What Are Buyers of Home Health Care Businesses Looking For?

The Business- Most buyers have specific lines of business that constitute their core business and certain lines of business that they may want to grow into. In homecare, examples of this are skilled intermittent care, homemaker/attendant care, hospice, DME & IV infusion. Some buyers want to concentrate in particular areas such as the Medicare certified skilled intermittent space while others are trying to diversify into areas such as hospice or homemaker/attendant care. There are also buyers that have a narrow payer focus such as Medicare while others prefer to have a wide variety of payers. Some companies have grown to substantial size based on participation in State Medicaid Waiver programs. Knowing what space you are in and your payer characteristics will most likely determine the type of buyer and possibly the specific buyers for your business.

Location - As companies expand, they have a good idea of where they want to expand geographically. If you, as a seller, can identify which buyers want to enter or expand into your geographical market, you can make yourself more attractive to those potential buyers. Examples of this are Certificate of Need (CON) states and large urban areas. Agencies in CON states where starting up an agency is relatively difficult sometimes garner higher valuations and can be sold relatively quickly as buyers have limited options of growing within that geographical area. Another example of company's expansion into different geographic markets is the acquisition of Dyna Care as well as Patient Care's operations in Chicago by Amedisys which, in a few months made Amedisys one of the largest home health agencies in the Chicago metropolitan area where they had no presence previously. The more compelling the reasons your agency is attractive to buyers; the easier it will be to sell at a good price.

Referral Sources - Some buyers look for diversified referral sources while some prefer large referral sources such as hospitals. In general diversified physician referral sources are more attractive to buyers rather than a few physicians providing the majority of an agency's referrals. Preferred provider relationships with large institutions such as hospitals or even acquisition of hospital base agencies are attractive to larger buyers if they can be assured that they can retain the future business. Avoid large medical director fees as this often can make potential buyers uncomfortable.

People - Ultimately, healthcare is a service business and service businesses are only as good as the people in them. In this era of extreme shortage of field nurses and therapists, a company with a stable workforce of good clinicians is invaluable. Knowledgeable and capable clinical managers as well as tenured sales and marketing staff can add dramatically to the value of your company. Company valuations are enhanced through better quality and service, which will lead to better profitability and increased selling price if you have motivated staff with good leadership & marketing skills.

Systems - Sellers systems are often the reason some companies have better operational and financial results. Companies with good systems tend to be easier to sell, as information is readily available. Financial information, quality of care data and much of the operational data is easily accessible. Companies with good systems tend to be the easiest companies to sell with the best valuations as there seems to be a direct correlation between organization, quality & profitability.

As you can see, homecare companies are not that different from other service companies. Good strategy, good people and good systems tend to produce better results. If you want to make the most out of the agency that you have built, concentrate on the basics. The use of professional consultants, although sometimes expensive, can ultimately pay in the long run if they help you become the company that everybody wants.


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