Your Primer to Healthcare Mergers and Acquisitions

Special Medtrade Show Edition: Why You Should Invest In Pediatric Home Health Care Now

Oct 9, 2018

by Bradley M. Smith

by Bradley Smith, ATP, CMAA

Volume 5 Issue 21, October 9, 2018

Today, families provide nearly $40 billion of uncompensated pediatric home health care (parents are believed to lose about $3,200/year in income when caring for a sick child), though this picture is rapidly shifting with the expansion of Medicaid, the increasing influence of managed care organizations (MCOs), and the Centers for Medicare & Medicaid (CMS) emphasis on providing pediatric care in client homes. This accelerating change offers an opportunity for home health care providers to enter and/or increase market share in an area of demonstrated need.

The Nature of the Pediatric Care Market

Children often need home health care for reasons that differ markedly from their elder counterparts, including chronic illness, injury, and medical issues that occurred at birth. While many of these may overlap with other needs (e.g., individuals with intellectual/developmental disabilities [I/DD] already eligible for Medicaid), there remains a significant population of infants and children requiring medical care and home health care services. CMS estimates that at least 20% of infants and children are eligible for Medicaid-funded home health care services which they currently do not receive.

Investing in the Pediatric Home Health Care Market

There are several great reasons to enter or expand existing services in the pediatric home health care market in the near future:

The safety of the pediatric market - Like Medicare, Medicaid will naturally have downward pressure on reimbursement rates. This has, and will continue to manifest itself, in variability of all reimbursements in all of Medicaid including pediatric services, depending on numerous factors.

The increased reliance of state Medicaid programs on MCOs - This trend will exclude more and more providers while rewarding those that can adapt. MCOs will be looking for ways to let less providers into their networks as well as exclude existing providers that do not meet their increasingly sophisticated data requirements. Providers that have the ability to demonstrate their superiority of clinical care will standout by being a greater value the MCOs, giving these DMEs a seat at the MCO’s table.

The ability to affect positive social change - Most of us entered this field because we felt good from helping our fellow humans in need at the same time we built a company that could provide sustainable benefit for ourselves, our employees, and our larger communities. Successfully addressing the complex medical needs of infants and children takes the positive impact of our work to a whole new level.

The ability to demonstrate clinical prowess in an area of great need - This will not only set you apart from other competitors in the market but will help you recruit and retain the talent from top to bottom, as well as win you accolades from families, competitors and payers in you market. The leverage you can gain when negotiating contracts with insurance providers and health plans provides immediate benefit as well as strengthening your position for the long-term.

The pediatric home health care market offers a multitude of possibilities for DME and other healthcare entrepreneurs. What do you do if you find yourself lacking the clinical depth you need as a provider but still want the aforementioned advantages for your company? The most effective way to enter the pediatric home health care arena is to acquire a company in the space and there are plenty of opportunities to do so in today’s marketplace.

Bradley M. Smith

Bradley M. Smith ATP, CM&AA

Managing Director/Partner

For over 20 years, Brad has held a number of significant executive positions including founding Lone Star Scooters, which offered medical equipment and franchise opportunities across the country, Lone Star Bio Medical, a diversified DME, pharmacy, health IT, and home health care company, and BMS Consulting, where he has provided strategic analysis and M+A intermediary services to executives in the healthcare industry. In addition, he is a regular columnist for HomeCare magazine and HME News, where he focuses on healthcare marketplace trends and innovative business strategies for the principals of healthcare companies. At VERTESS, Brad is a Managing Director and Partner with considerable expertise in HME/DME, home health care, hospice, pharmacy, medical devices, health IT, and related healthcare verticals in the US and internationally.

We can help you with more information on this and related topics. Contact us today!

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