FTC, Justice Department have new guidelines for vertical mergers

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/ftc-justice-department-have-new-guidelines-for-vertical-mergers.html?utm_medium=email

Trump Administration Updates Vertical Merger Guidelines - Multichannel

Guidance on vertical mergers got its first major overhaul from the Federal Trade Commission and the U.S. Department of Justice in more than 35 years under new joint guidelines published June 30.

Vertical mergers are those that combine firms or assets at different stages of the same supply chain, such as healthcare company CVS Health’s acquisition of insurer Aetna. Previously proposed mergers like that of insurers Humana and Aetna would be considered horizontal.

FTC Chairman Joe Simon said in a news release that the new guidances “are an important step forward in maintaining vigorous antitrust enforcement, and reaffirm our commitment to challenge vertical mergers that are anticompetitive and would harm American consumers.”

Leaders said that the guidelines explain FTC and Justice Department investigative practices and will give the business community clarity about antitrust concerns, such as the type of evidence the FTC and Justice Department review and how they define markets.

To read the full guidelines, click here

 

 

 

 

 

Despite COVID-19, less dramatic decline in Q2 M&A than expected, Kaufman Hall reports

https://www.fiercehealthcare.com/hospitals/despite-covid-less-dramatic-decline-q2-m-a-than-expected-kaufman-hall-reports?mkt_tok=eyJpIjoiT1RJMlpqWTNPREJtTmpGaSIsInQiOiJ0enNDdXU5R0ZEdUJmSE1GcXl5UHd4VjdcL1FQcWE3ckN2YmhLVUhnazNFNlhUOEdLQndTcnRnXC9TbWNzWDhZMW5KWEhtMUxJRDRFdG1uXC84NGVhTHZ5QklGK0Fyc2dadXVcL0phNWFaVGY1SGlVVzN6NFRxVlRLOE9mRmdHR2VmdDgifQ%3D%3D&mrkid=959610

Mergers and acquisitions deals consolidation

While the COVID-19 pandemic has done a financial number on organizations across the healthcare industry, it did not stymie mergers and acquisition deals as much as anticipated, according to a new report.

Kaufman Hall officials said in their latest M&A report that deals in the second quarter declined in comparison to the same quarter a year earlier.

However, they said, two “transformational” deals announced in June pushed the quarter to a far less dramatic decline in deal activity relative to the underlying performance measures in the sector—and could even indicate deals will ramp up in the near future.

“I don’t think there could’ve been any sort of realistic expectations of what might’ve happened as a result of the pandemic,” the report’s author Anu Singh, managing director and leader of the mergers, acquisitions and partnerships practice, told Fierce Healthcare.

“I think there was a feeling that because of what this would do to financial performance and maybe the trajectory of the industry participants themselves, there was a thought this would perhaps significantly slow down transaction activity as well,” Singh said. “And, as the quarter played out, there was not a significant … drop in the level of activity.”

Deals in the second quarter included Steward Health Care’s acquisition by a group of affiliated physicians and Advocate Aurora Health proposed a merger with Beaumont Health. Lifespan and Care New England Health System in Rhode Island also resumed partnership talks.

“What we were, perhaps, a little surprised to see is there still was large scale transformational system partnership. There still was large portfolios of for-profit or hospital management companies looking to retool their portfolio,” Singh said. “There still was a need for community hospitals to look upwards to find the benefits of larger health systems.”

Overall, the report says, there were 14 deals in the second quarter, down from 19 deals in the same quarter a year earlier and down from 29 deals in the first quarter of 2020.

The report also found:

  • At more than $800 million, the second quarter had one of the highest figures for average size of seller by revenue ever recorded by Kaufman Hall. The historic high previous recorded in 2018 was $409 million.
  • Total transacted revenue for the quarter was just over $12 billion.
  • Nine of the 14 transactions were by for-profit hospital and health systems. None of the transactions in the last quarter were completed by academic medical centers or religiously affiliated health systems.

Impact of COVID-19

So what does the second quarter say about the potential future impact of the COVID-19 pandemic on deals? Singh wrote that while health systems paused their activities for a while, the pandemic may also have “strengthened their rationale” for partnering up in the first place.

Like leaders in many other sectors, healthcare leaders are reevaluating their business and may be examining their healthcare delivery models, Singh said.

