A potential bidding war for tech-enabled home health provider Signify Health shows the continued attractiveness of the home health market, according to a mergers and acquisitions expert.
News surfaced over the weekend that Amazon, UnitedHealth and Option Care Health are joining CVS Health as possible suitors for Signify Health. Michael Moran, a partner with M&A Healthcare Advisors, told McKnight’s Home Care Daily Pulse that this activity could be a sign that there has been a shift again in the mergers and acquisitions market for home health.
“Three years ago, every three to four deals we would sell out of five would be to a strategic buyer,” Moran said. “The majority of buyers we see now are private equity, and now I think it’s kind of turning back in a way where these larger strategic companies are trying to stay competitive and continuing to grow and scale their companies.”
A spokesperson for Signify Health would not comment to McKnight’s Home Care Daily Pulse about the reported interest in the Dallas-based firm.
A couple of weeks ago the Wall Street Journal reported that CVS Health was making a run for Signify Health. For months, CVS executives have said they were interested in adding a home care firm to their stable of businesses that also includes retail pharmacy, virtual primary care and Aetna health insurance.
Interest from Amazon, UnitedHealth and Option Care Health intensifies the interest in the home care space. Amazon has been moving aggressively into healthcare. Last month, the company announced it would buy One Medical Care, a human-centered, technology-powered primary care firm, for $3.9 billion. In announcing the deal, Amazon said the healthcare industry is “ripe for reinvention.”
UnitedHealth is also expanding aggressively into home health. It is expected to close soon on its $5.4 billion acquisition of home health and hospice giant LHC Group.
Moran speculated a deal to buy Signify could make it even harder for smaller home health agencies to compete in an already fragmented market.
“Looking at it from a macro level, the more consolidation, the tougher for your traditional mom and pop home health company to compete, make a profit and stay afloat,” Moran said.
The home health market has been a hot spot for mergers and acquisitions activity for the past couple of years. Last year, there were approximately 50 deals in the space, according to M&A advisory firm Mertz Taggart. However, the home health segment has lost some of its steam in recent weeks as larger companies, such as Amedisys and Addus, have paused deals until they know whether the Centers for Medicare & Medicaid Services will finalize a proposal to cut Medicare payments to home health providers by 4.2% in 2023.
