HUNTSVILLE, Ala. — Help at Home employed nearly 800 caregivers scattered across every county in Alabama, helping 1,100 older clients those with disabilities with activities such as bathing, housework and meal preparation.

And then suddenly, it was gone.

Alabama’s largest provider of home care services said it abruptly left the state last fall because the state’s “reimbursement and regulatory environment” made it difficult to recruit and retain enough workers, according to Kristen Trenaman, the company’s vice president of public relations. Its departure sent state agencies scrambling to find new caregivers for the people who relied on it.

Help at Home’s departure from Alabama “had a significant effect,” according to Debra Davis, deputy commissioner for the Alabama Department of Senior Services. Davis said her agency worked with former Help at Home clients to find replacements on the fly.

Help at Home, owned by private equity firms Centerbridge Partners and Vistria Group, continues to provide in-home and community-based care in a dozen other states, with 49,000 caregivers and 66,000 monthly clients. It’s been aggressively expanding outside Alabama, acquiring home care companies and posting thousands of job openings on its website. Neither firm responded to Stateline’s request for comment.

Proponents of private equity investment in health care say the infusion of capital helps smaller companies expand into new markets, streamline their costs and pay for new technology.

But critics point to Help at Home’s departure from Alabama as a cautionary tale for what can happen when states that spend little on health care rely on private equity-owned providers to care for their most vulnerable residents.

Private equity-owned health care companies are focused on generating robust profits for investors. Typically, they want to cut costs, increase cash flow, use debt to fund expansion and then sell within a few years for maximum profit. In health care, critics say, that business model can diminish the quality of care, increase costs and narrow access for patients — particularly in more lightly regulated industries such as home care and hospice care.

“We leave a lot to the whims of the market and allow private players to dictate access to and quality of health care, and the case of Help at Home is a great example of that,” said Mary Bugbee, senior research and campaign coordinator for health care at the Private Equity Stakeholder Project, a research and advocacy group.

“At the end of the day it’s about money, and if we don’t have guardrails in our policies to prevent these pullouts, they’re going to keep happening.”

Private equity firms pool investments from pension funds, endowments, sovereign wealth funds and wealthy individuals to buy controlling stakes in companies. They’ve drawn increasing legislative scrutiny and public outrage as they’ve grown their footprint in U.S. health care companies.

And while much of that negative attention has focused on hospitals and nursing homes, many private equity firms also have turned their sights to the lucrative and less regulated home health care industry.

“There are favorable demographic trends in the aging population that’s only going to keep getting older,” Ankeet Patel, a vice president at private equity firm Shore Capital Partners, told the audience at the Home Health Care News Capital + Strategy Conference in April 2023. “Pair that with home-based settings being cost-effective and the preferred setting for people that receive care, and that creates a lot of opportunity.”

Around 10,000 baby boomers turn 65 every day. By 2030, 1 in 5 Americans will be over age 65, the largest share in U.S. history. That’s tens of millions of people who will need care in the coming years, and most older adults say they would prefer to age in their homes, rather than in a nursing home, for as long as possible.

As long-term care for older adults moves away from nursing homes and toward home care, private equity is following close behind.

Increasing demand

Home care can mean a variety of things. Home health is often the term for more skilled care provided by licensed nurses and therapists, including wound care and medication management. Personal home care typically refers to nonclinical services from professional aides, such as help bathing and dressing, or performing household chores that might include cleaning, cooking and laundry.

It’s not just aging consumers who prefer home care to nursing homes: Insurance payers like it too. For both public and private insurance, it’s a potential cost-saver for people who don’t need round-the-clock supervision.

Monthly costs for in-home care average about $5,000 for 40+ hours per week, compared with $8,000-$9,000 at a nursing home, according to the most recent Cost of Care Survey from insurance company Genworth. The survey is cited by agencies including the U.S. Department of Health and Human Services.

But costs vary widely from state to state. In Mississippi, in-home care averages around $3,800 monthly, while a private room in a nursing home is nearly twice that, about $7,300 per month. In Massachusetts, in-home care is nearly $6,000 monthly while a private nursing home room is more than $13,500 a month.

For those who need 24/7 care, home health is far less economical, averaging around $19,000 per month, more than twice the cost of a private room in a nursing home.

A 2019 analysis of Medicare claims found total costs 90 days after an emergency department visit were lower for patients treated at home versus those treated in the hospital. The home health patients also had lower hospital readmissions.

As consumer demand increases and insurance giants such as Humana and UnitedHealth Group wade into the market with their own home health agencies, private equity continues to gobble up smaller home health companies, consolidating them into regional networks. From 2018 to 2019, private equity was involved in nearly half of home health care industry deals.

