New York’s home care services prepares for wave of mergers and acquisitions

Kathy Febraio, president and CEO of the New York State Association of Health Care Providers, said the Health Department blamed the wait on pandemic-related staffing issues. As a result, natural market forces that have long been stymied are about to explode into view

“There’s a lot of pent-up need for that application and pent-up desire for LHCSAs [licensed home care services agencies] to make changes,” Febraio said.

Monica Pomeroy, a Health Department spokeswoman, said the moratorium enabled the department to develop a new methodology for the public-need criteria. She said the department continued to process asset acquisitions and license approvals for agencies associated with assisted living programs. She attributed the delay in releasing the application to Covid-19.

“The pandemic disrupted patterns of service delivery as well as LHCSA operations, causing the department to defer release of the new application until such time as unregistered and nonoperational LHCSAs could be identified and new patient service by county data could be collected and analyzed,” Pomeroy said in a statement.

The new application for change in ownership requires agency operators to pass financial feasibility and character and competence reviews. New agencies must prove a public need for services in their county, meaning either that the area has fewer than five or that the new agency would serve a population not being served by existing agencies.

The nonexistence of the application did not stop M&A activity, said health care lawyer Emina Poricanin, who runs Albany-based Poricanin Law. Home care executives instead drew up agreements to manage the target agency, which kept its own separate license, and submitted those to the Health Department.

The department said it has 68 management agreements under review, the majority of which involve an asset purchase agreement for change in ownership.

Julian Hagmann, vice president at Caring Professionals in Forest Hills, Queens, said the home care agency inked a management agreement for an additional two licenses during the moratorium. It now can file for a change in ownership to formalize the acquisition.

“It’s basically a mad scramble right now if you’re an attorney in the home care space, because you have all these M&A agreements on the back burner,” Hagmann said. “The department’s going to get flooded.”

Poricanin said it might take the Health Department up to two years to go through all the license applications, which then go before the state Public Health and Health Planning Council for approval. The wave of new applicants includes home care operators who shied away from deals during the moratorium and those who applied for license before the moratorium went into effect but did not win approval in time.

Given that many licensed home care agencies rely on the Medicaid program for revenue, Poricanin said operators have a huge incentive to engage in mergers and acquisitions.

“Really the only way that these providers are making money is by volume, so they have to grow,” she said. “Consolidation is the means of survival.”

Other major changes to the state’s home care sector are afoot. Stakeholders are bracing for the release of a request for proposals under the Medicaid long-term-care program—which would further whittle down the number of licensed home care agencies in New York by requiring them to go through an application process to be able to continue billing Medicaid.

Febraio said the Health Department should wait to release the RFP until the full effects of the new license application are clear because current state data on the number of licensed agencies might not be accurate.