The pandemic may have been a catalyst for more organizations to work together to serve patients, which could support reevaluation of the potential for future deals. As an example, Singh pointed in the report to Lifespan and Care New England, which had suspended talks for a potential deal in 2019 but restarted talks after the two systems began “working together in unprecedented ways,” in response to the crisis.

Finally, for-profit health systems have continued to reshape their portfolios over the quarter, with six of the 14 transactions representing divestitures by major for-profit health systems including Community Health Systems, Quorum and HCA.

“For many organizations, it’s going to serve as a reminder or a catalyst that there is safety in scale,” Singh said. “There is safety in being part of a large system that has more deployable resources and maybe more capabilities to deal with situations like that.”

 

Penn State Health to acquire hospital from Geisinger

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/penn-state-health-to-acquire-hospital-from-geisinger.html?utm_medium=email

Penn State Health to acquire Geisinger Holy Spirit | ABC27

Penn State Health has signed a definitive agreement to acquire Holy Spirit Health System in Camp Hill, Pa., from Geisinger Health. 

Hershey, Pa.-based Penn State Health and Danville, Pa.-based Geisinger entered into the definitive agreement about eight months after signing a letter of intent.

Under the transaction, expected to be completed in October, Penn State Health will acquire Holy Spirit Hospital, its affiliated outpatient practices and urgent care centers, Ortenzio Heart Center, and West Shore EMS. After the transaction closes, Holy Spirit Hospital will be renamed Penn State Health Holy Spirit Medical Center.

“Holy Spirit’s hospital, employed medical group and strong community of independent practice physicians, working in collaboration with our Milton S. Hershey Medical Center, offers consumers a strong competitive alternative for healthcare services,” said Penn State Health CEO Steve Massini in a news release. “We’re pleased we could reach agreement with Geisinger to bring Holy Spirit into the Penn State Health family.”

The transaction requires regulatory approval by the Federal Trade Commission and the Pennsylvania attorney general. 

 

Navigating a Post-Covid Path to the New Normal with Gist Healthcare CEO, Chas Roades

https://www.lrvhealth.com/podcast/?single_podcast=2203

Covid-19, Regulatory Changes and Election Implications: An Inside ...Chas Roades (@ChasRoades) | Twitter

Healthcare is Hard: A Podcast for Insiders; June 11, 2020

Over the course of nearly 20 years as Chief Research Officer at The Advisory Board Company, Chas Roades became a trusted advisor for CEOs, leadership teams and boards of directors at health systems across the country. When The Advisory Board was acquired by Optum in 2017, Chas left the company with Chief Medical Officer, Lisa Bielamowicz. Together they founded Gist Healthcare, where they play a similar role, but take an even deeper and more focused look at the issues health systems are facing.

As Chas explains, Gist Healthcare has members from Allentown, Pennsylvania to Beverly Hills, California and everywhere in between. Most of the organizations Gist works with are regional health systems in the $2 to $5 billion range, where Chas and his colleagues become adjunct members of the executive team and board. In this role, Chas is typically hopscotching the country for in-person meetings and strategy sessions, but Covid-19 has brought many changes.

“Almost overnight, Chas went from in-depth sessions about long-term five-year strategy, to discussions about how health systems will make it through the next six weeks and after that, adapt to the new normal. He spoke to Keith Figlioli about many of the issues impacting these discussions including:

  • Corporate Governance. The decisions health systems will be forced to make over the next two to five years are staggeringly big, according to Chas. As a result, Gist is spending a lot of time thinking about governance right now and how to help health systems supercharge governance processes to lay a foundation for the making these difficult choices.
  • Health Systems Acting Like Systems. As health systems struggle to maintain revenue and margins, they’ll be forced to streamline operations in a way that finally takes advantage of system value. As providers consolidated in recent years, they successfully met the goal of gaining size and negotiating leverage, but paid much less attention to the harder part – controlling cost and creating value. That’s about to change. It will be a lasting impact of Covid-19, and an opportunity for innovators.
  • The Telehealth Land Grab. Providers have quickly ramped-up telehealth services as a necessity to survive during lockdowns. But as telehealth plays a larger role in the new standard of care, payers will not sit idly by and are preparing to double-down on their own virtual care capabilities. They’re looking to take over the virtual space and own the digital front door in an effort to gain coveted customer loyalty. Chas talks about how it would be foolish for providers to expect that payers will continue reimburse at high rates or at parity for physical visits.
  • The Battleground Over Physicians. This is the other area to watch as payers and providers clash over the hearts and minds of consumers. The years-long trend of physician practices being acquired and rolled-up into larger organizations will significantly accelerate due to Covid-19. The financial pain the pandemic has caused will force some practices out of business and many others looking for an exit. And as health systems deal with their own financial hardships, payers with deep pockets are the more likely suitor.”

