When it comes to hospice acquisitions, buyers’ and sellers’ expectations on price tags are becoming more aligned.

A surge of deals in 2021 and 2022 led to record-high valuations in the space with multiples reaching in excess of 30x in some instances. While many buyers were willing to pay that premium, some stepped out of the market due to the high valuations.

But deal volume has largely declined in late 2023 and early 2024, and valuations are starting to come down.

“[Buyers and sellers] are definitely coming closer. The peak chasm certainly was in the second half of 2022, but we’re now approaching two years hence. There’s been a reset since then,” said Mark Kulik, senior managing director for The Braff Group. “You’re looking at buyers saying, ‘I can’t pay it or won’t pay more.’ At the same time, you’re looking at sellers saying, ‘I don’t like it, but I can clearly have confidence that the market has changed, and the prices have come down off their peaks.’”

Selling prices are most commonly measured in multiples of EBITDA, according to Kulik. This is coupled with a detailed examination of the company’s financials. As part of this, some buyers may also consider revenue per average daily census, though that is rarely a deciding factor.

However, this doesn’t mean that buying a hospice is a bargain-basement transaction. For potential assets with strong financials, good staffing levels and effective regulatory compliance, valuations are still relatively high, though generally less than the 2021-2022 peak, according to Jake Vesely, vice president of Provident Healthcare Partners.

Case in point, the recent $85 million acquisition of Covenant Health and Community Services by the Chemed Corp. (NYSE: CHE) subsidiary VITAS Healthcare traded for a multiple of 18x, based on the sellers’ 2022 financials, according to Vesely.

“Strategics are being very selective now in terms of the assets they want to go after in certain geographies. But for the right assets, they’re still getting pretty aggressive,” Vesely told Hospice News. “For the right assets, they are still maintaining valuations. Where it’s come down slightly more is for much smaller assets, sub $1 million of EBITDA. In 2022, those groups were trading for a premium, all of a sudden. Now we’re seeing valuations come down, more significantly for the smaller groups in the space.”

Hospices generally still command higher valuations than other providers in the home-based care market, such as traditional home health or personal care, Kevin Palamara, managing director at Provident, indicated.

Prices also tend to be higher in certain geographies with high barriers to entry, such as certificate of needs states or in California where the state has implemented a moratorium on hospice licensing, Palamara said

“When you have a quality opportunity that has some size and scale, low length of stay, you’re still going to see pretty significant valuations for those deals. That may not be at the peak of what we saw in the 2021 timeframe, but the right opportunities are still seeing significant value,” Palamara told Hospice News. “You still have a very active and robust buyer community, especially when it comes to strategic buyers, whether they’re publicly traded or private equity-backed.”