BrightSpring Health Services (BTSG) Outperforms on Specialty Pharmacy Growth Amid Home Health Expansion

Specialty Pharmacy Solutions revenue surged 32% year-over-year to $2.8 billion in Q2 2025, exceeding earlier guidance by 9% largely due to new contract acquisitions. This outperformance highlights the division's dominant market position and strong pricing power.

Home health revenue rose 17.1% to $185 million, driven by a 6.4% increase in patient volumes to 30,000. The growth reflects continued demand for in-home care services and operational efficiency gains across the network. According to industry analysis, the home health segment continues to expand.

The company raised full-year adjusted EBITDA guidance to $590–$605 million, up from prior expectations. While this revision signals confidence in near-term profitability, investors should note two key frictions: the Community Living segment divestiture remains subject to regulatory approval, and the company's optimism about 2026 payment rule changes-which could boost home care reimbursement-depends on regulatory enactment.

Strategic Shifts: Capital Allocation and Market Positioning

BrightSpring Health Services (BTSG) announced a transformative $835 million divestiture of its Community Living business to Sevita, a move designed to unlock significant capital flexibility and sharpen the company's strategic focus. This strategic retreat from the Community Living segment directly supports management's stated direction toward higher-growth pharmacy and provider services. While the transaction promises enhanced financial agility, its completion remains contingent on securing necessary regulatory approvals, introducing a key execution risk that investors must monitor closely. The divestiture, expected by year-end, aligns with the company's broader effort to streamline operations and concentrate resources on its core, high-potential segments.

Amidst evolving regulatory pressures, BrightSpring demonstrated underlying operational resilience. A significant 90% of its home health locations achieved a 4-star rating or higher, underscoring the company's ability to maintain quality standards even as the industry navigates complex changes. This performance metric signals operational strength and regulatory adaptability within its core provider services. Furthermore, the home health division showed robust demand, evidenced by a 6.4% year-over-year increase in its patient census, now standing at 30,000 patients.

This growth highlights expanding market penetration, particularly in higher-acuity therapy areas where BrightSpring is actively building its footprint.

Management expressed optimism about potential future reimbursement improvements, specifically referencing the proposed 2026 payment rule, which could enhance rates in the home care sector. However, this anticipated benefit hinges entirely on regulatory outcomes and remains uncertain. The company's Q2 2025 results, marked by 29% revenue growth to $3.15 billion and a 28% rise in Adjusted EBITDA to $143 million, provide the foundation for these strategic assertions. While the path forward appears promising, investors should acknowledge that the realization of full benefits from the divestiture and future payment rule changes depends on successfully navigating regulatory dependencies and market uncertainties.

Growth Risks and Market Headwinds

CMS regulatory updates are emerging as a major growth friction for home health providers. The agency's overhaul of the OASIS-E2 system and push for digital quality measurement standards demand significant compliance investments. According to CMS announcements, providers must now navigate stricter data collection protocols and revised reporting timelines, which strain operational resources. These changes come as the industry operates in a sluggish 3.7% CAGR market according to IbisWorld data, where margin pressures are already acute.

High staff turnover compounds these challenges. Nearly 80% of agencies report workforce instability, forcing reliance on costly contract labor. For example, physical therapy contractors now command $71.11 per hour according to industry benchmarks, while therapy visits average $172.74 per visit. In regions like the Northeast, where wages are elevated, these costs erode thin profit margins. Even as demand grows, providers struggle to absorb these expenses amid stagnant Medicare reimbursements.

Despite regulatory and labor hurdles, the sector remains structurally attractive. Aging demographics and pandemic-driven shifts toward home-based care sustain long-term demand. However, agencies must balance compliance investments with cost controls-a tightrope walk where missteps could quickly turn growth into financial strain.