 

 

 

 

Highmark, HealthNow New York enter affiliation agreement

https://www.fiercehealthcare.com/payer/highmark-healthnow-new-york-enter-affiliation-agreement?mkt_tok=eyJpIjoiWlRJMk9UYzVZVFl4Tm1VMSIsInQiOiJ0aElzSllzTkpISWNIcU13ZXErNVdPSzU3K05cLzRVY2FEWFMycDNHZTZcLzlTYUo3UVNNQXd3ZjlwZXlFbVA3c3NQTHI0NFhqcjhFNk1VUXc4aVlnYW9aSnFVOVIydEFqWG5weWdEc2Viall1elwvK0RIRWtEajhPWGw3TEFTNDlkUCJ9&mrkid=959610

Insurers Highmark, HealthNow New York join forces, predict better ...

Highmark is expanding its reach into New York through an affiliation with HealthNow New York.

The acquisition is pending regulatory approval, the two Blues insurers announced Tuesday. Should it be finalized, HealthNow’s plans will continue to operate locally as Highmark BlueCross BlueShield of Western New York and Highmark BlueShield of Northeastern New York.

HealthNow will bring nearly 1 million additional members into the Highmark fold and boasted $2.8 billion in revenue for 2019. It will join the fourth largest Blues organization in the country, building on Highmark’s 5.6 million members and $18 billion in operating revenue for 2019.

David Holmberg, Highmark’s CEO, said on a call with reporters that Highmark has been pursuing a “focused growth strategy of working with like-minded partners” to improve care quality and affordability.

“We believe together Highmark and HealthNow can be transformational as we prepare healthcare for the next generation of people in all of our regions,” Holmberg said.

Highmark entered intro similar affiliations to expand into Delaware and West Virginia.

HealthNow will maintain its Buffalo headquarters as well as offices in the Albany area and will maintain a significant amount of local autonomy, executives said on the call. The boards of both insurers have unanimously signed off on the deal.

Dave Anderson, CEO of HealthNow, will remain at the helm once the two insurers have integrated. Anderson told reporters that uniting with Highmark allows it to maintain its community-based presence and approach while tapping into the scale of the larger health plan.

He said the affiliation has been in the works for more than two and a half years, but the COVID-19 pandemic highlighted just how critical the additional scale would be to filling some of the gaps exposed as the virus spread.

So while COVID-19 wasn’t on either company’s radar as talks began, the pandemic did play a key role in underscoring the value of uniting, Anderson said.

“COVID has essentially emphasized the strategy that we put in place,” he said.

The insurers did not offer an estimated timeline for the affiliation to be completed.

 

 

 

Beaumont, Advocate Aurora explore merger

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/beaumont-advocate-aurora-explore-merger.html?utm_medium=email

Advocate Aurora Health, Beaumont Health Exploring Partnership ...

Beaumont Health announced it is in partnership talks with Advocate Aurora Health on June 17, less than one month after canceling a plan to merge with Akron, Ohio-based Summa Health. 

Southfield, Mich.-based Beaumont and Advocate Aurora, which has dual headquarters in Downers Grove, Ill., and Milwaukee, said they began partnership discussions in late 2019 but paused talks to allow both organizations to focus on the COVID-19 pandemic. On June 17, the health systems signed a nonbinding letter of intent to create a health system that would span across Michigan, Wisconsin and Illinois.

Though talks are still in early stages, the health systems have already agreed to an equal one-third governance representation of any future partnership between Beaumont, Advocate Health Care and Aurora Health Care, which merged in 2018 to create Advocate Aurora Health.

Beaumont President and CEO John Fox said the system is excited to explore the partnership with Advocate Aurora.

“The potential opportunity to leverage the strength and scale of a regional organization while maintaining a local focus and strong presence in Michigan as a leader and major employer is important to us,” Mr. Fox said in a news release.

