What a Hospice Benefit Revamp Could Signal for M&A Trends

A restructuring of the Medicare Hospice Benefit could have impacts on merger and acquisition activity in the industry.

Calls for changes to hospice eligibility and length of stay are growing louder among industry stakeholders. A main concern being voiced to the U.S. Centers for Medicare & Medicaid Services (CMS) is that the current six-month prognosis poses limitations on access, utilization and quality of care.

Eligibility and length of stay issues encircling the hospice benefit represent both an opportunity and challenge for growth and sustainability, according to Jennifer Sheets, a long-time hospice and home health veteran.


“The reality is that across the country people are being referred to hospice way too late to take advantage of the benefit,” said Sheets, speaking at the National Association for Home Care & Hospice (NAHC) Financial Management Conference in New Orleans. “I do worry that because people are becoming more aware of what hospice can be and the service it provides that we’re going to be a target pretty soon, and we’re already somewhat of a target from CMS. But when you think about that health care dollar, it’s probably the biggest value, especially at the end of life. We have to all be advocating to protect the beauty of the hospice benefit.”

Sheets currently serves as a member of NAHC’s board of directors.

Regulatory agencies such as CMS and the U.S. Department of Health & Human Services (HHS) Office of the Inspector General (OIG) have placed length of stay and eligibility in the forefront amid rising instances of alleged fraud, waste and abuse in the hospice space. Longer patient stays and higher costs associated with more intensive levels of care, such as general inpatient services, can be red flags of potential bad-acting hospice operators.


The challenges in expanding access and utilization among increased regulatory oversight may have far-reaching impacts on how hospices approach strategic growth, as well as how buyers are eying the space, according to Mark Kulk, senior managing director at The Braff Group.

Hospice M&A activity has been up for several years running. Even during recent cooled activity from a period of record-high volumes and valuations during the past three years has the hospice market holding strong compared to other sectors.

Interest in the space isn’t anticipated to abate anytime soon, but investors may be pivoting their attention elsewhere along the health care sphere amid rising regulatory pressures in the hospice space, according to Kulik.

“On the regulatory side, hospice has just an incredible and intense increase in regulatory oversight with all types of audits and investigations,” Kulik previously told Hospice News. “So you’ve got a bit of enhanced regulatory scrutiny on the industry, and that tends to cool off activity.”

Even with a narrowing regulatory scope in the industry, private equity interest remains high.

Transaction volume in the hospice and home health sector rose by 20% during the second quarter of 2023, outpacing deals across other health care industries, according to a report from Levin Associates. This includes private equity firms and other portfolio companies, which represented one-third of the buyers in the home health and hospice space.

But payers are increasingly making up more of the mix of those expanding in hospice, a trend that could signal where future reimbursement structures could be heading, according to Dylan Sammut, editor of health care at Irving Levin Associates.

“We saw a significant uptick in deal activity for home health agencies and providers” Sammut told a local news outlet. “Demographic tailwinds have drawn interest from a wide range of buyers, from health insurance giants to major corporations. It has created a very active market.”

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