THRIVE: Industry Trends and Activity
Author: Maxwell Healthcare Associates
Posted: January 30, 2024
The industry becomes more volatile every day with post-acute care transitioning towards a focus in value. At Maxwell Healthcare Associates, we believe that as long as caregiver passion exists within the agency, any organization can thrive with the proper knowledge. The team at MHA comprises of many longstanding industry veterans from all aspects of the care process. Through each interview we aim to empower your agency in making the shift from surviving to thriving amid the strenuous post-acute care environment.
In this interview, we sat down with Jay Duty, Chief Operating Officer at MHA. Jay discusses the common trends he’s observed throughout the market, conditions driving M&A activity, and the overall state of the industry as it prepares for the CY24 Final Rule.
What do you believe to be the most important and or alarming trend currently in post-acute care?
I think we're having to become more optimized with the resource of staffing. I think a lot of decisions are being made at high levels on, “How can I (an agency) grow?”. Agencies must consider where they are able to grow simply by their ability to provide care staff to see patients in the home. Amid the staffing crisis, growth is often staggered by understaffing in specific geographic areas.
What things should providers look for in the market as they approach the new year?
With the turn of the year coming, obviously the final rule is going to be driving a lot of that, which I think for now in the industry is a good guy. I think that's going to loosen up the M&A market a little bit. I think we've seen kind of in the past, the record deals in 2021 driven by people trying to stay away from the capital gains tax - the scare that was there, that really drove deal size.
It drove multiples up very, very high in the M&A space. I think that the market has kind of rebased a little bit. Obviously, about summer of 2022, that deal volume just dropped off a cliff, really, and then has started to recover the back half of 2023. But really through that desert of the summer of 2022, until 2023, we weren't seeing all that many deals.
Now, I think with the rule finalizing and it being a 0.8% good guy, that at least brought some more people to the market that were kind of sitting back with a “wait and see” approach, it's going to bring them into the market in both home health, and hospice, and even in the private duty space.
Obviously, behavioral health is a huge trend as well. So, I think the confidence now and knowing what the market looks like, at least for the year 2024. I think there's some headwinds once again that will come in a proposed rule the next summer. But in the first half of 2023, a lot of the investment bankers and private equity firms that are looking to transact current providers are looking to continue to find the right assets to grow their footprints. I think there'll be some interest and market activity very early on in the new year (2024).
What is the current state of M&A activity? Are these conditions being influenced directly by post-acute specific trends, or is it a result of the greater economy?
Yeah, I think the greater economy has a lot of influence on that. I think the cost of capital is a big piece of the picture. If I have to go to the market and get money to buy a larger asset, I might be a little bit scarcer. I think cash on hand for cash flow within organizations can drive that a lot. PE firms will be ready to transact, especially with a little bit of pent-up deal making there, too. I think the post-acute space with pressures on labor, simply not just having enough nursing staff to really make these transactions.
One of the main changes is considerations. Activity used to be driven by everybody gobbling up an asset because they wanted more dots on the map and wanted to be able to just grow the size of their organization. Now, the provider side especially, and the PE firms are being a little choosier in the assets they acquire.
Is it clean? Is there some financial risk in there? Clinical due diligence is the reason that people are moving away from some deals a little bit more than that used to be. So that's really driving that volume. And that's what we've seen here at Maxwell Healthcare Associates; we're having people on the seller side come to us to deeply analyze and prepare their assets.
They want to be as clean and ready to go to the market as possible. Buyers want to be really scrutinous of the compliance and regulatory pieces, making sure that the documentation is strong, that patients are appropriate, that there aren't risky things like cap issues in hospice that are present.
So overall, a lot more analysis and thought, rather than just kind of the land grab of going to expand their footprint just by sheer size.
When undergoing a consolidation, centralization, or merger, what are some best practices the operations team should take to streamline that process while also creating an environment that's going to foster continuous growth?
I think as you look at some of these assets, especially if there's a big geography, you must ask, “Where have they optimized their intake?” Have they centralized their services in a way that makes sense”? Those pieces make it a lot easier in the integration process after a deal, when that deal is done, you want to make sure that you can go in and actually operate in a streamlined manner. One of the market trends, obviously, is having to do more with less and really being a good steward of clinical assets that you have for patient care. You need to make sure you streamline those processes of, “How do I intake a patient? How do I reduce the windshield time?” Things like missed visits is a huge piece that we talk about at MHA. Helping organizations know, “How do I make sure my length of stays and documentation are appropriate?” “Are there risky documentation practices? Are my quality scores, and my patient satisfaction scores high?”
