Predictions of a hospice M&A rebound have fizzled as a volatile regulatory and economic climate threatens to curb transaction activity in 2025 and beyond.

Among the recent changes impacting strategic hospice decisions is the unfurling of the Trump administration’s new reciprocal tariff policy, according to Mark Kulik, senior managing director at The Braff Group. The administration cited “large reciprocal trade deficits” between the United States and other countries in an executive order that imposed a 10% tariff on all imported goods, which took effect April 2, 2025. Trump recently announced a pause on the tariff policy for a 90-day period in response to rising concerns.

The new tariffs would raise the costs of hospice care delivery, particularly with  pharmaceuticals, medical equipment, energy and building expenses, and more, Kulik stated. Alongside unexpected inflation trends, the tariffs could slow progress on what was otherwise a highly anticipated normalization in hospice deal making, he said.

“At the end of Q4 2024 there was a renewed level of optimism that hospice M&A would be picking back up significantly,” Kulik told Hospice News. “Very quickly that cautious optimism stepped into a new level of fresh uncertainty in Q1 2025, with the tariffs as one piece and the other being inflation spiking up again. Given the recent developments, we’re probably going to have a slowing down or a tapping of the brakes until we see how the tariff news settles going forward.”

Economic forces at play in hospice M&A

Uncertainty about interest rates, inflation trends and the new tariffs is indeed brewing, according to Tom Lillis, partner at Stoneridge Partners Strategic Consulting.

The economic factors are “nowhere near” the prime market conditions for either a seller or buyer of hospice assets, Lillis said. Though investors have a strong appetite for hospice amid rising demand, they’re taking a much more cautious approach to M&A due to a potentially shaky economy, he stated.

“A lot of the conversations I’ve had with everything that’s going on [with] the tariffs [and] interest rate cut uncertainty is that folks are looking into the market and seeing that money’s not necessarily going to get really cheap this year,” Lillis told Hospice News. “We’ll still see growth as the aging population continues to grow. But the new [Trump] administration is making unilateral decisions, and that could be problematic.”

Interest rates have run high for several years running, but many stakeholders predicted that this year would see more stabilization, said Eugene Goldenberg, managing director at Edgemont Partners.

Stakeholders anticipated a much stronger lending environment as a result of this trend, but interest rates remain a pain point for many investors, he indicated.

“We’ve seen an improvement in the lending environment relative to two years ago, and interest rates have stabilized and come down, but they were anticipated to decline at perhaps a faster pace this year,” Goldenberg told Hospice News. “That has yet to happen.”

Higher interest rates can make borrowing an expensive feat for buyers, Kulik explained. The Federal Reserve to date has not announced any plans to lower current interest rates. But the new tariff announcements and inflation trends could see a “more guarded” stance on potential reduction of interest rates, Kulik stated.

Federal Reserve Chair Jerome Powell has indicated that it is too soon to determine the impacts of the tariffs and the “appropriate path for monetary policy,” in a recent USA Today report.

“We’re in a period of guarded caution and slow-rolling of deals,” Kulik said. “I would expect a level of unpredictability for the next few months.”

Regulatory winds steering hospice M&A

The various regulatory shifts impacting the hospice space are another wrench being thrown into the mix, Goldenberg said. Also at the crux of the issues is that the Medicare Hospice Benefit has remained largely unchanged since its inception in 1983, he said.

More providers and stakeholders have called for changes to “modernize” the hospice benefit to better support reimbursement that meets the needs of today’s patient population. Moreover, program integrity concerns are being fueled by fraudulent operators stepping into the hospice space.

Rising regulatory scrutiny has taken a toll on hospice M&A activity, Goldenberg said. Buyers are carefully considering an organization’s compliance track record, Goldenberg said.

“There’s definitely room for improvement, and we’re going to see folks finding ways to run more compliant operations with a continuation of scrutiny from both a regulatory and compliance perspective,” Goldenberg said. “All of these regulatory burdens could make it more and more difficult for smaller providers to compete.”

When it comes to M&A, the fraud concerns center around the practice of “license flipping” that has escalated in recent years. This involves a hospice operator selling their license soon after obtaining it, before regulators can detect or act on alleged malfeasant activity. The practice has emerged among a rash of newly licensed hospices in Nevada, Arizona, California and Texas. Many of these sales involve certain brokers who move the licenses between owners. California instilled a temporary statewide moratorium on new hospice licenses, while legislation was recently proposed in Nevada that would require new providers to undergo enhanced regulatory oversight for the first two years of operations.

To date, at least 15 states have enacted laws requiring a review of certain health transactions, the National Conference of State Legislatures reported.

Investors have increasingly had an eye on the program integrity issues percolating in the hospice industry, Lillis said. More interest has funnelled toward states that have regulatory guardrails in place aimed at curbing fraudulent activity, he stated.

Some buyers have increasingly been interested in states with some type of regulatory standards related to certificate of need, according to Lillis. CON laws are designed to control unnecessary expansion of hospice providers in a certain geographic region and ensure access among underserved patient populations. These laws can help curb competition, but also come with disincentives related to higher regulatory burdens that may stymie hospice growth, he said.

New federal regulations are also coming into play of hospice transaction considerations, according to Kulik.

The U.S. Centers for Medicare & Medicaid Services (CMS) 2024 home health rule included both a “36-month” rule that prohibited a change of ownership within 36 months of initial Medicare enrollment, as well as the implementation of a hospice Special Focus Program (SFP). The SFP has since been paused amid mounting concerns about the program’s allegedly flawed methodology to detect fraud, waste and abuse.

“With the 36-month rule applicable, anybody that was thinking about transacting in less than that time frame obviously now has to wait,” Kulik said. “So this extends or adds another layer of complexity or administrative burden. That’s a more significant issue from a completion perspective than what was applicable in the past, especially on the due diligence compliance side of heightened scrutiny levels.”

CMS is also launching a new quality reporting system, the Hospice Outcomes and Patient Evaluation (HOPE) tool. Slated for an October 2025 implementation in accordance with the agency’s 2025 final hospice rule, the HOPE tool will replace the current Hospice Item Set (HIS) and collect data at multiple time points across the hospice stay.

These developments have added new components when it comes to the outlook of hospice transacting, according to Kulik. Hospices face a 2% penalty for failing to meet the new HOPE tool requirements, risking potential revenue and profit margin loss.

“The HOPE tool implementation is also going to cause a bit of noise and fog relative to interpreting [a hospice’s] results or processes,” he said. “It could certainly be punitive if you don’t comply with the regulations. That’s a 2% potential hit for the next year economically, and that’s on top of everything else going on to running your business. It’s another burden on leadership and could be expensive. So there’s a rippling effect that could be present if you’re not managed properly.”

Compliance issues serve as a red flag that can deter a buyer’s interest, Lillis. But auditing activity has ramped up for hospices in recent years, making it difficult to weed out common errors from patterns of potential malfeasance, he stated.

Having strong quality outcomes and compliance provides significant leverage in today’s hospice M&A landscape, whether considering a joint venture, merger or acquisition, Lillis said. Quality is key to thriving and growing a hospice asset, regardless of size or scale of the organization, he indicated.

“It’s not an option to provide good clinical care and avoid compliance issues,” Lillis said. “The interesting, fascinating part is that the hospice market we’re seeing today is not the same as yesterday or tomorrow. There’s still great opportunity for organizations, be they nonprofit or for-profit, but they don’t walk in blindly.”