State review finds limited competition risk but flags quality and financial concerns in ResCare–Sevita deal

The Office of Healthcare Affordability released a final Cost and Market Impact Review on April 8, 2026, examining ResCare’s proposed sale of subsidiaries and assets to National Mentor Holdings, the parent company of Sevita, for $835 million. Assistant Chief Counsel Brian Karns told the board the transaction combines two major providers serving people with intellectual and developmental disabilities and that OKA opened a CMIR because the deal could affect availability, quality, payer costs and market consolidation.

Economists from Bates White presented the office’s analysis, concluding that the transaction is unlikely to materially reduce competition for intermediate care facilities, adult residential facilities or adult day programs in most California markets. "Our analysis shows that this transaction is unlikely to lead to a significant change in competition for provision of these services," partner Nathan Dua summarized.

Bates White noted the parties’ footprints rarely overlap in the same local markets. For example, Sevita and ResCare operate few intermediate care facilities in the same counties, producing combined shares well below antitrust thresholds used by DOJ/FTC. The firm also found the deal unlikely to substantially increase employer concentration or reduce wages in the labor markets that supply these services.

But the consultants warned of a separate and material risk tied to the acquirer’s record. "Sevita has a particular operational history and a financial approach," Michelle Lamb said, summarizing quality and financial concerns. Bates White contrasted Sevita’s internal client satisfaction scores — which in some measures exceed state averages — with public reporting and state inspection data showing elevated complaint, deficiency and citation rates versus peers. The presentation described substantiated complaints across multiple states, including allegations of resident abuse, medical mismanagement and failures in incident reporting.

Bates White also documented an aggressive financial strategy by Sevita’s owners. The firm said Centerbridge’s acquisition was followed by dividend recapitalizations that extracted more than the owners’ initial investment and drove leverage to levels credit agencies flagged as high. "Dividend payments approximated about 113% of owners’ initial investments," the consultant said, and leverage rose to roughly nine times earnings during the recapitalization period. Credit‑rating commentary cited in the report described the ownership strategy as aggressive and the company as highly leveraged.

OKA staff and the consultants told board members that these financial pressures could reduce investment in quality and, in extreme scenarios, lead to facility closures if practices that generated past problems were applied widely across newly acquired facilities. "The poor track record increases both risk of reduced quality and access to ID services," Bates White concluded.

Board members praised the technical scope of the review and asked whether OKA would follow up on quality outcomes after the transaction closes. Director Lensburg and staff said the office coordinated with other state agencies — including the California Department of Public Health and the Department of Health Care Services — and noted the CMIR statute contemplates referral to the Attorney General when anticompetitive impacts are suspected. Staff said OKA’s formal statutory duties end with the final report but that the department would consider future monitoring or studies to assess whether practices change under new ownership.

Public comments from Health Access California and others urged licensing agencies to use their authority to refuse or revoke problematic licenses and called for greater transparency about public comments submitted to OKA during CMIRs. Bates White’s full presentation and OKA’s final report are posted on the office’s website.