Those pieces are more important than ever. I think another best practice too is pre-deal diligence processes to see what the integrations process is going to look like afterwards. This is especially important if you're merging two provider organizations together, in this case there's a lot of complexity in optimizing workflow and processes.
I think an operations team in a post-acute agency must know everything before they go into the actual integration process. What can you learn through the diligence process, through that acquisition that'll really set you up for success? That goes back to some of those things like what services can be centralized, what can be handled optimally before you even get started, and then knowing those pain points. Maybe there are two vastly different ways that organizations have done things, know how to attack that, and bring both organizations together.
What role does technology play in a successful merger, and what type of technology should providers consider while navigating the current state of post-acute care?
I think, again, with having to do as much as you can with the clinical resources in the home, utilizing technology to really let those clinicians work at the top of their license and not be bogged down by the other pieces of their job is paramount. There's things like voice recognition that can help reduce the post-care charting time. How do I know as much as I can about that patient before I get there? How do I optimize the day of a nurse or therapist when they go to the home to know what the most efficient travel route is when they put their keys in their car.
How do I reduce windshield time? How do I communicate with the patient? How do I make sure that they've received a quality experience? There are all kinds of technologies, current and emerging, that can help with that. Using technology empowers communication with caregivers in a way that used to be impossible for the agency.
Furthermore, technology helps us optimize and predict what's going to happen clinically with patients. So, using technologies like predictive analytics are now a big piece that agencies are utilizing, optimizing the visits, making sure that you're spending time in the home with the patient providing care, and not solely focusing on the gigantic number of administrative tasks that pile up. So, tons of tools are rushing to the market to make sure that technology has its proper place in the workflow that clinicians are conducting in the home.
What can MHA do to assist agencies in both the operational and clinical front while they navigate the industry?
Our main goal is assistance based on strategic guidance and tech-enablement. We partner with an agency and provide the essential, expert-backed strategic recommendations for continued success and scalability. We approach strategy in three ways. First, we assess an organization to see what the pain points are, and then we optimize that. We find how we can help with the operational side to make sure that things run as efficiently as possible, and then we help organizations adopt things like technologies or process flows to modernize and overhaul operations. We're well positioned to talk through that in the world of integration optimization, making sure that we implement new software, and that organizations actually adopt these things. So, if it's a technology, if it's a process, just making sure that throughout that adoption cycle that stickiness is there within their organization.
Second, on the clinical front, our clinical reviews of chart audits provide unparalleled clarity. Furthermore, we empower people with compliance pieces of documentation. Just ensuring that work can get billed and collected properly, and then tons of work right now on the revenue cycle, making sure that the work and care being provided in the home is billed and collected properly. We've had a lot of people interested in the analytics side. So more and more every day, post-acute care is a very data rich environment. There's a lot of data out there. But kind of consolidating that data and analyzing it is something that we've been able to help organizations streamline. Maybe they've got some reporting through their EMR that they want to enhance. They want good, actionable data that changes the way that they operate, and the way that they steer their people in a way that's the most effective. We bring experts from all ranges of care analytics to support data confidence.
Finally, our suite of tech-enabled solutions and strategic partners unlock the essential ability of doing more with less. We champion communication and productivity to ensure adoption, streamlining, and success. Overall, MHA is the strategic partner to elevate agency quality and ensure longevity. No one knows the industry better than those that have direct care experience. MHA provides these experts and tech-enabled tools for continued strategic growth and unparalleled success at the agency level.
THRIVE with MHA - Strategic Success
The changes and turmoil within post-acute care aren't going anywhere, but at MHA we believe caregiver passion is stronger than any external scrutiny. Our experts bring a wealth of knowledge from all facets of the care environment and are prepared to provide assistance wherever needed. If you're ready to redefine your agency's success, our team will provide the strategic guidance needed to enhance your technology, align your goals, and empower your people. Contact us today at [email protected] or visit www.maxwellhca.com to learn more.