Advocate Aurora President and CEO Jim Skogsbergh described the potential deal as a “unique opportunity.”

“Beaumont Health has built a strong reputation for clinical excellence, education and research,” Mr. Skogsbergh said in a news release. “This is a unique opportunity to explore a partnership with a like-minded, purpose-driven organization.”

 

 

 

 

Tower Health cutting 1,000 jobs as COVID-19 losses mount

https://www.inquirer.com/business/health/tower-health-hospital-layoffs-covid-19-20200616.html

Tower Health cutting 1,000 jobs as COVID-19 losses mount

Tower Health on Tuesday announced that it is cutting 1,000 jobs, or about 8 percent of its workforce, citing the loss of $212 million in revenue through May because of the coronavirus restrictions on nonurgent care.

Fast-growing Tower had already furloughed at least 1,000 employees in April. It’s not clear how much overlap there is between the furloughed employees, some of whom have returned to work, and the people who are now losing their jobs permanently. Tower employs 12,355, including part-timers.

“The government-mandated closure of many outpatient facilities and the suspension of elective procedures caused a 40 percent drop in system revenue,” Tower’s president and chief executive, Clint Matthews, wrote in an email to staff. “At the same time, our spending increased for personal protective equipment, staff support, and COVID-related equipment needs.”

Despite the receipt of $66 million in grants through the federal CARES Act, Tower reported an operating loss of $91.6 million in the three months ended March 31, according to its disclosure to bondholders.

Tower, which is anchored by Reading Hospital in Berks County, expanded most recently with the December acquisition of St. Christopher’s Hospital for Children in a partnership with Drexel University. Tower paid $50 million for the hospital’s business, but also signed a long-term lease with a company that paid another $65 million for the real estate.

In 2017, Tower paid $418 million for five community hospitals in Southeastern Pennsylvania — Brandywine in Coatesville, Chestnut Hill in Philadelphia, Jennersville Regional in West Grove, Phoenixville in Phoenixville, and Pottstown Memorial Medical Center, now called Pottstown Hospital, in Pottstown.

Tower’s goal was to remain competitive as bigger systems — the University of Pennsylvania Health System and Jefferson Health from the Southeast, Lehigh Valley Health Network and St. Luke’s University Health Network from the east and northeast, and University of Pittsburgh Medical Center from the west — encroached on its Berk’s county base.

Tower had set itself a difficult task in the best of times, but COVID-19 has made it significantly harder for the nonprofit, which had an operating loss of $175 million on revenue of $1.75 billion in the year ended June 30, 2019.

Because health systems have high fixed costs for buildings and equipment needed no matter how many patients are coming through the door, it’s hard for them to limit the impact of the 30% to 50% collapse in demand caused by the coronavirus pandemic.

“Hospitals and all other health service providers were hit with this disruption with lightning speed, forcing the industry to learn in real time how to handle a situation for which there was no playbook,” Standard & Poor’s analysts David P. Peknay and Suzie R. Desai said in a research report last month.

Tower’s said positions will be eliminated in executive, management, clinical, and support areas.

The cuts include consolidations of clinical operations. Tower plans to close Pottstown Hospital’s maternity unit, which employs 32 nurses and where 359 babies were born in 2018, according to the most recent state data. Tower also has maternity units at Reading Hospital in West Reading and at Phoenixville Hospital.

Tower is aiming to trim expenses by $230 million over the next two years, Matthews told staff.

Like many other health systems, Tower has taken advantage of federal programs to ensure that it has ample cash in the bank to run its businesses. Tower has deferred payroll taxes, temporarily sparing $25 million. It received $166 million in advanced Medicare payments in April.

In the private sphere, Tower obtained a $40 million line of credit in April for St. Chris, which has lost $23.6 million on operations since Tower and Drexel bought it in December. Last month, Tower said it was in the final stages of negotiating a deal to sell and then lease back 24 medical office buildings. That was expected to generate $200 million in cash for Tower.

 

 

 

 

Predicting COVID-19’s Long-Term Impact on the Home Health Care Market

Predicting COVID-19’s Long-Term Impact on the Home Health Care Market

Predicting COVID-19's Long-Term Impact on the Home Health Care ...

