Hospice, Home Care Multiples Continue to Hit Record Highs at 29x

Multiples in the hospice and home care space reached 29x thus far in 2020, beating 2019’s record high of 26x, according to a recent research report by PwC’s Health Research Institute.

Hospice and home health merger and acquisition activity has buoyed results in the larger health care services sector, which saw transactions decline during the past 12 months, largely due to the fallout from the COVID-19 pandemic. Overall health care sector multiples hovered near 13.9x, up slightly from 13.8x the prior year.

Without the boost from hospice and home care, health care services multiples would have fallen to 12.3x, according to the PwC report.

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“In addition to directly or indirectly supporting COVID-19 care, health services companies face economic disruptions of uncertain location, timing, and scale,” the report indicated. “Furthermore, the duration of crisis-driven deregulation such as that related to permissible care location is unknown. Companies are trying to balance cost containment imperatives while assessing growth segments and not missing opportunities.”

Three key factors are likely to impact the health care M&A market going forward, according to PwC. These include companies’ liquidity positions, the short- and long-term needs surrounding the pandemic, and pre-existing market dynamics. 

The market outlook for hospice transactions continues to look promising despite the ongoing national emergency. While some transactions were delayed early in the year as providers turned their attention to responding to the pandemic, activity picked back up in the second quarter, a trend which industry observers expect to proceed apace.

Demographic tailwinds from the aging population and increasing demand for hospice care have led some to call hospice a “recession-proof industry.” Increased movement towards providing more health care in the home setting is also a contributing factor. 

“High and rising multiples in the Home Health & Hospice sub-sector were a key driver. Care outside hospital walls is increasingly of interest, and Medicare Advantage hospice coverage is changing,” PwC’s report said.

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