HUNTSVILLE, Alabama — Help at Home employs nearly 800 caregivers across Alabama counties to assist 1,100 seniors and clients with disabilities with activities such as bathing, housekeeping, and meal preparation. I am receiving it.
And suddenly it was gone.
Alabama's largest provider of home care services last year because the state's “reimbursement system and regulatory environment” made it difficult to recruit and retain enough workers, said Kristen Trenaman, the company's vice president of communications. In the fall, he suddenly announced that he was withdrawing from the state. After the facility was withdrawn, state officials scrambled to find new caregivers for the people who used it.
Help at Home's departure from Alabama has had a “huge impact,” said Debra Davis, deputy director of the Alabama Department of Aging Services. Davis said her agency worked with former Help at Home clients to find a replacement on the spot.
Help at Home, owned by private equity firm Centerbridge Partners and Vistoria Group, continues to provide home and community-based care in 12 other states, with 49,000 caregivers and It has 66,000 monthly users. The company is aggressively expanding outside of Alabama, acquiring home care companies and listing thousands of job openings on its website. Neither company responded to Stateline's requests for comment.
Proponents of private equity investment in health care argue that capital injections can help small businesses expand into new markets, streamline costs and pay for new technology.
But critics say Help at Home's withdrawal from Alabama could happen if a state that spends little on health care relies on private equity-owned providers to care for its most vulnerable residents. He points out that this is a warning bell.
Private equity-owned healthcare companies are focused on generating solid returns for their investors. Typically, they want to cut costs, increase cash flow, use debt to finance expansion, and sell within a few years for maximum profit. In health care, especially in less regulated industries such as home health and hospice care, critics say the business model can reduce the quality of care, increase costs and reduce access for patients.
“We leave much to the whims of the market, allowing private companies to determine the access and quality of health care. The case of Help at Home is a great example of this,” said Senior Research and Campaign Manager Coordinator Mary Bagby said. Healthcare for the Private Equity Stakeholder Project, a research and advocacy group.
“At the end of the day, it's about money, and unless there are guardrails in policy to prevent these withdrawals, they will continue to occur.”
Private equity firms pool investments from pension funds, endowments, sovereign wealth funds, and wealthy individuals to purchase controlling interests in companies. As they expand their influence in U.S. health care companies, they are drawing increasing legislative scrutiny and public outrage.
And while much of that negative attention has been focused on hospitals and nursing homes, many private equity firms are also turning to the lucrative and less regulated home health industry.
Ankeet Patel, vice president of private equity firm Shore Capital Partners, told the audience at the Home Healthcare News Capital + Strategy Conference in April 2023, “Ageing is a favorable demographic. “The population is changing rapidly, and the aging of the population will continue to progress.” He said: “When you combine the home environment being cost-effective and a favorable environment for those receiving care, there are many opportunities.”
Approximately 10,000 baby boomers turn 65 every day. By 2030, one in five Americans will be over the age of 65, the highest percentage in American history. This means tens of millions of people will need care in the coming years, but most older people want to age at home for as long as possible, rather than in a nursing home. There is.
As long-term care for the elderly moves from nursing homes to home care, private equity is following suit.
increase in demand
Home care has various meanings. Home health care often refers to more skilled care provided by licensed nurses and therapists, such as wound care and medication management. Personal home care typically refers to non-clinical services provided by professional aides, such as assistance with bathing and dressing, and performing household tasks such as cleaning, cooking, and laundry.
It's not just aging consumers who prefer home care to nursing homes, but insurance payers too. For both public and private insurance, this is a potential cost savings for those who do not require 24-hour monitoring.
According to the latest long-term care cost study conducted by insurance company Genworth, the average monthly cost for home care for 40 hours or more per week is about $5,000, compared to $8,000 to $9,000 for nursing homes. The study has been cited by agencies such as the U.S. Department of Health and Human Services.
However, costs vary widely by state. In Mississippi, home care averages about $3,800 a month, while a private room in a nursing home costs nearly twice that amount, about $7,300 a month. In Massachusetts, home care can cost nearly $6,000 per month, while a room in a private nursing home can cost more than $13,500 per month.
For people who need 24/7 care, home health care is much more economical, averaging about $19,000 per month, more than twice the cost of a private room in a nursing home.
An analysis of 2019 Medicare claims found that total costs 90 days after an emergency department visit were lower for patients treated at home than for patients treated in a hospital. Readmission rates for home health patients were also lower.
Private equity continues to swallow up smaller home health companies and their You are integrating your company into a regional network. From 2018 to 2019, nearly half of home health care industry deals involved private equity.
At the end of the day, it's about money, and unless policy has guardrails in place to prevent such withdrawals, they will continue to occur.
