Regulatory scrutiny is slowing down hospice M&A deals in 2026, and the recently approved 2027 final rule will be no help.
Interest in hospice acquisitions remains high, particularly among publicly traded companies and private equity firms. However, buyers are painstakingly combing through any potential compliance or billing issues during the diligence process, which is delaying closures, according to Mark Kulik, senior managing director of the M&A advisory firm The Braff Group.
“The process has slowed down dramatically in the last several years, relative to due diligence, and I would even say that the operational/regulatory/clinical aspects of due diligence have really superseded the financial ones,” Kulik told Hospice News. “Buyers are putting a lot more emphasis and importance in those areas than ever before in my almost 30 years of doing M&A.”
This emphasis on compliance comes as hospices face new regulatory requirements. The 2027 final rule established a new Service and Spending Variation Index (SSVI). This includes a scoring system using nine claims-based measures, each representing various aspects of hospice utilization as well as non-hospice spending. This is designed to identify hospices in need of increased transparency and oversight, according to the U.S. Centers for Medicare & Medicaid Services.
Also in the rule is a new requirement that hospices provide patients and families with an addendum to the election statement, indicating what treatments and services the hospice will cover and which are unrelated.
Despite these hurdles, hospice dealmaking is going strong in 2026 even if transactions are taking longer to complete.
The Braff Group projects 44 deals taking place this year, a new high since the end of the COVID-19 pandemic. In 2019, the year before the pandemic, 48 transactions occurred, Kulik said.
But buyers remain concerned about compliance risks, particularly audits that could lead to payment claw backs, according to Cory Mertz, managing partner for the M&A advisory firm Mertz Taggart.
“Buyers are always worried, afraid of audit risk,” Mertz told Hospice News. “That’s always the biggest issue, especially nowadays in hospice. So, [the final rule] just adds a little bit of another wrinkle.”
The fate of a transaction often hinges on whether a potential seller is a “have” or a “have not,” Mertz said. This can be distinguished by a number of factors, including geography, presence in a Certificate of Need state, clean compliance and strong financials.
“The ‘haves’ are still commanding premiums, but the ‘have-nots’ are much more difficult to sell,” Mertz said. “Many hospice Operators haven’t kept up with the regulatory requirements to continue to serve patients, and they don’t realize it until they get into diligence.”
Companies featured in this article:
