Introduction

Lydians Health believes healthcare is cycling back to a time of the “traveling medicine man” as healthcare technology advances, financial pressures build, and care convenience becomes a priority. Our goal is to assemble a metro‑dense Medicare‑certified home health platform in one of four Western states (CA, AZ, CO, NV) by acquiring 1–2 anchor agencies in a select metro and layer in a number of tuck‑ins to pursue 15–20% share or $50M in annual revenue and achieve high rates of return over a 15-20 year time horizon.  We believe the headwinds home-based care will face over the next number of years can be successfully navigated with a geographically concentrated offering. Achieving scale to navigate these headwinds will position Lydians Health to benefit from shifting trends in the broader healthcare industry and technology ecosystem. The following memorandum will outline this hypothesis.

Quick Hits

Home Health Industry

·         Aging & preferences: The U.S. will boast 1 in 5 residents over age 64 by 2030; Western metros are among the fastest‑aging. Over 75% of older adults prefer to age in place, reinforcing structural demand for home‑based care.

·         Fragmentation: As of July 2025, there were 12,114 Medicare-Certified home health providers nationwide. Among target metros, the market leader holds <20% share, leaving ample room for roll up consolidation.

·         Non‑cyclical with policy awareness: Demand is durable, even as we assume rate pressure (e.g., quality payment withholds, Medicare Fee for Service (FFS) rate recalibrations, Medicare Advantage (MA) rate discipline) and design operating buffers (patient density, denial reduction, mix management, MA negotiations).

·         Fair warning on revenue impacts: Base case includes continued rate tightening and HHVBP variability; we underwrite with density‑driven cost/visit reductions, denials prevention, and acuity‑appropriate utilization.

·         Quality Is Rewarded: Beginning in 2025, the Centers for Medicare and Medicaid began adjusting payouts to agencies based on 2023 quality scores. Upwards of 5% from base case for achieving a 5/5 star rating.

·         Convenience is Priority: Consumer demand has crowned many companies king as they seek out services that make their lives more convenient, this “last mile” strategy will make its way to healthcare.

Home Health Businesses

·         Highly Profitable: Achieving upwards of 30% margins at maturity with adjacent verticals to expand revenue capture; hospice, palliative, hospital at home.

·         Asset Light: With minimal physical footprint and low fixed costs, pressure will exist squarely on recruiting and workforce cost optimizations to start.

·         Predictable Revenue Streams: Medicare FFS and MA pay a flat fee in 30-day increments for home health, providing optimization opportunities while meeting quality standards and minimum expectations.

·         Referral Moats: Once on a provider’s short list for quality of care, easier to maintain relationship flywheel. This is even stronger when partnered with narrow network Medicare Advantage plans. Further crediting the acquire vs. build strategy.

·         Key in Value Based Healthcare Continuum: Hospitals are held accountable for readmissions among other quality outcomes yet can no longer afford to keep patients admitted beyond need. The home is the last mile of healthcare delivery.

·         Increasing Attention & Regulation: Given home health’s increasing importance in the healthcare continuum, additional attention is on agencies, restricting ease of entry.

Why Now, Emerging Themes

Value Based Care’s Increasing Priority:

·         Beginning in 2025, CMS’s Home Health Value-Based Purchasing has put real dollars at risk (±5%), rewarding timeliness, readmissions, and experience.

·         Medicare Advantage covers 54% of seniors and steers care to lower-cost, in-network providers that admit fast and manage total cost.

Reduction of Inpatient Services

·         Driven by tightening inpatient capacity, hospitals are discharging sooner and more frequently into post-acute care (PAC) settings. In 2023, 41% of Medicare’s (FFS) 1.6M discharges received PAC and 44% of those patients were directed to Home Health.

·         The Acute Hospital Care at Home policy window offers optionality for increased revenue capture if extended in Q4 2025. Home Health is positioned to capture these patients with proper investment.

Technological Optimization

·         Virtual care is mainstream and remote monitoring spend has surged, making tech-enabled home management feasible and expected.

·         A metro-dense platform with a unified EMR, intelligent routing, and payer playbooks creates conversion opportunities and preferred-status advantages.

·         Data and AI widen the gap by optimizing routes and documentation, predicting denials, and targeting high-risk patients to cut readmits.

Consolidation is accelerating. Investors are paying attention and building out regional platforms, but winning occurs at a city/county level. Building a metro dense platform in an attractive geography will create outsized investment returns.

