2025 Year End Update: Home Care & Hospice

2025 was somewhat of a strange year for home health and hospice dealmaking with volumes in certain sub-segments seemingly not reflecting market conditions. Let’s break it down.

Medicaid

Of all the strange numbers we saw this past year, deal activity for providers that focus on serving Medicaid beneficiaries was the most counterintuitive. As we laid out in our broad health care services roundup entitled, In 2024 We Predicted a Banner Year in Health Care Services M&A in 2025: Here’s What We Got Right and What We Didn’t Anticipate, the One Big Beautiful Bill (OBBB) included wholly unanticipated changes to Medicaid eligibility that various pundits estimated could kick up to 7 million people out of the program. But with each state determining how to implement the new guidelines, and the changes not going into effect for two years, the resulting impact is still very much in question. And with that much uncertainty in the air — uncertainty that likely won’t become more definitive until at least mid-2027 when the first wave of changes gets phased into the populace — buyers tend to get skittish. So, as we saw in certain behavioral health segments, we would expect deal flow to come down.

But as illustrated below, Medicaid home health actually set a record of 28 deals in 2025 just edging out the previous record of 27 set in 2024.

So, what gives?

Well, the numbers are deceiving.

If we look at quarterly numbers, an entirely different story emerges.

As the chart illustrates, 23 of the 28 transactions – more than 80% — were completed in the first half of the year before the OBBB was enacted July 3rd. And after? Deal flow plummeted, reflecting buyer concerns.

It remains to be seen how this all plays out. With respect to Medicaid eligibility, one of the key components of the bill was the introduction of a work requirement to maintain eligibility. Between 2018 and 2019, Arkansas and New Hampshire introduced their own work requirements to their Medicaid programs. The result? A substantial number of enrollees that dropped out of each program did so not because they weren’t working, but because of the administrative burdens and complex paperwork necessary to document employment status. Moreover, neither state reported any significant increase in employment as a result of their initiatives. In the end, Federal courts ruled that, among other reasons, the legislation was inconsistent with Medicaid’s core objective of providing medical assistance, and both programs were halted. Will the OBBB’s work requirements meet the same fate? Unclear. But it would appear there is precedent.

Medicare Home Health

In Medicare home health, where (a) every summer there’s a five-alarm fire drill between CMS’s proposed and final rule, (b) a 6% cut is estimated to have a net impact of minus 1.3%, and (c) an on-again, off-again temporary behavioral adjustment that gets larger every year, buyers have been whipsawed back and forth on go-forward profitability — and valuation. What’s more, the expansion of the Home Health Value-Based Purchasing Model to all 50 states — a model that can increase or decrease a provider’s reimbursement by as much as 5% — has given them another thing to worry about and scrutinize. So, in addition to buyers being skittish on Medicaid (see above), they’re a bit shaky on Medicare. So, no surprise then that deal flow in the sector has fallen.

The good news is that after more than 30 years of consolidation, there is not an abundance of sizable independent acquisition candidates available to acquire. So, despite the reimbursement unknowns, if you’re looking to acquire a home health agency, the supply and demand curve favors attractive sellers.

Moreover, regarding go-forward reimbursement risk, as evidenced by CMS’s slowing down the implementation of various provisions that would lower payment rates, speculation is growing that future cuts may be more moderate.

Hospice

Given the reimbursement and eligibility uncertainty regarding Medicare home health and Medicaid respectively, we would expect that buyers would gravitate to the comparatively more stable hospice segment. And here, just like in Medicaid, the numbers seem to belie the conditions on the ground with hospice deal flow down vs. 2024. In this case, however, the explanation is somewhat clearer. The number of independent providers with a census north of 100-150 — the target zone for many acquirers — is a key limiting factor. Moreover, as a result of CMS’s Provisional Period of Enhanced Oversight, which has focused on hospice providers in select states, we have seen a slowdown in deals due to protracted due diligence and deal abandonment.

Despite the above, demand is unquestionably there. No surprise then that over the past year, valuations are approaching the peaks seen between mid-2020 and mid-2022.

What’s more, just like we saw in the Medicaid figures, the quarterly numbers may be a better indication of market sentiment. In this case, we note the substantial rise in hospice transactions in Q3 and Q4.

Private Duty

Insulated from legislative and regulatory risk, the macroeconomic environment plays a comparatively greater role in private duty dealmaking. So, with inflation well below the peaks in 2022 and interest rates easing at the end of 2024, the rise in deal volume in 2025 played out true to form.

Outlook

When we put it all together, aggregate home care and hospice deal flow has been essentially flat over the past three years and somewhat below pre-pandemic volume.

That said, we remain generally bullish on the space for several reasons, some of which have been alluded to above.

With (a) numerous sponsors already having platforms in the space, (b) a relatively short investment horizon that makes it difficult to diverge substantially from their original investment thesis, and (c) size a key component of exit multiple expansion, private equity will continue to buy. More selective? No doubt. But sitting idly by on the sidelines? Unlikely.

With market coverage a key competitive advantage to securing contracts with payors, conveners, or other providers focused on coordinating care across multiple access points, national and regional providers will continue to seek out strategically situated acquisition candidates.

After more than twenty years of consolidation, the pool of acquisition candidates continues to shrink. While this contributes to declining M&A volume, it doesn’t necessarily reflect proportionate decrease in demand. That said, buyers may be more difficult to identify – there isn’t as much serial acquisition activity as we’ve seen in the past. But they’re out there. And in a competitive market, they’ll pay up to secure increasingly rare opportunities.