A $2.4 billion merger between two powerhouses in the home health field is expected to create a new industry giant and set in motion significant long-term consequences for the home health field, according to Home Health Solutions Owner and President J’non Griffin.
In a deal set to close in 2018, Kentucky-based Almost Family, Inc., and Louisiana-based LHC Group, Inc, have announced their plans for an all-stock merger of equals, creating a company with a starting roster of more than 30,000 employees nationwide.
“This merger is a huge development, with the potential to shore up confidence in the future of home health, impact stocks and rejuvenate an industry feeling the weight of an increasing regulatory burden,” J’non said.
But she warns that the move could have some negative consequences – especially for smaller agencies.
“The new company created by this merger will be poised to set the professional tone and standards in the entire industry regarding delivery of well-coordinated, patient-centered care,” J’non said.
“Smaller agencies struggling to meet quality expectations may find it increasingly hard to compete in the evolving marketplace. Coupled with increasing regulations, the evolution of a faster-paced, coordination-intensive market with much bigger players could squeeze some smaller, struggling agencies into selling or going out of business,“ she added.
Expect more buyouts and partnerships
The merger between LHC and Almost Family reflects a dramatically shifting turf in the industry, as agencies increasingly look at strategic partnerships, joint ventures and other consolidation efforts to buffer the challenges presented by mounting regulatory burdens.
“Buyouts and partnerships are a growing trend,” J’non said. “We can expect to see increasing numbers as agencies work out innovative answers to the demands for quality outcomes, expedited turnarounds, increasing care coordination, and value-based reimbursement.”
So far this year, LHC Group had acquired more than 35 home health, hospice or community-based locations, as well as six long-term acute care hospital operations, before it announced plans for the merger with Almost Family.
2018: A ‘transformative’ year ahead
Next year is shaping up to be a transformative year in many ways for the home health field, according to J’non. In January, agencies will implement new Conditions of Participation set by the Centers for Medicare and Medicaid Services (CMS), requiring extensive operational, administrative and clinical changes.
“Meeting the demands of the new CoPs is expected to be a watershed moment for some agencies which have been struggling to stay afloat under the compliance burden, and simply may not be able to adapt quickly enough to the new round of regulations,” she said.
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In addition to new CoPs requirements, agencies throughout the country are expected to be required to transition soon to the value-based reimbursement model already under demonstration in nine states.
Coming soon: Value-based purchasing
Officials at Almost Family and LHC have made no bones about positioning the giant company created by the merger to become the industry leader in value-based reimbursement.
Although a value-based purchasing model is only active in nine states right now, many home health experts believe CMS may have recently signaled its readiness to soon expand VBP to all other states.
“CMS did not really make many adjustments to the value-based purchasing in the 2018 Payment Rule, and the changes that were made were not really significant changes,” J’non said. “That may well indicate that CMS believes the model is ready for a full-scale release.”
The VBP model has largely been considered a success because the nine states participating in the demonstration have seen improvements in outcomes at a faster rate than states which were not included in the program, J’non said.