Acquisitions in the home care industry are poised to take off in 2025, fueled by lower interest rates and President-elect Donald Trump's incoming administration.
Large home care providers including Addus HomeCare, Aveanna Healthcare and the Pennant Group said during third quarter earnings calls they would aggressively look for deals next year to gain scale and better compete for hospital referrals. The interest in deal-making is an about-face for an industry that has been burdened by labor shortages, rising costs and battles with Medicare Advantage organizations over better rates.
Related: Why UnitedHealth, Amedisys are standing behind their deal
“[Consolidation] is definitely about scale and volume in exchange for rates,” said Tyler Giesting, director of healthcare and life sciences at advisory firm West Monroe. “As they grow, it also improves their top line so they can invest in capabilities they need to run the business in a way that the MA plans require, such as reporting on value-based care measures.”
The appetite for acquisitions spans home healthcare, personal home care services, private duty nursing and hospice companies.
Jeff Shaner, CEO of Aveanna Healthcare, told analysts during an earnings call the company was “revving up the M&A engine” to acquire home health, private duty nursing and hospice organizations in 2025. The Atlanta-based company operates in 22 states.
The Pennant Group CEO Brent Guerisoli said the Eagle, Idaho-based company wants to expand its footprint in home health. The company offers home health and hospice services across 13 mostly western states. In August, the Pennant Group acquired assets in Oregon, Washington and Idaho from Signature Healthcare at Home for $80 million.
“We are an opportunistic company and we are going to grow where we have strength and where there is great opportunity,” Guerisoli told analysts during an earnings call.
Addus HomeCare CEO Dirk Allison also told analysts during an earnings call the Frisco, Texas-based home care company would be looking to buy home health and personal care businesses after it completes the $350 million acquisition of Gentiva’s home care business, which is expected by the end of the year.
Addus HomeCare offers non-medical personal care, home health and hospice services across 22 states. Allison said the company’s deal pipeline for 2025 is more robust than in previous years.
“Over the past couple of years, the acquisition opportunities that meet our strategic objectives have been somewhat limited due to some unfavorable market conditions. However, we are starting to see a few more opportunities that could strengthen all three of our segments in markets where we currently operate,” Allison said.
The renewed interest in deal-making could revive a buying frenzy in home care that began in 2021 and continued into 2023. Humana purchased Kindred at Home for $8.1 billion in 2021 and later rebranded it CenterWell. In February 2023, UnitedHealth Group acquired LHC Group for $5.4 billion and struck a deal to buy Amedisys for $3.3 billion four months later.
But higher interest rates, rising labor costs and the Justice Department’s scrutiny of the UnitedHealth-Amedisys deal put a damper on acquisitions in the second half of 2023 and the first half of this year, analysts said. In the first three quarters of 2024, home care acquisitions declined 25% compared to the same period last year, according to healthcare advisory firm Mertz Taggart.
In the past few months, lower interest rates have helped spark renewed interest in acquisitions, Mertz Taggart managing partner Cory Mertz said in a third quarter industry report.
The Trump administration and a Republican-controlled Congress could also help drive deals in the new year, Andrew Woods, chairman of consulting firm Liberty Partners Group told members of the National Alliance for Care at Home during a recent webinar. Woods said both might see home care as a less expensive alternative to facility-based care and encourage policies that drive more care to where people live.
“They understand, if they are old school Republicans, that deficits and debt matter. They’ll want to do everything they can to shore up the Medicare trust fund, not only with efficient services like home health, but other services in healthcare that can serve Baby Boomers,” Woods said.
The Justice Department’s lawsuit to block the bid from UnitedHealth Group’s Optum to buy Amedisys is a wild card that could disrupt deals in 2025, though some analysts don't expect the suit will continue after President-elect Trump takes office.
Giesting also said the lawsuit could be dismissed by a new administration — and added most home care companies probably won’t make deals large enough to raise antitrust concerns in a highly fragmented industry.
Addus HomeCare, Aveanna and the Pennant Group did not respond to requests for comment on whether the lawsuit would affect their acquisition plans.
