Our recent coverage of private equity investments in the long-term care space just quantified what our team already noticed—investments, mergers, acquisitions, consolidations and other restructuring in this space is on the rise. The survey found that 38% of private equity executives planning health care investments over the next 18 months are considering investments acquisitions in the long-term care sector—defined as including home health, long-term care facilities like nursing homes and assisted living, and hospice services. Not surprisingly, 25% of the respondents said they had difficulty finding attractive investment targets—specifically targets with the right technology or service lines. Most were looking to invest in organizations valued at $100 million or less (see 38% Of Private Equity Executives Considering Long-Term Care Deals).
The interest in long-term services and supports (LTSS) isn’t surprising given the market demographics. The proportion of the population (both over and under 65 years of age) in need of assistance with activities of daily living (see More Than 20% Of 85+ Adults Need ADL Assistance). The projections for the prevalence of dementias is on the increase (see 14% Of Those Aged 75+ Have Early Symptom Of Alzheimer’s and In 2016, Prevalence Of Alzheimer’s & Depression Higher In Residential Care Communities With 25 Or Fewer Beds Than In Larger Communities). And, the incidence of autism is on the increase (see Autism Rates & Autism Costs-A Future View and Prevalence of Autism Spectrum Disorder Among Children Aged 8 Years – Autism and Developmental Disabilities Monitoring Network, 11 Sites, United States, 2014).
While demand is up, cost pressures for payers remains high and fewer Americans can afford to pay for long-term care out of pocket. This has led to a substantial push to move reimbursement for LTSS services from fee-for-service to some form of value-based payment. That was the focus of my presentation, Has The Time Come To Embrace Value-Based Reimbursement, at the Leading Age Wisconsin Annual Fall Conference. The same trends that have reshaped the health care market focused on treating acute and chronic conditions are now also coming to LTSS—more managed care, more technology, more consolidation.
Overall, LTSS spending in the United States is increasing. LTSS spending totaled $348.1 billion in 2017, an increase of 48% from 2008, when spending was $235.1 billion (see 2018 Long-Term Services & Support Market Update). Nine million consumers receive LTSS every year including the elderly, consumers with physical disabilities, consumers with intellectual and developmental disabilities (I/DD), and consumers at-risk of institutionalization. At the same time, the number of Medicare post-acute care provider organizations has remained essentially stable. The number of home health provider organizations has declined by 1.6%. The number of inpatient rehabilitation facilities increased by 0.4%. The number of long-term care hospitals decreased by 1.2%, and the number of skilled nursing facilities increased by 0.2% (see Number Of Medicare Post-Acute Care Provider Organizations Stable).
These trends will likely change the composition of the long-term care market. A recent survey found the Medicare bundled rate program will decrease referrals to SNFs (see Hospitals Using Bundled Payment Report Reducing Skilled Nursing Facility Use And Improving Care Integration) and increase the footprint of health systems in the LTSS market space. And, home care organizations are facing a new competitive landscape due to improved technology and the consolidation through mergers (see Private Equity Poised to Reshape Home Health Care Industry?).
A few of the big moves in the field are being led by Humana. Last month, Humana and private equity firms TPG Capital and Welsh, Carson, Anderson & Stowe announced the $1.4 billion acquisition of Curo Health Services, to provide outpatient medical services for seniors (see Humana And Private Equity Finalize $1.4 Billion Curo Health Hospice Deal). Earlier, Humana and its private-equity partners also acquired post-acute care provider Kindred Healthcare for $4.1 billion acquisition-Kindred’s home health, hospice, and community care businesses are operated as Kindred at Home (see Humana-Led Consortium Closes $4.1 Billion Kindred Acquisition).
Then there was the announcement earlier this year that ProMedica Health System, in partnership with Welltower, acquired HRC ManorCare (see ProMedica & Welltower Finalize Acquisition Of HRC ManorCare). HCR ManorCare provides services through its 450 assisted living facilities, skilled nursing and rehabilitation centers, memory care communities, outpatient rehabilitation clinics, and hospice and home health agencies. The ManorCare portfolio operates under the brand names of Heartland, ManorCare Health Services, and Arden Courts. The $4.4 billion transaction makes ProMedica one of the top 15 U.S. health systems.
Another example of market activities is the acquisition by Amedisys subsidiary, Associated Home Care, of Bring Care Home (see Amedisys Closes on Massachusetts Personal Care Acquisition). Amedisys is a home health provider organization with more than 17,900 employees who work across 420 care centers in 34 states and Washington, D.C. And in March, private equity firm Stonehenge Partners Inc. acquired Queen City and Capital City Hospice of Columbus, Ohio for an undisclosed amount (Stonehenge is reported to target equity and junior capital investments of between $5 million and $35 million, see Private Equity Firm Acquires Hospice with High Nurse-Patient Ratio).
In the months ahead, the “integration” of LTSS services into the overall health and human service system is likely to continue—with a similar profile in terms of market trends. The shape that integration will take remains the unanswered question. For more on the long-term services and supports market, check out our recent analyses from the OPEN MINDS Industry Library:
- Who Pays For Long-Term Services & Supports?
- What Is U.S. Spending On Long-Term Services and Supports By Service Type?: An OPEN MINDS Market Intelligence Report
- State Medicaid Programs With MLTSS: The 2017 OPEN MINDS Update
- What Are The Medicaid Financing & Service Delivery Systems For The I/DD Population Receiving LTSS?: An OPEN MINDS Market Intelligence Report
- What Does The U.S. Spend On Long-Term Services & Supports, By Payer?: An OPEN MINDS Market Intelligence Report
- Which States Provide Medicaid Long-Term Services & Supports Through Managed Care?: An OPEN MINDS Market Intelligence Report
- The Shifting Long-Term Services Market: A Strategic Guide To Support Services For Complex Population
- Defining Assisted Living
- Alzheimer’s Association Issues New Guidance For Dementia Care In Nursing Homes
- Alzheimer’s Disease Prevalence To Double By 2040
For more, join Deb Adler, Senior Associate, OPEN MINDS & Former SVP Network Strategy, UnitedHealth Group/Optum on February 13 at The 2018 OPEN MINDS Performance Management Institute for her session, The OPEN MINDS Health Plan Partnership Summit: A Guide To Developing & Negotiating Partnership Agreements With Health Plans.