Home Health & Hospice Week

Multiple factors will affect an agency’s trajectory.

Predicting what will happen in a year full of historically unprecedented events is far from accurate.

For instance, one “assumes no more cash assistance programs, nor changes in [Centers for Medicare & Medicaid Services] reimbursement models going forward,” says Rich Tinsley, CEO of home health M&A advisory firm Stoneridge Partners in Louisville, Kentucky.“There are so many factors in the future forecast.”

That said, M&A experts say activity is already rebounding from barriers such as travel restrictions. And that recovery is only going to increase.

“On the small to medium deals that are being helped from the federal cash stimulus, as of now I would expect those companies to begin having what were Q1 cash flow issues in August or September,” Tinsley forecasts. Then deal flow should pick up the second half of the year.

COVID-19 funding “has likely created a false sense of security for some folks,” says Cory Mertz with M&A firm Mertz Taggart in Fort Myers, Florida.“For others that would have otherwise struggled, it bought them some time. But it’s really just temporary relief,” he says.

“We expect to see a resumption in M&A announcements in the third quarter and certainly in the fourth quarter,” predicts Lisa Phillips with Irving Levin Associates and HealthcareMandA. com.“Like ‘elective’ surgeries that really weren’t elective, deals that were postponed because of the pandemic … will come back,” Phillips maintains.

Amedisys Inc. CEO Paul Kusserow pre­dicted it may take a bit longer, but the ramp-up will be steep.“When all of this stops, which we assume will occur sometime in 2021, the impacts of PDGM will kick in,” he said in the company’s May 8 earnings call. When much of the relief money has to be re­turned, “I think there will be even more of a severe shakeout,” Kusserow predicted.

When struggling HHAs will again feel the squeeze of PDGM depends on multiple factors, including how much Provider Relief Fund money they received, whether they obtained any PPP loan funding, and whether they’ll be entitled to keep the money under the Department of Health and Human Services’ terms and conditions, Mertz says.“They may find that they don’t have as much money available to them as their account balance indicates,” he cautions.

Buyers will be looking for “solid companies” at a “value price,” Tinsley expects. Buyers will have to be able to manage their acquisitions through PDGM obstacles.

The pace is picking up and people seem more optimistic, which seems to be leading to an M&A ramp-up, Tinsley says.“The general consensus is the worst is behind us — we hope,” he concludes.