Home- and community-based services markets are starting to recover after they “panicked” when the Centers for Medicare & Medicaid Services in late-April proposed that 80% of Medicaid payments for HCBS go to direct care workers, among several other HCBS-related changes, according to recent commentary from advisory firm Mertz Taggart.

Initially after CMS’ issuance of the Medicaid Program: Ensuring Access to Medicaid Services proposed rule, Mertz Taggart said, there was a downturn in the HCBS market. As an example, the firm noted that Addus HomeCare’s share price dropped almost 30% when news of the CMS proposal hit. Almost 60% of the provider’s revenue comes from HCBS.

But things are not as dire as they first appeared, Mertz Taggart said. The home care company has since regained some of its initial losses, “a sign that institutional investors believe things aren’t quite as bad as they initially seemed,” according to the advisory firm. 

Strong interest in the HCBS marketplace still exists, according to Mertz Taggart.

“We’ve spoken with several strategic acquirers since the news broke to gauge their general sentiment,” Mertz Taggart Managing Partner Cory Mertz said in an online post. “Most buyers with HCBS as central to their investment thesis continue to show strong interest. Valuations for add-ons in the $3M to $50M range remain robust. Several PE [private equity] groups seeking platform opportunities at the higher end of the market continue to look for opportunities, although some have hit the pause button until more is known.”

The rule also would make mandatory some HCBS quality measures, among several other changes related to HCBS.

If finalized, CMS said, the proposed HCBS requirements in part would supersede and replace the reporting and performance expectations described in March 2014 guidance for Section 1915(c) waiver programs. Some assisted living communities provide HCBS such as personal care and supportive services to residents via those state Medicaid waivers.

The comment period period for the proposed federal regulation, one of two introduced at the same time, currently ends July 3, although several organizations have asked CMS to extend the deadline by at least 30 days.