Target Geographies

Lydians Health began by targeting seven western states whose 65+ residents account for over 20% of the 65+ population nationwide and grew by 45.1% compared to the rest of the country’s 33.9% growth rate between 2010 and 2020 according to Consumer Affairs. After digging in on the state of the Home Health industry in each state, the following metro areas will be targeted for acquisition:

California (LA Metro, San Jose Metro): Significant 65+ population (10.7% of 65+ population), hyper‑fragmented; high labor costs; dense referral ecosystems; scale yields cost/visit advantages and preferred‑network access.
Arizona (Phoenix Metro): Attractive retirement state (44.9% Growth Rate), high MA penetration; large, sprawled geography rewards tight routing and prior‑auth discipline; many mid‑sized independents.
Colorado (Denver Metro): Rapidly growing 65+ population (50.8% growth rate), fragmented Front Range; winter logistics; system alignment matters; quality standouts amid sub‑scale agencies.
Nevada (Las Vegas Metro): Attractive retirement state (51.4% Growth Rate), Large, moderately consolidated; steerage by MA plans significant; clinician shortages intensify capacity constraints; quality dispersion creates room for standout operators.

Market Structure by Metro

*Method: “Visits” proxy = Timely‑Start denominator, aggregated at agency level within metro clusters.

Source: data.cms.gov (July 2025 release)

Implication: Ideal targets = high agency count + modest leader share

Agencies Lydians Health will be pursuing

The opportunities for consolidation in these metro areas are driven by the desire from mom & pop home health agencies that have been operating since before 2020 and have failed to innovate in the post-COVID era, leading to a desire to exit and step aside for a fresh perspective. These companies will have solid fundamentals, with significant financial upside on margin enhancement and efficiencies within a rollup environment. Lydians Health will concentrate on only one of the above metro areas once an anchor business has been identified and meets the following expectations among others:

Attractive Anchor Agency Attributes

·         Flat or Increasing $1-2M in EBIDTA after owner addbacks with  >15% margin (if flat revenue, looking for increasing margin % year over year.)

·         Trailing 8 quarter quality scores at or above 3 out of 5 stars to imply staying power of quality program. (Recall, these scores also impact Medicare reimbursement rates.)

·         1-3 existing commercial partnerships (i.e. Medicare Advantage) for proof of concept getting foot in door with commercial plans

·         5+ years in operation, supporting stable referral relationships and brand presence in community.

·         Cap any single referral partner (hospital system, ACO, large physician group, MA network) at <30% of starts. Ideally top‑10 referral sources <50% combined.

Red Flag Agency Attributes

·         Owner/Operator is a clinician actively seeing patients through home health agency; this is a predictable margin erosion. These agencies may still be attractive opportunities, but proper expense modeling and clinical leadership investments will be a negative hit on financial projections.

·         No Commercial payers in payer mix, indicating not included in MA negotiations or existing narrow networks

·         We expect to identify additional red flags as further diligence is done on existing target businesses.

Top Down Market Sizing (Phoenix Example)

Formula: 65+ population × HH utilization rate × periods per user × blended revenue/period
Assumptions (Phoenix): ~0.79M 65+; HH utilization ~5% of 65+; 1.8 30‑day periods/patient; $1,950 blended (Medicare FFS ≈$2,200; MA ≈$1,750; mix‑weighted).
Calculation: 0.79M × 5% = 39,500 users → ×1.8 = 71,100 periods → ×$1,950 ≈ $139M annual TAM for Medicare/MA HH in metro.

Sensitivity: Utilization 4–6%; periods/user 1.6–2.0; blended revenue $1,800–$2,200

⇒ TAM range $100–$195M.

Serviceable Market: TAM × agency share goal (15-20%) ⇒ $15–$39M Annual Revenue

Ideal Targets: Of the 104 Phoenix Agencies, ~46 are not affiliated with a health system, nationwide consolidator, or are non-profit.

·         There are 10 potential anchors responsible for 27% of Market Share

·         There are 23 potential tuck-ins responsible for 24% of Market Share

·         There are 13 agencies that are not a quality fit at face value.

Expected Fundraising, High Water Mark Returns, Deal Flow

·         Home Health Agencies primed for acquisition that meet Lydians Health “Attractive Anchor Agency Attributes” will trade in the 4-6x EBITDA range. Tuck-In firms will be pursued in the 3-5x earnings multiple range.

