When Private Equity Buys Your Home Care Agency

Martha Caldwell, 79, did not read the letter carefully the first time. It arrived on a Tuesday in November, one page with a logo she did not recognize, informing her that the home care agency her daughter had found four years ago had been acquired by a regional holding company. The letter used the word “exciting” three times. Martha set it on the counter next to the coffeemaker and went back to her crossword.

She had not been looking for an agency. Her daughter had looked for one after Martha’s second fall, and had found Patrice, who ran a twelve-person operation out of an office on Broad Street that smelled of fresh paint and had photographs of her staff on the wall. Patrice was a nurse first and a businesswoman second, and she made that clear at the first meeting. She had matched Martha with Denise based on a fifteen-minute conversation with Martha about what mattered to her, which turned out to be consistency, punctuality, and not being called “sweetie” by people who did not know her. Denise knew all three within a week.

Six months after the letter, Patrice is gone. Denise is still there. Two of Denise’s colleagues are not. Martha’s care plan now includes a fourth weekly visit that was not in the original plan and that Martha does not remember requesting.

Martha does not know what private equity is. Most people do not, and the people who benefit from that gap have not been eager to explain it. Here is the explanation at the kitchen table.

A private equity firm is an investment company that raises money from large investors — pension funds, endowments, wealthy individuals — and uses that money to buy companies. The firm buys at one price, works to increase the company’s financial value over three to seven years, then sells at a higher price. The difference between the purchase price and the sale price is the return. Everything that happens between purchase and sale is shaped by this goal.

The home care industry looks attractive to PE firms for three reasons. The population is growing: there will be 80 million Americans over 65 by 2040, and most of them will need some form of in-home support. The market is fragmented: thousands of small agencies like Patrice’s operate locally, inefficiently, without the pricing power or technology infrastructure of a large enterprise. And the revenue is reliable: Medicare and Medicaid pay on predictable schedules. For a firm that buys companies to improve them financially and sell them for a profit, this is a compelling picture.

What changes when a PE firm acquires a home care agency is not always visible to the person receiving care. It shows up in patterns that accumulate over time.

Staffing may shift. The locally owned agency competed for aides on relationship and culture; the acquired agency competes on scheduling efficiency. Aides with higher hourly rates or more training may be replaced by aides with lower rates. Turnover increases not because the new owners are malicious but because the incentive structure no longer rewards retention the way Patrice’s did.

Scheduling may change. An independent agency optimizes scheduling around the patient. An agency optimizing for margin may optimize around billing. More visits, shorter duration, higher volume per aide per day. The visits Martha receives may look the same on paper and feel different in practice.

Services may expand. Martha’s fourth weekly visit generates Medicare reimbursement the agency did not have before. Whether Martha needs a fourth visit is a clinical question. Whether the visit was added to Martha’s plan because she needs it or because it generates revenue is a structural question, and the incentive structure answers it before the clinical question is asked.

Documentation requirements for aides frequently increase after acquisition. New compliance systems, new reporting requirements, new administrative layers. The aide who spent forty minutes with Martha now spends twelve of those minutes on a tablet entering data that serves the agency’s billing and compliance needs, not Martha’s care needs.

None of this happens in every acquisition. These are documented patterns, not universal outcomes. The evidence on PE ownership in healthcare is mixed but directionally concerning: research published in JAMA and Health Affairs has found higher rates of billing irregularities and, in some categories of care, worse patient outcomes in PE-owned facilities compared to non-PE-owned ones. The consolidation is accelerating. As of 2024, PE firms had invested more than $100 billion in healthcare services over the prior decade.

The fourth weekly visit is worth examining closely. Medicare will reimburse for home health aide services when they are ordered by a physician and meet clinical criteria. The ordering physician is rarely the person who adds a visit to a care plan; that decision may originate with the agency’s care coordinator, who is now an employee of a holding company with a margin target.

Martha may need a fourth visit. The dizziness Denise noticed last winter, the mornings when Martha moves more slowly, the week in February when she skipped breakfast three days in a row — these are signals that a fourth visit could legitimately serve. But Martha did not ask for it. Her physician did not call her to discuss it. It appeared on her care plan the same way the letter appeared on her counter: as a fact about her life that someone else had decided.

The reader who understands the incentive structure can ask the question the structure is designed to prevent: was this service added because I need it, or because it generates revenue? That is not a hostile question. It is the question any person should be able to ask about any service she receives. The problem is that most people do not know there is a question to ask.

Not all capital entering this market behaves the same way. This matters because the reader may have concluded that PE ownership is categorically bad and local ownership is categorically good, and the picture is more complicated than that.

Some PE-backed organizations have invested in technology and training that smaller independent agencies could not afford. Care coordination software, remote patient monitoring infrastructure, clinical oversight systems — these are expensive to build and maintain, and some PE-backed agencies have deployed them in ways that produce better outcomes than the fragmented technology environments of smaller competitors. The incentive to reduce hospitalizations (which generate liability and cost) aligns with the incentive to deliver good care, and some PE-backed operators have followed that alignment.

Capital with a longer time horizon tends to produce better care outcomes than capital with a shorter one. A fund that holds an agency for ten years has a different relationship to patient outcomes than a fund that plans to exit in four. Institutional investors — pension funds, endowments — have time horizons that match the compounding relationship argument this publication has made across seventeen series. Whether those investors are moving into aging care infrastructure in meaningful ways is a question the next pieces in this series address.

The reader has three questions she can ask any home care agency before she or her family selects it, or after the letter arrives.

Who owns this agency? The answer should be public. If the agency is reluctant to answer, that reluctance is itself information.

Has the ownership changed in the last three years? A PE acquisition within the prior three years is the relevant window. Agencies recently acquired are in the period of highest operational disruption.

What is your aide retention rate? A retention rate above 70 percent suggests a culture that values continuity. A retention rate below 50 percent suggests an environment that does not. The person who has been with an agency for three years knows things about the patients she serves that cannot be transferred in a handoff note.

These questions do not require the reader to understand fund structures or exit multiples. They require her to understand that the incentive behind the care shapes the care, and that the incentive is now visible to her if she looks.

Denise is still there. Two of her colleagues from the Patrice era are not. The aide who left in January took a job at a hospital with benefits. The one who left in March moved to a competitor agency that pays seventy-five cents more per hour. Denise stays because Martha matters to her and because she has been with Martha for three years and does not want to start over. The new owners have not offered her a raise.

The system that depends on Denise’s loyalty is not a system. It is a person making a daily decision to stay in a job that has become less hospitable because she cares about a specific woman in a small house in Chattanooga who hates being called “sweetie.”

Martha knows this, in the way that people who receive care come to know the things that are not said aloud. She knows that Denise is staying because of her, not because of the holding company on Broad Street. She knows this is not sustainable. She does not know what to do about it.

The reader who understands the incentive structure now knows something Martha does not yet know she knows: the system she is depending on is being shaped by forces she can evaluate, and some of those forces she can influence. The next pieces in this series show how.