Maximizing Value: How Advisors Evaluate Home Health & Hospice Assets
- Mar 22
- 7 min read
By Cory Mertz, Managing Partner — Mertz Taggart | Updated March 2026
Executive Summary: Insights from a recent webinar with Maxwell Healthcare Associates and Mertz Taggart. A buyer is not just valuing what a home health or hospice agency has earned. A buyer is valuing how durable those earnings look, how transferable the business feels, and how much risk comes with the transition. At a glance:
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In a recent webinar hosted with Maxwell Healthcare Associates, Mertz Taggart managing partner, Cory Mertz, and Maxwell’s COO, Jay Duty, walked through the key factors that drive how home health and hospice agencies are valued in an M&A transaction.
What Financial Metrics Do Buyers Look at When Valuing a Home Health or Hospice Agency?
When we assess a company on behalf of a seller, we focus on three high-level financial metrics: revenue, gross margin, and adjusted EBITDA margin.
Revenue is where it starts. Generally, larger agencies with higher revenue tend to command stronger multiples, all else being equal.
Gross margin tells you how much is left after your cost of providing care, things like: clinician compensation, burden costs, travel, and supplies.
Healthy ranges often look like this:
Home health: 45% to 55%
Hospice: 50% to 55%
Home health can be more variable depending on revenue mix, including episodic revenue, Medicare Advantage, Medicaid, VA reimbursement, and geography.
Adjusted EBITDA margin is what’s left after subtracting overhead from your gross profit, with certain adjustments factored in.
Ranges often viewed as attractive include:
Home health: 15% to 25%
Hospice: 18% to 25%
But adjusted EBITDA is rarely simple. Different buyers may evaluate the same agency differently depending on:
owner involvement
replacement cost
retention cost
growth trajectory
time period under review
what the buyer believes is sustainable after closing
That is why a multiple means very little without a credible view of adjusted EBITDA.
One important detail: buyers evaluate these numbers on an accrual basis, not cash basis. That means revenue is recognized when it’s earned, and payroll is matched to the month the work was performed. The goal is to line everything up so that margins are consistent from month to month. If your books are on a cash basis, having them converted to accrual before going to market gives buyers, and you, a much clearer picture.
Why Is Adjusted EBITDA So Important, and So Variable?
Adjusted EBITDA is the number that multiples are applied to, which is why it matters so much. But it’s also one of the most variable parts of a valuation.
Two buyers can look at the same company and arrive at different adjusted EBITDA figures, and both can be reasonable. The adjustments depend on factors like:
the time period being evaluated (pro-rata, trailing twelve months, or another period),
whether the company is growing,
and how the buyer models replacement or retention costs for the owner after closing.
This is worth keeping in mind if someone approaches you with a high multiple.
A multiple doesn’t mean much without understanding what it’s being applied to. An advisor or broker who leads with a lofty multiple before doing a thorough analysis of your financials may not be giving you the full picture.
The more valuable conversation is one that starts with what your adjusted EBITDA actually looks like, on an accrual basis, with honest adjustments, so you can make a sound decision about whether and when to go to market.
How Do Operational Efficiencies Affect an Agency’s Value?
Beyond the financials, buyers look closely at how well an agency runs day to day. The areas that come up most often include:
clinical quality,
intake and scheduling,
revenue cycle management,
and workforce productivity.
How efficiently you convert referrals into admissions, process eligibility and authorizations, and collect on claims all contribute to the picture a buyer forms of your agency. If those back-office processes are running smoothly, it signals lower risk. If they’re not, buyers may see it as margin they can improve, which can work in their favor during negotiations, not yours.
Workforce management is especially important because labor is the largest cost in this business. Buyers want to understand how you staff your branches, how productive your clinicians are, and what systems you use to manage scheduling and capacity. The more visibility you have into your own workforce data, the stronger your position.
Clinical quality matters too.
Strong documentation, solid patient outcomes, and a clean regulatory track record reduce risk for a buyer. And in a market that’s moving more toward managed care and Medicare Advantage, the ability to manage authorizations and payer-specific requirements efficiently has become a significant factor.
How Does Technology, Especially EMR Compatibility, Factor Into Valuation?
Technology has moved from a “nice to have” to a real factor in how agencies are evaluated.
