No fallout from proposed rate cut, as market takes wait-and-see stance

The Centers for Medicare and Medicaid Services (CMS) plans to levy a hefty behavioral adjustment on home health reimbursement in fiscal year 2023, a move projected by some industry advocates to impact up to 40 percent of providers with negative margins.

But the market has remained steady with investors seemingly undeterred thus far by the prospect of leaner paychecks, inflation and a critical worker shortage driving higher labor costs.

“We’re not seeing any home health deals killed because of the proposed pay reduction,” said SimiTree Associate Principal Mark Romano, who directs the company’s M&A clinical and financial diligence, market analysis and acquisition search, business valuation, and post-integration solutions.

Overall M&A activity in 2022 has been slower than in 2021, which was a busy year showing a flurry of movement among large platform providers pursuing multiple market operational structures. Many of those 2021 buys created the operations hub for continued acquisition of smaller providers going forward. Consequently, Romano said, 2022 has seen less activity as buyers focus more heavily on integration and consider next steps.

“Compared to recent years, the market was already a little slower this year before the proposed rule was issued this summer,” Romano said.

Market uncertainty

After a slow first quarter, the market was rebounding when CMS issued a proposed payment rule this summer. The proposed rule would drop Medicare reimbursement for home health by 4.2 percent next year.

Now buyers are taking a wait-and-see approach as proposed legislation to freeze the pay cut through 2026 makes its way through Congress, and industry advocates push CMS to reconsider the pay cut before issuing the final rule this fall.

“Uncertainty keeps buyers hesitant,” Romano said. “And while the proposed decrease hasn’t killed activity, it has introduced some uncertainty right now that buyers don’t like.” Whether the pay cut is approved or frozen, Romano said its impact on the market may not necessarily be negative. “Once the unknown factor is taken away the market can rebound,” Romano said. “It will adjust accordingly once the unknown factor is eliminated.”

Need a reimbursement prediction?

SimiTree’s data analysts are helping home health providers and potential buyers remove some of the uncertainty about the impact of the proposed rate cut on their operations in 2023.

Using the CMS Limited Data Set, SimiTree experts can provide a high-level analysis of the projected impact on reimbursement for any home health provider. The reimbursement impact analysis is one of multiple data analytics services SimiTree offers to help both providers and investors better understand market details, make sound projections, and identify growth opportunities.

SimiTree’s new Market Analysis Platform (MAP) provides critical market intelligence in an easy-to-understand format, making it simple to quantify current and trended market share, evaluate competitors and partners, see revenue trends, service footprints, quality scores and patient movement, and identify high referral targets.

Have a question for us about MAP or our reimbursement impact analysis? Use the form below to reach out!

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