Hospice in High Demand in Acquisitions Market

About 70% of acquisition targets in the home-based health care sector in the second quarter of the year were hospice providers, according to a report from the market intelligence firm Irving Levin Associates.

The bulk of those targets provided hospice care alone, rather than a mix with home health. During the first quarter, only 22% of targets in the space were hospices, showing a sharp rise in demand for hospice acquisitions, according to the report.

Many in the industry have observed that investors are leaning in towards hospice due to disruption in the home health space stemming from the patient-driven groupings model (PDGM).


“The appeal of the hospice market could be attributed to its stable reimbursement and payment rates compared with home health. Before the COVID-19 pandemic, investors and buyers in the home health market were holding out for the effects of the Patient-Driven Groupings Model, a reimbursement overhaul introduced by the Centers for Medicare and Medicaid Services (CMS) on January 1, 2020,” Irving Levin Associates reported. “The impact on small agency owners was expected to be tough, with many industry insiders predicting a wave of bankruptcies, closures, and sales in the first year of PDGM.”

Effective Jan. 1, 2020 Medicare began reimbursing home health care providers through PDGM, which classifies patients into payment categories based on clinical characteristics and other patient information, and shifts the home health payment model to a 30-day payment period rather than the 60-day episode.

Among the various segments of the health care industry, hospice continues to be the one to watch, even as valuations soar and multiples continue to hit record highs, largely due to rising demand from the aging population who are increasingly accepting of hospice.


In 2018, hospice utilization reached slightly higher than 50% for the first time, according to the U.S. Centers for Medicare & Medicaid Services.

“Future tailwinds could be propping the sector up,” according to the report. “With an aging U.S. population, and increased awareness of hospice and palliative care due to the COVID-19 pandemic, the hospice M&A market might prove to be more resilient and stable than we expected.”

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