The Patient-Driven Groupings Model (PDGM) and its unintended ripple effects were supposed to be the dominant story this year for the nation’s 12,000 or so Medicare-certified home health care providers. But the coronavirus has rewritten the script for 2020, throwing most of the industry’s previous projections out the window.

While PDGM — implemented on Jan. 1 — will still shape home health care’s immediate future, several other long-term trends have emerged as a result of the coronavirus and its impact on the U.S. health care system.

These trends include unexpected consolidation drivers and the sudden embrace of telehealth technology, the latter of which is a development that will affect home health providers in ways both profoundly positive and negative. Unforeseen, long-term trends will also likely include drastic overhauls to the Medicare Home Health Benefit, a revival of SNF-to-home diversion and more.

Now that providers have had roughly three full months to adapt to the coronavirus and transition out of crisis mode, Home Health Care News is looking ahead to what the industry can expect for the rest of 2020 and beyond.

‘Historic’ consolidation will still happen, with some unexpected drivers

Although the precise extent was often up for debate, most industry insiders predicted some level of consolidation in 2020, driven by PDGM, the phasing out of Requests for Anticipated Payment (RAPs) and other factors.

That certainly appeared to be true early on in the year, with Amedisys Inc. (Nasdaq: AMED), LHC Group Inc. (Nasdaq: LHCG) and other home health giants reporting more inbound calls related to acquisition opportunities or takeovers of financially distressed agencies.

In fact, during a fourth-quarter earnings call, LHC Group CEO and Chairman Keith Myers suggested that 2020 would kick off a “historic” consolidation wave that would last several years.

“As a result of this transition in Q4 and the first few months of 2020, we have seen an increase in the number of inbound calls from smaller agencies looking to exit the business,” Myers said on the call. “Some of these opportunities could be good acquisition candidates, and others we can naturally roll into our organic growth through market-share gains.”

Most of those calls stopped with the coronavirus, however.

Although the vast majority of home health agencies have experienced a decline in overall revenues during the current public health emergency, many have been able to compensate for losses thanks to the federal government’s multi-faceted response.

For some, that has meant taking advantage of the approximately $1.7 billion the U.S. Centers for Medicare & Medicaid Services (CMS) has distributed through its advanced and accelerated payment programs. For others, it has meant accepting the somewhat murky financial relief sent their way under the Provider Relief Fund.

In addition to those two possible sources of financial assistance, all Medicare-certified home health agencies have benefitted from Congress’s move to suspend the 2% Medicare sequestration until Dec. 31.

Eventually, those coronavirus lifelines and others will be pulled back, kickstarting M&A activity once again.

“We believe that a lot of the support has stopped or postponed the shakeout that’s occurring in home health — or that we anticipated would be occurring around this time,” Amedisys CEO and President Paul Kusserow said in March. “We don’t believe it’s over, though.”

Not only will consolidation happen, but some of it will be fueled by unexpected players.

With the suspension of elective surgeries and procedures, hospitals and health systems have lost billions of dollars. Rick Pollack, president and CEO of the American Hospital Association (AHA), estimated that hospitals are losing as much as $50 billion a month during the coronavirus.

“I think it’s fair to say that hospitals are facing perhaps the greatest challenge that they have ever faced in their history,” Pollack, whose organization represents the interests of nearly 5,000 hospitals, told NPR.

To cut costs, some hospitals may look to get rid of their in-house home health divisions. It’s a trend that may already be happening, too.

The Home Health Benefit will look drastically different

With a mix of temporary and permanent regulatory changes, including a redefinition of the term “homebound,” the Medicare Home Health Benefit already looks very different now than it did three months ago. But the benefit will likely go through further retooling in the not-too-distant future.

Broadly, the Medicare Part A Trust Fund finances key services for beneficiaries.

While vital to the national health care infrastructure, the fund is going broke — and fast. In the most recent CMS Office of the Actuary report released in April, the Trust Fund was projected to be entirely depleted by 2026.

The COVID-19 virus has only accelerated the drain on the fund, with some predicting it to run out of money two years earlier than anticipated. A group of health care economics experts from Harvard and MIT wrote about the very topic on a joint Health Affairs op-ed published Wednesday.