– Mary Bugbee, Senior Research and Campaign Coordinator, Healthcare, Private Equity Stakeholder Project
debt piles up
Private equity firms typically aim to buy companies to increase profits and then sell them within five to seven years. They often use the company's assets as collateral for loans and acquire companies with borrowed money.
Help at Home's private equity owners, Centerbridge Partners and Vistoria Group, partially financed their 2020 acquisition of the company with $745 million in debt. Currently, Help at Home, rather than private equity owners, must service debt and interest, which could make it difficult to generate a healthy profit in states like Alabama, where Medicaid reimbursement rates are low. There is sex.
Accumulating debt in companies to finance additional purchases or pay dividends to investors is a hallmark of private equity. Bugbee, of the Private Equity Stakeholder Project, said the industry tends to use debt more recklessly than publicly traded companies, which need more financial transparency. There is also the idea of high risk, high return.
Private equity-owned companies struggling to service large amounts of debt may make business decisions to unload services in one state and expand in states that are more effective at keeping the business afloat, Bagbee said. said.
Michael Fenne, senior health care coordinator for the Private Equity Stakeholder Project, said overindebtedness makes companies more financially vulnerable and more likely to cut unprofitable service areas.
“This is a great example of how much private equity can shape a state's health care landscape,” Fenne said of Help at Home's sudden exit from Alabama. “They can do it in a variety of ways. Sometimes they cut staff, sometimes they cut real estate.
“What is striking about this situation is that we have taken more lenient steps toward complete removal from the state.”
A high percentage of Help at Home's revenue comes from Medicare and Medicaid, leaving it vulnerable to regulatory changes and state budget challenges, according to a 2022 report from credit rating agency Moody's Investors Service. ing.
“It's possible. [for a business] “It's possible to make money from Medicaid even at low reimbursement rates, but it's going to be much harder to do that if you're in a debt-ridden business,” Bagbee said.
Help at Home's Trenaman told Stateline that the decision to leave Alabama was not made lightly.
“We take our responsibility to provide the safest in-home personal care services to our customers very seriously,” she said in an email. “Given that responsibility, we believe we have been forced to make the very difficult decision not to renew our annual contract effective September 30, 2023.”
Alabama's Medicaid policy for home care makes it difficult to recruit and retain employees, and “Alabama has not been able to overcome these challenges,” she said.
Alabama is one of 10 states that has not accepted federal funding to expand Medicaid eligibility to people making up to 133% of the federal poverty level. The state has some of the strictest income-based eligibility requirements in the country.
Help at Home also operates in Florida, Georgia and Mississippi, none of which have expanded Medicaid. About a year before leaving Alabama, Help at Home acquired home care companies in Georgia, Indiana, New York, Ohio and Pennsylvania. As of late January, the company had about 2,700 job openings on its website, most of them for caregivers.
However, Alabama has particularly low Medicaid reimbursement rates for home care services. According to KFF, a health care policy research organization, the state reported paying home health agencies just $27 per day per Medicaid client receiving their care, but does not publish rates for home personal care. There wasn't. Home health reimbursement is the lowest daily rate for home health agencies among the 26 states that report patient volumes to KFF.
Texas and Wyoming also have not expanded Medicaid, but they reimburse home health agencies about $181 and $58 per visit or day, respectively.
“Medicaid and the state's failure to expand it is definitely a valid reason for businesses to suffer,” Bagbee said. “But there are similar examples of private equity-owned health care companies pulling out of some states and not others, because at the end of the day, it's about profits.”
Possibility of regulation
Because private equity operates similarly across the healthcare sector, state and federal laws promoted by private equity involvement in hospital systems and other healthcare sectors may also operate in home health agencies.
Last year, 24 states enacted laws related to health care integration and competition, according to the National Conference of State Legislatures, an advisory think tank for lawmakers.
“Change of Ownership [of companies owned or being acquired by private equity] “This is a window of time that regulators can use to really look at companies and who is acquiring them,” Bagbee said. “If they do their due diligence, it can go a long way in protecting patients and workers.”
Improving transparency, mandating certain staff-to-patient ratios, and increasing wages for health care workers will also help protect patients and communities.
This year, California will begin implementing a 2022 law that requires health care providers to notify the status of major financial transactions, including mergers and acquisitions. In January, New York state raised the minimum wage for home health care workers to $17.55 to $18.55, depending on location. These wages will continue to rise every year until 2026.
Efforts to enact new rules are often delayed by years as policymakers want to see evidence of harm to workers and patients before enacting changes.
“But we have a good idea of how private equity typically works, having spent decades observing how private equity investments play out in the healthcare sector. There are still ways regulators and policymakers can be proactive,” Bagbee said.
Stateline is part of States Newsroom, a nonprofit news network supported by a coalition of grants and donors as a 501c(3) public charity. Stateline maintains editorial independence. If you have any questions, please contact Editor Scott S. Greenberger. [email protected]. Follow Stateline on Facebook twitter.
