In 2001, I joined the home care industry as a VP of Sales for a home healthcare agency. For the past 19 years I've seen the industry drastically change, yet in some ways remain the same. I get the benefit of talking to providers all around the country on a regular basis, and to hear their challenges and successes. From my vantage point, here's how the "Big 3" of private duty, home healthcare, and hospice look today. Just for fun, I'm going to give each one a Buy, Sell, Hold rating like Wall Street analysts do.
Private Duty Non Medical Homecare - The private duty homecare industry has settled in after a decade of explosive growth in the number of providers. Anecdotally, I used to get at least 1 phone call per month from a new franchisor who was planning to take their brand nationally. Most times this was based upon a single, successful location which the prospective franchisor felt they could replicate in other markets. Those calls have slowed dramatically over the past 3 years. I've seen the number of $5mil+ providers grow strongly during this time. In the past, this was a rare bird but now private duty agencies of this size (and above) are common. The big regional players are expanding their footprint to compete with franchise agencies and independents. A number of smaller agencies have exited the market, and struggling franchisees in challenging markets have called it a day. The industry appears to be on the verge of "right sizing" itself which should lead to more robust providers with larger and more consistent revenue streams. The impact of new Medicare Advantage inclusion hasn't really yet been felt, and remains to be seen if it will have any dramatic impact on the market.
Licensed Home Healthcare - Of course, with the advent of PDGM the home healthcare world is in a bit of turmoil, at least for smaller to mid sized providers. The first major reimbursement shakeup in 20 years is creating opportunity and consolidation. As early as late Summer 2019, smaller providers were planning their exit from the industry and I've even seen some shutdowns during the early days of PDGM. Of course, like anything else, change brings opportunities for well funded efficient organizations. The calls I receive looking to acquire smaller providers "on the cheap" are steady at least. The challenge is most of these smaller providers don't have the financial stability to hang in there until a suitor comes along. There has been strong and significant consolidation among private equity companies and home health over the past 7 years, and that had the effect of forcing smaller providers out of the industry over that period of time. That trend should rapidly accelerate over the next 24 months and change the home healthcare landscape dramatically. I've been exhorting my clients and prospective clients to "Get big or get good" for the last 5 years if they wanted to flourish. Those that took that advice now sit in position to acquire smaller providers, or be acquired by larger ones.
Hospice - Hospice is sitting comfortably in the seat that home healthcare occupied a decade ago. While it has seen its share of regulatory changes, it has been treated as more of a "hands off" benefit, while home healthcare has been constantly poked and prodded for savings in the program. While it's doubtful that hospice will forever stay clear of major reimbursement and regulatory changes, it is an attractive area of the industry right now. Larger well funded providers have dramatically ramped up their sales and marketing efforts creating challenges for smaller providers to gain or retain market share. Hospice today reminds me of the glory days of home healthcare. At the moment it's the most attractive area of the industry to grow in.
The beauty of the industry is that there is overall growth with the number of patients in need growing daily. Funding to care for these patients grows but not in lockstep with need, hence the increased scrutiny to eliminate fraud from the system, which hel