Piling on debt

Private equity firms typically aim to acquire a company and boost profits before selling it within five to seven years. They often purchase companies with borrowed money, using the company’s assets as collateral for the loans.

Help at Home’s private equity owners, Centerbridge Partners and Vistria Group, partially funded their 2020 purchase of the company by loading it with $745 million in debt. Now, Help at Home — and not its private equity owners — must pay off the debt and interest, which can leave it less able to turn a healthy profit in a state such as Alabama with low Medicaid reimbursement rates.

Piling debt onto a company to finance additional purchases or to pay investors a dividend is a private equity hallmark. The industry tends to use debt more recklessly than publicly traded companies that must be more transparent about their financials, said Bugbee, of the Private Equity Stakeholder Project. Plus, there’s an attitude of high risk, high reward.

A private equity-owned company struggling under high debt payments might make the business decision to unload its services in one state while expanding in a state that can better help the business stay afloat, Bugbee said.

Extra debt can leave a company more financially vulnerable and more likely to look for less-profitable service lines to cut, said Michael Fenne, senior coordinator for health care at the Private Equity Stakeholder Project.

“This is a good example of the extent that private equity can shape the health care landscape in a state,” Fenne said of Help at Home’s abrupt departure from Alabama. “They can do that in different ways; sometimes it’s cutting staff, sometimes it’s shedding real estate.

“What stood out about this situation is that they went beyond any of those more mitigated measures toward a complete removal from the state.”

A high percentage of Help at Home’s revenue came from Medicare and Medicaid, leaving it vulnerable to regulatory changes and state budget challenges, according to a 2022 report from Moody’s Investors Service, a credit rating agency.

“It’s possible (for a business) to make money from Medicaid, even from low reimbursement rates, but if you have a business that’s saddled with debt it’s going to be a lot harder to do that,” Bugbee said.

Trenaman, of Help at Home, told Stateline that the decision to exit Alabama wasn’t made lightly.

“We take our responsibility to provide the safest, in-home personal care services to our clients very seriously,” she said in an email. “Taking that responsibility into account, we believe we had no choice but to make that very difficult decision not to renew our annual contracts effective September 30, 2023.”

Alabama’s Medicaid policies for in-home care made it difficult to hire and retain employees, she said, “and we have not been able to overcome these challenges in the state of Alabama.”

Alabama is one of 10 states that has not accepted federal funding to expand eligibility for Medicaid coverage to people making up to 133% of the federal poverty level. The state has some of the stingiest income-based eligibility requirements in the country.

Help at Home also operates in Florida, Georgia and Mississippi, none of which has expanded Medicaid. In the year or so before its Alabama exit, Help at Home purchased home care companies in Georgia, Indiana, New York, Ohio and Pennsylvania. As of late January, it had about 2,700 open jobs on its website, most of them for caregivers.

But Alabama does have especially low Medicaid reimbursement rates for home care services. The state reported paying home health agencies just $27 per day for each Medicaid client receiving care, according to KFF, a health policy research organization, though it did not share its rates for in-home personal care. Its home health reimbursement is the lowest daily rate for home health agencies out of the 26 states that reported their numbers to KFF.

Texas and Wyoming, which also have not expanded Medicaid, reimburse home health agencies about $181 and $58 per visit or per day, respectively.

“Medicaid and a state’s failure to expand it is definitely a valid reason a business might struggle,” said Bugbee. “But there are analogous examples of private equity-owned health care companies that will pull out of some states and not others because at the end of the day, it’s about their bottom line.”

Potential for regulation

Since private equity functions similarly across the health care sphere, state and federal laws that were spurred by private equity’s involvement in hospital systems and other health care sectors also could work for home health agencies.

Last year, 24 states enacted laws related to health system consolidation and competition, according to the National Conference of State Legislatures, an advisory think tank for lawmakers.

“The change of ownership (of companies owned or being acquired by private equity) is a window of time that regulators can use to really look into a business and who’s acquiring it,” Bugbee said. “If they do their due diligence, it can go a long way toward protecting patients and workers.”

Improving transparency, requiring certain health care staff-to-patient ratios and boosting wages for health care workers can also help protect patients and communities.

This year California will begin enforcing a 2022 law that requires health care providers to notify the state of major financial transactions, including mergers and acquisitions. In January, New York increased minimum wages for home health care workers to $17.55-$18.55, depending on the region. Those wages will continue to rise annually through 2026.

Efforts to enact new rules often lag a few years behind, as policymakers want to see evidence of harm to workers or patients before enacting changes.

“But after watching private equity investments play out in health care for decades,” Bugbee said, “we do know enough about how private equity typically operates that there are still ways regulators and policymakers can be proactive.”

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