Private Equity at Home: Wall Street’s Incursion into the Home Healthcare and Hospice Industries

As the pandemic continues to change the way Americans view healthcare, the home healthcare and hospice industries continue to proliferate as viable alternatives to traditional nursing homes and hospitals. The growth of these industries has made them attractive targets for private equity investment.

The Private Equity Stakeholder Project’s latest report, Private Equity at Home: Wall Street’s Incursion into the Home Healthcare and Hospice Industries, highlights several large private equity- owned home healthcare and hospice companies that have been scrutinized.

While non-profits have previously constituted the majority of home healthcare and hospice companies, both sectors are now dominated by for-profit companies. Although the industries remain fragmented, private equity firms have acquired large home healthcare and hospice companies and consolidated smaller ones to establish large footholds in both industries. For-profit home healthcare and hospice companies have experienced their share of controversy, including:

• Underpaid and overworked employees (who are mostly women of color);
• Medicare fraud; and
• Lower quality of care compared to their non-profit counterparts.

Such problems have the potential to be exacerbated by the common private equity strategy of pursuing outsized returns over relatively short periods of time (e.g., 25% return over a period of 3-7 years).

Companies like Brightspring Health Services, Interim Healthcare and Aveanna Healthcare are examples of controversial home healthcare and hospice companies that are, or were previously, owned by private equity firms:

• Brightspring Healthcare (KKR, Onex Corporation) has been subject to a number of wage theft lawsuits and investigations related to lapses in patient care.
• Interim Healthcare (Levine Leichtman Capital Partners, Wellspring Capital) has been investigated for violations of the False Claims Act, similar to other companies under its private equity owner’s control.
• Aveanna Healthcare (J.H. Whitney and Bain Capital) was subject to a Bloomberg investigation that shed light on its cost-cutting practices and their relationship to staffing issues and patient neglect.

As private equity continues to consolidate the home healthcare and hospice industries through acquisitions and add-on investments, it is increasingly important to ensure that private equity’s outsized profits do not come at the expense of patient care. Policymakers should implement laws that promote greater transparency and oversight over private equity transactions in the home healthcare and hospice industries to guard against excesses that could harm patients and employees alike.