Senior Care Niches Top Private Equity Targets for 2014

Skilled nursing facilities and home healthcare are listed among the top areas for private equity investment in 2014 in a Beckers Hospital Review article on trends for 19 niche investment areas in the healthcare space.

“While the overall volume of transactions in 2013 declined from 2012, there was significant growth in certain sub sectors of healthcare,” says Beckers.  

One such sub sector is home healthcare, which continues to see “substantial” growth because of its role as a lower-cost alternative to hospitals and nursing homes, especially as the baby boomer generation ages, the article says. 


Spending among home health care agencies had a projected 5.1% growth to $77.8 billion in 2012, and future growth is not expected to slow. 

“Although this sector is currently fragmented, with the majority of agencies having only been in the business for roughly five years, greater franchising can be expected in the future,” says Beckers. 

Still, the sector is not without headwinds, especially as the Affordable Care Act calls for a base rate reduction starting in 2014 and extending for four years with a maximum cumulative reduction of about 7%. Despite the cut, home health care agencies with larger footprints are still expected to realize profit margins. 


However, because of the industry’s rapid growth, the Centers for Medicare and Medicaid Services has been monitoring home health care for fraud and abuse, Beckers notes.

On the skilled nursing side, the industry brings in around $180 billion a year, according to 2011 MedPAC data, with positive margins that year estimated between 4-6%. 

“SNFs remain an interesting area for investors, in part fueled by unlimited demand from an aging population, notwithstanding the uncertainty of regulatory investigations and periodic efforts at payment reform,” says Beckers. 

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Still, despite demand, the sector faces headwinds in the form of reimbursements, with some state budgets behind on Medicaid payments and rate cuts on the Medicare side, forcing operators to get creative. 

“Changes in reimbursement and eligibility lead entrepreneurial owners to seek out different types of patients, e.g., developmentally disabled, subacute and others,” says the article. “…Despite Medicare cost reductions, we expect that Medicare patients will continue to be a real focus of SNFs.” 

Other health care areas for private equity investment include hospice, health information technology, and hospital and health systems. 

Read the full list of trends for 19 niche investment areas. 

Written by Alyssa Gerace