the businesses and their patients. “If we ultimately see the cost of care go up in the quest for profit, and inevitably the quality of the care go down in the typical cost cutting efforts that equity capital firms are well associated with, everyone will pay the price,” he added.

The industry is wrought with examples of where these types of acquisitions spell a myriad of issues depending on which side of the deal a business falls on. Experts cite the case of the skilled nursing facility industry, where larger firms have bought out smaller agencies and the patients ended up experiencing significant downgrades in level of care and satisfaction. Once large portions of the money-challenged skilled nursing care industry was bought up by private equity firms, many agencies saw the cash extracted from them, their staffs reduced, and the overall business model suffer.

While much of the angst and concern regarding private equity influence bottoming out the level of care administered from agency to agency, a chorus of other voices are more worried about the unintended consequences with regards to nurses, aides, caregivers, and other staff. Since in essence, the private equity firm’s obligation and loyalty lies with its core investors, an agency being stripped of resources, staff, and equipment could be a common occurrence to fulfill the mandate to stay tight to operational budget and bottom line margins.

Workforce advocacy groups are already keeping a close eye on this wave of private investment on homecare. Additional study is needed to clearly gauge the positive and negative effects on patients and homecare. Additionally, market forces and factors including the shortage of qualified caregivers and the aging population influencing higher demand will also play a role in attracting more or deterring additional mass investment.

On the other side of the debate, some in the industry have cited how investment from large equity capital firms allowed their agencies to expand and open new locations. Others have gone on record to say that private money provided by such firms helped saved their agencies as they were struggling in smaller, less lucrative areas. Higher efficiency in operational standards is also an achievable goal when a cash strapped agency gets an infusion of capital. Taking such things into consideration is one reason why a respectable number of politicians, industry supporters and insiders, and business owners view the private investment trend as a net positive for most of the industry as a whole.

According to recent data, on a national level there have been nearly 40 large scale private equity funded acquisitions deals spanning the home health, home care and hospice industry within the last 3 years. The list of participants includes companies both large and small such as Home Helpers, Humana, Senior Helpers and others. As the demand for homecare services reaches its apex, all parties will have a vested interest in how this plays out in the long run.

For more information on this topic or on Home Health Software technology, email us at Info@Alorahealth.com

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