The future of home-based care will very likely be dominated by managed care, according to a 40-year veteran of the space.
Mark Heaney, CEO and chairman of DTRT Health Acquisition Group (Nasdaq: DTRTU), also predicts that the consolidation efforts made by home-based care providers won’t slow down in 2022.
Heaney covered these topics and more at Home Health Care News’ Capital+Strategy event in Washington, D.C., last week. He also detailed how special-purpose acquisition companies (SPACs) – one being his own DTRT – have been going to market at a lower rate.
Heaney said that might be a good thing.
In essence, SPACs are shell companies that raise money to acquire or merge with businesses looking to hit the public market. A SPAC often has a two-year timeline to identify and strike a deal with its target, with any money raised returned to investors if an acquisition or combination never materializes.
For businesses, the appeal of teaming up with a SPAC is that it’s a quicker way of going public compared to traditional means.
Heaney said that several companies that have merged with SPACs in the last two years haven’t been ready to go public. Because SPACs offer companies a quicker path to go public, the process can sometimes be rushed, he said.
In 2020, 248 SPACs raised more than $83 billion in funds, CNBC detailed in a June report. The year before, 59 SPACS raised more than $13 billion. Since then, SPAC activity has cooled a bit.
“We don’t need that many SPACs [acquiring companies], period,” Heaney said. “If it’s cooled, good. When we’re ready to make an announcement on the company with which we’d like to merge, you should ask yourself, ‘Is that company public ready? Is this a company that ought to be public?’ I don’t think enough of them have done that.”
Heaney is the former CEO of the Frisco, Texas-based Addus HomeCare Corporation (Nasdaq: ADUS). Heaney spent over three decades at Addus, serving at different times as COO, CEO and chairman of the board. As CEO, Heaney helped lead Addus’ successful IPO in 2009, three years after the company was acquired by a private equity (PE) firm.
DTRT Health Acquisition Corp. was officially announced at the beginning of September, with pricing of its initial public offering of 20 million units priced at $10 per unit. On Sept. 2, the SPAC became listed on the Nasdaq Capital Market.
Heaney was able to raise $234 million and is now looking for a public-ready company to merge with. Once the merger happens, Heaney and his team will step away and their involvement will decrease.
Financial services firm Cantor Fitzgerald & Co. acted as the sole bookrunner in the early stages of DTRT, with full-service boutique broker Odeon Capital Group LLC serving as the lead manager for the offering. As for the SPAC’s name, “DTRT,” it is an acronym that stands for “do the right thing.”
There are advantages to going the SPAC route – it’s not only quicker,the valuation is also a certainty.
“It’s going to be faster and you’ll have valuation certainty because there’s no question,” Heaney said. “For a public-ready company, speed and certainty are really powerful arguments.”
Future of home-based care industry
As for the future of the industry, Heaney said he’s been surprised at the sudden growth for home-based care providers in the last decade and doesn’t expect it to slow down anytime soon.
When making pitches to companies as a SPAC, Heaney said he recently has pointed out that in 1980, the United States spent $500 million on home- and community-based services and personal care. In 2019, that number was $60.3 billion.
Heaney also said there’s no doubt that managed care will define the industry in the future.
The rate at which managed care is growing and the consolidation efforts made in the industry are both surprising, Heaney said, though not completely unpredictable.
“I just didn’t think those things would happen as quickly as they are,” he said.
That sentiment was referenced several times at Capital+Strategy. And although there are worries over consolidation when it comes to the fear of a PE crackdown, many in the industry like Heaney see more growth on the horizon.
The post Home Care Veteran Sees Managed Care Increasingly Defining Home-Based Care, Slower SPAC Movement appeared first on Home Health Care News.