·         Anchor agencies will be purchased with self-funding and outside capital from key strategic partners who understand the healthcare space. Tuck-in agencies will ideally be purchased on leverage through private credit or other debt instruments.

·         Investment activity in this space is continuing to heat up, with major insurance players like United Health and Humana getting involved in the home based care space. Most notably, United Health’s Optum closed on an acquisition of Amedisys in July of 2025 for $3.3B or 15.2x forward earnings.

·         Many platforms achieving geographic density and scale in the $7-10M EBITDA range are expected to trade in the 10-12x multiple. Targeting 3x multiple on invested capital over decade time horizon.

·         2-3 anchor targets identified within each of 5 metro areas at different stages of owner outreach, NDA, preliminary diligence. Targeting first LOI by Q1 2026, awaiting regulatory rulings to firm up multiples.

Strategic Workstreams

1)      Acquire & Integrate

·         1–2 anchor agencies in target metro (top‑quartile quality, clean surveys) + 3–5 tuck‑ins; prioritize local relationships while migrating to platform standards

·         Identify and elevate existing clinician (likely nursing) leadership to assume day to day operations of existing business, establish clear growth pathways for caregivers, secure quality program leadership.

·         Single EMR (priority for anchor sites to have same EMR, less critical for tuck in); centralized intake, authorization, coding, QA teams; standardized OASIS (intake assessment) workflows & clinical pathways.

·         Optimize administrative footprint within rev cycle, scheduling/routing, human resources, recruiting, marketing.

2)      Optimize Operations

·         Initial team focus once clinician leader is in place running day to day operations.

·         Route density with quadrant routing; increase visits/clinician/day (metro‑adjusted).

·         Authorization & denials through payer/plan playbooks; Turnaround Time (TAT) < 48 hours for standard authorizations.

·         Reduce Low Utilization Payment Adjustments (LUPA) (target dependent); visit plans aligned to Medicare acuity expectations; concurrent review.

3)      Grow & Innovate

·         MA narrow‑network inclusion; preferred status with top hospitals; Direct‑to‑Consumer marketing engine

·         AI‑enabled chart review and documentation reminders; after‑hours virtual RN hub; RPM starter kits (CHF/COPD/wound) embedded in Home Health infrastructure; progress toward assuming Hospital‑at‑Home subcontracting with partner systems.

·         Explore off-shoring administrative/back office functions, build a direct to consumer marketing for brand recognition and community referrals, and explore dual eligible partnerships with PACE programs and FQHC lookalikes where mutually beneficial.

4)      Expand Geography (Year 4-6, Progress Dependent)

·         Lydians Health will remain singularly focused on initial geography to ensure stable and profitable growth trajectory.

·         If outstanding debt on tuck-in agency purchases has been cleared and board approves, leadership will engage a net-new team member to identify new metro area in the United States and run through Lydians Health playbook with Lydians Health oversight on separate fund.

Risks & Mitigations

·         First Time CEO: Surround executive with board of industry insiders; Medicare experts, Home Health executives, Insurance experts, and strategic capital partners to provide outsized support on capital and time involvement.

·         Reimbursement changes: patient/route density, LUPA control, denial reduction, scenario reserves, payer and acuity diversified mix.

·         MA auth delays/denials: centralized auth pods, escalation trees, data‑driven documentation, value‑based riders.

·         Staffing scarcity: career ladders, preceptor programs, float pools, commute‑light routing, recruiter scorecards, caregiver wellness and retention programs.

·         Integration slippage: standardized playbook, EMR specialist, project milestones, weekly integration war room.

·         Competitive response: payer/network exclusives, quality tiers, DTC brand presence, community partnerships.

·         Regulatory/survey risk: audit‑ready documentation, coding QA, mock surveys, rapid CAP protocols.

·         Key Clinician/Quality risk: Identify and ensure professional/financial needs being met.

Summary

Lydians Health will convert a fragmented, aging‑driven market into a metro‑dense, quality‑led platform that excels on timeliness, outcomes, and cost/visit. Lydians Health will offer a platform that prioritizes caregiver support and boasts best-in-class retention metrics. After optimizing operations through centralized teams and payer playbooks, we will extend our advantage through AI integration to improve team member efficiencies, remote patient monitoring to expand patient lifetime value, and Hospital at Home partnerships to increase revenue capture. With a single‑metro launch based on 1-2 anchors with 3-5 tuck ins, we create durable economics and multiple exit paths while addressing investor concerns on market size, timing, defensibility, and policy exposure.