“COVID-19 is causing the Medicare Part A program and the Hospital Insurance (HI) Trust Fund to contend with large reductions in revenues due to increased unemployment, reductions in salaries, shifts to part-time employment from full time and a reduction in labor force participation,” the group wrote. “In addition to revenue declines, there was a 20% increase in payments to hospitals for COVID-related care and elimination of cost sharing associated with treatment of COVID.”

Besides those and other cost pressures, Medicare is simultaneously expanding by about 10,000 new people every day. The worst-case scenario: the Medicare Part A Trust Fund goes broke closer to 2024.

There are numerous policy actions that can be taken to reduce the financial strain on the trust fund. In their op-ed, for example, the team of Harvard and MIT researchers suggested shifting all of home health care under Part B.

In 2018, Medicare spent about $17.9 billion on home health benefits, with roughly 66% of that falling under Part B, which typically includes community-based care that isn’t linked to hospital or nursing home discharge. Consolidating all of home health care into Part B would move billions of dollars away from Part A, in turn expanding the Trust Fund’s lifecycle.

“Such a policy change would move nearly $6 billion in spending away from the Part A HI Trust Fund but would put upward pressure on the Part B premium,” the researchers noted.

Of course, all post-acute care services may still undergo a transformation into a unified payment model one day. However, the coronavirus has devastated skilled nursing facility (SNF) operators, who were already dealing with the Patient-Driven Payment Model (PDPM), a payment overhaul of their own.

Regulators may shy away from introducing further disruption until SNFs have a chance to recover, a process likely to take years — if not decades.

Previously, the Trump administration had estimated that a unified payment system based on patients’ clinical needs rather than site of care would save a projected $101.5 billion from 2021 to 2030.

Telehealth will be a double-edged sword

The move toward telehealth was a long-term trend that home health providers were cognizant of before COVID-19, even if some clinicians were personally skeptical of virtual visits. But because the virus has demanded social distancing, telehealth has forced its way into health care in a manner that would have been almost unimaginable in 2019.

In late April, during a White House Coronavirus Task Force briefing, President Donald Trump indicated that the number of patients using telehealth had increased from about 11,000 per week to more than 650,000 people per week.

Meanwhile, MedStar Health went from delivering just 10 telehealth visits per week to nearly 4,000 per day.

Backed by policymakers, technology companies and consumers, telehealth is likely here to stay.

“I think the genie’s out of the bottle on this one,” CMS Administrator Seema Verma said in April. “I think it’s fair to say that the advent of telehealth has been just completely accelerated, that it’s taken this crisis to push us to a new frontier, but there’s absolutely no going back.”

The telehealth boom could mean improved patient outcomes and new lines of business for home health providers. But it could also mean more competition moving forward.

For telehealth to be a true game-changer for home health providers, Congress and CMS would need to pave the way for direct reimbursement. Currently, a home health provider cannot get paid for delivering virtual visits in fee-for-service (FFS) Medicare.

Sen. Susan Collins (R-Maine) has floated the idea of introducing legislation that would allow for direct telehealth reimbursement in the home health space, but, so far, no concrete steps have been taken — at least in public. With a hyper-polarized Congress and a long list of other national priorities taking up the spotlight, it’s impossible to guess whether home health telehealth reimbursement will actually happen.

While home health providers can’t directly bill for in-home telehealth visits, hospitals and certain health care practitioners can. That regulatory imbalance could lead to providers being used less frequently as “the eyes and ears in the home,” some believe.

A new SNF-to-home diversion wave will emerge

Over the past two decades, many home health providers have been able to expand their patient census by poaching patients from SNFs. Often referred to as SNF-to-home diversion, the approach didn’t just benefit home health providers, though. It helped cut national health care spending by shifting care into lower-cost settings.

At first, the stream of SNF residents being shifted into home health care was like water being shot from a firehose: In 2009, there were 1,808 SNF days per 1,000 FFS Medicare beneficiaries, a March 2018 analysis from consulting firm Avalere Health found. By 2016, that number plummeted to 1,539 days per 1,000 beneficiaries — a 15% drop.

In recent years, that steady stream has turned into a slow trickle, with more patients being sent to home health care right off the bat. In the first quarter of 2019, 23.3% of in-patient hospital discharges were coded for home health care, while 21.1% were coded for SNFs, according to data from analytics and metrics firm Trella Health.

