Hospice buyers in the M&A market in 2026 are looking for strong regulatory compliance, solid cash flow and effective leadership as they hunt for deals.
Hospice M&A has seen an uptick in late 2025 and to date in 2026 after a three-year slump in deal activity. The M&A advisory firm The Braff Group projects that 44 transactions will take place in 2026, senior managing director Mark Kulik previously told Hospice News. About 30 of those have been either platform or bolt-on acquisitions. In contrast, only 25 deals occurred in 2023.
As buyers weigh companies to purchase, regulatory compliance has risen to the top of their wish list, according to Les Levinson, partner and co-chair of the Transactional Health Law Group at Robinson & Cole.
“A regulatory compliant company has really become front and center among all the other factors,” Levinson told Hospice News. “Compliance is becoming the singular most important criteria in terms of — not only holding value when parties have agreed on what the terms of a transaction are going to be — but execution timing and making sure that a deal actually gets done.”
This focus on compliance comes at a time when hospices are under heavy scrutiny by regulators, facing an onslaught of government and contractor audits as well as payment clawbacks.
Compliance is especially paramount in regions that are currently under a provisional period of enhanced oversight, Cory Mertz, managing partner at the M&A advisory firm Mertz Taggart indicated.
The U.S. Centers for Medicare & Medicaid Services (CMS) in July 2023 first announced a “provisional period of enhanced oversight” for hospices in California, Arizona, Nevada and Texas. This year, the agency added Ohio and Georgia to that list.
A key component of the enhanced oversight includes a medical review of claims before a Medicare Administrative Contractor (MAC) will pay them.
“Those states now require a different level of diligence, or level of tolerance, to billing and compliance errors,” Mertz told Hospice News. “The threshold is much lower in the enhanced oversight states. So, we always recommend that before our clients go to market that they do a billing and compliance audit. That will tell them a lot.”
Buyers are also searching for strong management teams, Levinson said, particularly for platform or additive transactions. Private equity firms and some strategic buyers see effective leadership in an acquisition target as a big selling point.
Levinson pointed to home health and hospice provider The Pennant Group (Nasdaq: PNTG) as an example of one of those strategic buyers. The company has been an active acquirer for the past several years, including some large transactions.
For prospective deals, Pennant scouts for agencies that show strong promise for organic growth that have talented local leaders or entrepreneurs in place, CEO Danny Walker said in an earnings call. Pennant prioritizes local management of its sites, including those it acquires. The company also develops a pipeline of local leaders and often keeps management teams in place at companies it buys.
Though compliance is giving it a run for its money, cash flow has long been king when it comes to vetting a transaction. Buyers project whether a hospice’s cash flow is transferable and sustainable, according to Mertz.
“An acquisition is ultimately an investment in the future cash flow of the business. Buyers are going to look at the current EBITDA, which is a proxy for cash flow, and ask two basic questions: How transferable is that cash flow, and how sustainable is that cash flow?” Mertz said. “The answers to those two questions will ultimately drive the value of the company or how the buyers will look at it.”
Companies featured in this article:
Mertz Taggart, Robinson Cole, The Braff Group, The Pennant Group
