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Home health should continue to remain a magnet for private equity (PE) investment this year, KPMG healthcare and life sciences consultants said Thursday during a press roundtable.

KPMG’s Global & U.S. Private Equity Leader Glenn Mincey said demand from investors for healthcare acquisitions remains strong, despite inflationary pressures from rising interest rates and higher labor costs. However, Mincey also admitted deals could take longer to negotiate. 

“The challenge in the near future and far future frankly is aligning buyer and seller pricing expectations,” Mincey said. “The dam seems to be leaking a little bit on price matching, and the demand seems to be heading toward behavioral health and home healthcare.” 

The healthcare industry has been a hotspot for PE investment over the past few years. Although PE firms completed fewer healthcare acquisitions in 2022 than 2021, it was still the second best year on record for mergers and acquisition activity in the sector. Home health and hospice were among the top 15 subsets, according to the Private Equity Stakeholder Project.  

While home health and healthcare overall will continue to attract investors, several challenges could reshape the healthcare industry. These include labor shortages, margin compression on healthcare delivery, and reimbursement pressure from state, federal and private payers, according to Ash Shehata, KPMG National Sector Leader for Healthcare and Life Sciences. However, he said these factors ultimately could revolutionize the industry.

“Those three things are the perfect storm to drive us to innovate and drive us to look for more advanced uses of technology and new uses of AI (artificial intelligence),” Shehata explained. 

Mincey agreed, adding that AI could help automate mundane tasks, such as note-taking during patient consultation and follow-up communications with patients.

“Those are things that occupy a significant chunk of every professional’s day,” Mincey asserted. “If you can make a healthcare professional more proficient with his or her time, they will become much more effective.”