Genesis HealthCare (NYSE: KEN) CEO George Hager suggested the initial SNF-to-home diversion wave was over in March 2019. Kennett Square, Pennsylvania-based Genesis is a holding company with subsidiaries that operate hundreds of skilled nursing centers across the country.

“To anyone [who] would want [to] or has toured a skilled nursing asset, I would challenge you to look at the patients in our building and find patients that could be cared for in a home-based or community-based setting,” Hager said during a presentation at the Barclays Global Healthcare Conference. “The acuity levels of an average patient in a skilled nursing center have increased dramatically.”

Yet that was all before the coronavirus.

Over the last three months, more than 40,600 long-term care residents and workers have died as a result of COVID-19, according to an analysis of state data gathered by USA Today. That’s about 40% of the U.S.’s overall death toll.

CMS statistics place that number closer to 26,000.

In light of those figures and infection-control issues in congregate settings, home health providers will see a new wave of SNF-to-home diversion as robust as the first. As the new diversion wave happens, providers will need to be prepared to care for patients with higher acuity levels and more co-morbidities.

“[That’s going to change] the psyche of the way people are going to view SNFs and long-term care facilities for the rest of our generation,” Bruce Greenstein, LHC Group’s chief strategy and innovation officer, said during a June presentation at the Jefferies Virtual Healthcare Conference. “You would never want to put your parent in a facility if you don’t have to. You want options now.”

One stat to back up this idea: Over 50% of family members are now more likely to choose in-home care for their loved ones than they were prior to the coronavirus, according to a survey from health care research and consulting firm Transcend Strategy Group.

Separate from SNF-to-home diversion, hospital-to-home models will also likely continue to gain momentum after the coronavirus.

There will be a land grab for palliative care

Over the past two years, home health providers have aggressively looked to expand into hospice care, partly due to the space’s relatively stable reimbursement landscape. Amedisys — now one of the largest hospice providers in the U.S. — is the prime example of that.

During the COVID-19 crisis, palliative care has gained greater awareness. Generally, palliative care is specialized care for people living with advanced, serious illnesses.

“Right now, we are seeing from our hospital partners and our community colleagues the importance of palliative care, including advanced care as well as appropriate pain and symptom management,” Capital Caring Chief Medical Officer Dr. Matthew Kestenbaum previously told HHCN. “The number of palliative care consults we’re being asked to perform in the hospitals and in the community has actually increased. The importance of palliative care is absolutely being shown during this pandemic.”

As community-based palliative care programs continue to prove their mettle amid the coronavirus, home health providers will increasingly consider expanding into the market to further diversify their services.

Currently, just 10% of community-based palliative care programs are operated by home health agencies.

Demand will reach an all-time high

The home health industry may ultimately shrink in terms of raw number of agencies, but the overall size of the market is very likely to expand at a faster-than-anticipated pace.

In years to come, home health providers will still ride the macro-level tailwinds of an aging U.S. population with a proven preference to age in place — that hasn’t changed. But because of SNF-to-home diversion and calls to decentralize the health care system with home- and community-based care, providers will see an increase in referrals from a variety of sources.

In turn, home health agencies will need to ramp up their recruitment and retention strategies.

There’s already early evidence of this happening.

Last week, in St. Louis, Missouri, four home-based care agencies announced that they were hiring a combined 1,000 new employees to meet the surge in demand, according to the St. Louis Dispatch.

Meanwhile, Brookdale Senior Living Inc. (NYSE: BKD) similarly announced plans to hire 4,500 health care workers, with 10% of those hires coming from the senior living operator’s health care services segment.

Bayada Home Health Care likewise announced plans to ramp up hiring.

“We are absolutely hiring more people now than ever,” Bayada CEO David Baiada previously told HHCN. “The need for services — both because of societal and demographic evolution, but also because of what we anticipate as a rebound and an increase in the demand for home- and community-based care delivery as a result of the pandemic — is requiring us to continue to accelerate our recruitment efforts.”

The bottom line: The coronavirus may have presented immediate obstacles for home health providers, but the long-term outlook is brighter than ever.

 

 

 

 

INSIGHT: Health-Care M&A Post-Pandemic—Opportunities, Not Opportunism

https://news.bloomberglaw.com/health-law-and-business/insight-health-care-m-a-post-pandemic-opportunities-not-opportunism

INSIGHT: Health-Care M&A Post-Pandemic—Opportunities, Not Opportunism

The Covid-19 pandemic has devastated the health-care industry. In addition to the tragedies that the pandemic has brought, health systems have universally experienced severe and rapid deterioration of their bottom lines due to plummeting patient volumes, pausing of high margin elective surgical procedures, and increased expenses.