The EMR system is the starting point. From a buyer’s perspective, if the seller is on the same EMR, that’s a bonus as it reduces transition risk, and some buyers may be willing to pay a bit more for that smoother integration path.
Even when the EMR platforms match, the way each organization uses the system can vary significantly. How you define terms, how you structure reporting, and whether you close out months consistently all affect how useful the data is to a buyer during due diligence.
Beyond the EMR, buyers are paying attention to the broader technology stack.
Speech recognition tools that cut documentation time for nurses, referral management platforms, predictive analytics, workforce scheduling tools, patient satisfaction surveying — these are all areas where technology investments can show a buyer that your agency is operating efficiently and making data-driven decisions.
The key question a buyer asks about technology isn’t just “what do they have?” It’s “how are they using it?”
An agency that has strong tools and is leveraging them to improve productivity, manage care quality, and make strategic decisions is a more attractive acquisition than one with the same tools collecting dust.
What Kinds of Risk Are Buyers Most Focused On?
For strategic buyers (companies already in the space looking to grow), the primary concern is transition risk.
What happens to the business if the owner steps away? Buyers want to understand:
what systems are in place,
what the leadership bench looks like,
and whether key referral relationships are tied to the owner personally or distributed across the team.
If a buyer feels that the cash flow could deteriorate once the owner disengages, that’s a risk they’ll price into their offer. Building a management or executive team that can operate independently, and referral relationships that aren’t concentrated in one person, are two of the most valuable things a seller can do before going to market.
For financial buyers (private equity groups or family offices looking for a platform to enter the space) risk is still important, but they’re also evaluating opportunity.
They’re looking at:
whether the platform can scale,
whether the leadership team can support growth,
and whether there’s overhead capacity to expand.
In those situations, a financial buyer may be willing to pay a premium to get into the industry, especially if they see a path to meaningful returns over a four- to five-year horizon.
Why Does Cultural Alignment Matter in a Home Health or Hospice Transaction?
This is one of the areas that surprises people. Culture isn’t just a soft consideration, it can directly influence which offer a seller accepts and how the transition goes.
When we run a competitive process and present a seller with multiple strong offers, it’s not unusual for the seller to choose an offer that isn’t the highest in terms of dollars.
They choose the buyer they feel most confident will get the deal to closing without trying to renegotiate, who will treat their employees well, and who will take care of the legacy they’ve built. For many owners, this is their life’s work. The buyer who respects that often wins.
From the employee perspective, a change in ownership can be unsettling.
People worry about what it means for them, whether their roles will change, whether the culture they’ve been part of will survive.
A thoughtful buyer plans for that.
They work collaboratively with the seller on an employee communication strategy, helping ensure the right people are brought in at the right time and in the right way, without compromising confidentiality.
There’s also a practical reason culture matters: every transaction involves a holdback for potential indemnification claims. If the relationship between buyer and seller is strong, the post-closing period tends to go smoothly. If it’s not, even minor disagreements can escalate. We’ve seen situations where buyers who felt things weren’t going well tried to place blame on the seller, even when the seller had done nothing wrong. It took time, energy, and legal costs to resolve.
Choosing a buyer whose values align with yours isn’t just about feeling good. It’s about protecting yourself after the deal is done.
When Should You Start Preparing for a Sale?
Earlier than most owners expect.
Some of our clients have engaged us years before they planned to go to market. In one case, a client first reached out with a six-year timeline. We started by understanding their objectives and running what we call a gap analysis:
here’s where your valuation is today,
here’s where you want it to be,
and here’s what needs to happen to close that gap.
Over time, month over month, quarter over quarter, we check in, update the analysis, and make recommendations. When both the value and the timing align, that’s when you go to market.
Even if a sale is years away, getting a clear, honest picture of what your agency looks like through a buyer’s eyes is one of the best investments you can make. It gives you a roadmap for the improvements that will matter most when the time comes.
If you’re thinking about a future sale of your home health, home care, or hospice agency, we’re happy to have a confidential conversation about how your agency would be received in the M&A marketplace. Reach out to us at info@mertztaggart.com or visit our Value Accelerator Program to learn how we help owners prepare.
About the Author
Cory Mertz, M&AMI, is a managing partner at Mertz Taggart, where he advises home health, home care, and hospice owners on selling their businesses. With nearly two decades in healthcare M&A and more than 160 completed transactions across the firm, Cory brings firsthand experience to every conversation.
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