Undeniably, the COVID-19 pandemic has changed the lives of billions across the world. It's caused great suffering, altered the way we go about our daily lives, and transformed the healthcare industry too.
One major consequence of the pandemic: the shift toward home health.
"Families recognize the imperative of trying to keep their loved ones comfortable and safe in their home," says Barry Freeman, Managing Director of Lincoln U.S.' healthcare industry team.
That's not the only difference in the healthcare industry. Along with this shift toward home health, the industry is also seeing a movement toward value-based models and joint ventures within health services — in other words, the combining of services to offer patients better outcomes.
"We are seeing more and more of these kinds of models emerging, and it's very beneficial for high quality home health operators who do have the technology, the infrastructure, the clinical pathways, and the ability to inter operate with the hospital to be really valuable partners," Barry says.
This episode of Across the Table features a conversation between Geoffery Cockrell and Trey Andrews of McGuireWood and Barry at Lincoln U.S. All three have experience working in the healthcare space, whether that be working in mergers and acquisitions or providing guidance on transactional and regulatory models.
Geoff, Trey, and Barry lend their expertise on how the healthcare industry is changing, and specifically the prognosis for home health and telehealth. They also chat about the future and provide insight into why the diversified model of healthcare is the one to watch in coming years.
What they do: Geoff is the Chair of McGuireWood's private equity group and serves on the firm's Board of Partners; he has extensive experience in mergers and acquisitions, especially in the healthcare space.
★ COVID-19 has changed the landscape of healthcare. The pandemic has illuminated the advantages home healthcare has over hospital care. Plus, telehealth has allowed doctors to meet with patients as healthcare facilities become overwhelmed. These aren't temporary trends, either; the runway for the home health industry could last 5-10 years.
★ PDGM has shifted to value-based care. The Patient-Driven Groupings Model (PDGM) has shifted to a reimbursement scheme largely dependent on the value-based care model. In other words, companies are incentivized to deliver quality outcomes rather than simply offering a great number of services. Although there was some skepticism about whether this shift would be effective, healthcare agencies benefited from government cash flow to aid during the pandemic, which may have made a smooth transition to value-based PDGM.
★ The pendulum is swinging back to a diversified model of healthcare. These days, pure play models — or companies that focus mostly on one type of care, like hospice or pediatric care — have higher valuation than diversified models that might incorporate skilled and unskilled care, for instance. However, Barry believes that the shift to value-based care will also end up favoring diversified players.
[3:12] A catalyst for home healthcare: COVID-19 has increased the push for people to have their loved ones cared for at home instead of in hospitals. Barry says this is not just a temporary consequence; he predicts this turn toward home health will have a lasting impact.
[7:54] Changing to value-based care: Healthcare providers are shifting their focus away from offering a high volume of services to providing quality patient outcomes.
[13:54] Partnership: More hospitals and home healthcare operators are turning to joint venture relationships, or combining services rather than siloing them.
[21:26] The rise (and challenges) of telehealth: Although telehealth has been around for at least 30 years, the pandemic accelerated its use. However, it's not a replacement for some areas of healthcare, like home health services that require physical assistance.
[27:35] Diversified vs. pure play models: Healthcare providers focusing on one specialization may have higher valuations now, but the market is moving in a different direction. These days, investors are beginning to look at companies with more diversified models.
[31:35] Value-based structures in the home health area: One value-based model appearing in home health include the CMS innovation program, which concentrates more on holistic care to avoid hospital readmissions and manage chronic conditions.
[34:38] Looking toward the future: With greater stability from government reimbursement, Geoff believes that "the tailwinds are going to continue to blow in the direction of consolidation" which "bodes well" for the industry.