By some estimates, health system losses will be around $200 billion by the end of June and revenues have dropped by around 50 percent. As a result of the financial uncertainty caused by the pandemic, many hospital and health systems terminated or delayed potential transactions as they focused on managing the crisis and protecting their workforces and communities.

But this may just be the calm before a big M&A storm.

Rise in M&A Activity

Through our work as legal and communications counselors, we have seen preliminary M&A activity rise in recent weeks, with providers exploring and negotiating transactions, including several that have not yet been publicly announced.

Some systems are looking to capitalize on the time between the end of the first wave of Covid-19 and a potential resurgence in the fall to get letters of intent finalized and announced. This coming M&A activity presents legal and communications challenges when the national spotlight is firmly on health systems.

Providers are starting to resurrect deals that were paused during the initial period of the Covid-19 crisis, including Community Health System’s sale of Abilene Regional Medical Center and Brownwood Regional Medical Center to Hendrick Health System.

Some systems are seeking new strategic partners, such as Lake Health in Ohio, and New Hanover Regional Medical Center in North Carolina, which resumed its recent RFP response process after a pause.

Still others are looking for new opportunities consistent with pre-Covid growth strategies, as adjusted for pandemic-related developments and challenges.

More Consolidation

Larger and more financially robust health systems are expected to weather the crisis, whereas smaller systems and hospitals with less cash and tighter operating margins, including rural and critical access hospitals, may be facing insolvency, closure, and bankruptcy. This creates a scenario where one party is financially distressed as a result of the pandemic and needs to partner with or join another system to survive. These circumstances will likely fuel increased consolidation in the health-care industry.

For a struggling provider, joining a larger system can offer much-needed financial commitments, access to capital, disciplined management structure, economies of scale for purchasing and improved IT infrastructure, among many other strategic benefits. A well-positioned system, even if financially weakened due to pandemic challenges, will be able to negotiate favorable deal terms if it has significant strategic value to its prospective partner.

Communications Strategy is Important

As providers explore and execute partnerships, they must implement a stakeholder and communications strategy that focuses on benefits for each side given the new financial reality. Doing so will minimize criticism of opportunism by the acquiring system—and best position a definitive agreement and successful deal.

An effective communications strategy will emphasize how the proposed transaction will maintain or improve quality or affordability, ensure access to care for communities and address financial challenges faced by health systems as a result of the pandemic.

Health systems should articulate how their M&A activity will stabilize affected health systems, allow them to manage the Covid-19 crisis and future pandemics, and continue to meet the overall care needs of the community. It can also highlight how these partnerships will facilitate continued care in a market, which otherwise might lose a valuable health-care resource, as well as the positive economic benefits the transaction will bring for local communities.

Communications that support the vision, rationale and benefits of a deal will also need to be relevant to the regulatory bodies whose approval may be required.

Public perception and support of health-care providers have been extremely positive during the pandemic to date, as evidenced by homemade banners, balcony tributes, and praise on social media. Health systems and their staffs have borne personal risk and financial pain by focusing on patients and public health at the expense of all else. This goodwill can be valuable as health systems seek stakeholder and community support for their transactions.

That goodwill can also quickly be forgotten.

As health systems race to the altar to beat out competitors for M&A targets and other strategic relationships, it is critical that they are thoughtful in structuring their deals and justifying the activity.

For example, acquisitions and partnerships involving substantial outlays of capital and lucrative executive compensation or severance packages will be viewed negatively if undertaken by a system that instituted large compensation reductions across the system or even furloughed or laid off employees during the pandemic.

As the dust begins to settle from the first wave of Covid-19, it is clear that there will be drastic changes to how health systems do business. The pandemic will also create financial winners and losers. Hospitals and health systems must think proactively about a strategy for growth as opportunities with willing transaction partners arise.

But being proactive must be balanced against appearing to be opportunistic or taking advantage of the worst health crisis in our lifetimes. To maintain their goodwill and reputations, health systems should continue to do deals for the right reasons and for the benefit of their communities.