Hospice M&A ‘Historically Strong’ Despite Recent Cool Down

Though investors and strategic buyers didn’t wade quite as deep into the hospice market in 2022 compared to years prior, the tide may be rising for M&A during 2023.

Though hospice M&A activity fluctuated last year, volume is expected to rebound, but probably with larger numbers of smaller deals. Swelling demand for hospice and home health have made the industry “extremely compelling” for investors of all walks, according to Rebecca Springer, senior health care research analyst at PitchBook.

The pace of M&A activity in the industry slowed in 2022 but still held at “historically strong” levels despite lingering COVID and labor headwinds, Springer said. Private equity interest remains high despite the slower pace, she added.


“What’s happening in this sort of broader macroeconomic landscape is not like the sky is falling, but we are seeing things slowed down a lot from obviously very, very strong points,” Springer told Hospice News. “I think what we’re going to see is a lot of platform creations, add-ons and growth in minority equity investments. Firms still have capital to deploy. Even though they’re not going to be doing as many large deals, that capital has to go somewhere.”

In 2022, roughly 60 home care, home health and hospice private equity deals took place across the United States and Canada. This was down from nearly 100 in 2021, but was in line with 2020’s volume, according to a PitchBook report.

A glut of hospice activity late in 2021 got last year off to a slow start as buyers worked to integrate their new assets and reassess their capital deployment strategies in light of rising inflation and labor costs.


But 2022’s somewhat dampened market does not signal depleting interest in the space, according to Jake Vesely, vice president at the M&A advisors Provident Healthcare Partners, and Kevin Palamara, managing director at the firm. Several economic and financial forces impacted investor decisions to pick up or pass on hospice assets, they said.

“In 2021 many larger groups, especially those backed by private equity sponsors, were seeking an exit due to the possibility of a capital gains increase. While M&A activity in 2022 was lower, this certainly does not indicate buyer interest has lowered,” Palamara and Vesely told Hospice News in an email. “It was simply a combination of an exceptionally active 2021, combined with many M&A targets holding off on a process due to the lingering effects from COVID-19 and the labor market, which impacted financial performance and census growth for many agencies in 2022.”

Yet, the total deal values of hospice and home health deals remained high in 2022 and “exceeded record-breaking levels seen in 2021,” Provident analysts indicated in a recent report

A series of megadeals tipped the scales when it comes to the dollar amounts in hospice and home health transactions. Among them was LHC Group’s (NASDAQ: LHCG) $5.5 billion agreement to sell to Optum Health, a subsidiary of UnitedHealth Group (NYSE: UNH). Humana Inc.(NYSE: HUM) also divested a 60% stake in the former Kindred at Home hospice segment, now rebranded as Gentiva, to the private equity firm Clayton, Dubilier & Rice for $2.8 billion.

CVS Health’s (NYSE: CVS) $ 8 billion acquisition of Signify Health and the spinoff of Enhabit, Inc. (NYSE: EHAB) from Encompass Health (NYSE: EHC) also drove up price tags, according to Provident.

For example, Enhabit’s revenue reached $1.08 billion last year, and the company hit 7.83x EBITDA, Provident reported.

Enhabit’s M&A pipeline is “much more robust” than a year ago, immediately after the spinoff, according to President and CEO Barb Jacobsmeyer. Hospice will be a focal point of Enhabit’s strategic growth, Jacobsmeyer said.

“I would say [our pipeline] is more skewed towards hospice,” Jacobsmeyer told Hospice News at the Home Care 100 Conference. “Mainly because there’s still that overhang into home health on what does that reimbursement landscape look like in the future. Currently 80% of our revenues are home health. We would like to build up hospice to have more overlap of where it strategically fits with home health to create those tuck-ins that allow us to have greater scale and density in a market.”

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