Valuing Hospice Agencies in 2025: A Comprehensive Guide for Owners, Investors, and M&A Professionals

Will Hamilton
Sep 4, 2025
8 min read

The hospice industry plays a critical role in the U.S. healthcare system, providing compassionate, end-of-life care to patients with terminal illnesses. Hospice services include pain management, symptom relief, counseling, and support for both patients and their families. The industry is heavily regulated and deeply influenced by reimbursement policy, but it continues to be a highly active sector for M&A, driven by demographic tailwinds and the ongoing aging of the U.S. population.

Whether you're preparing to sell a hospice agency, evaluating a partnership opportunity, or seeking to benchmark financial performance, this article explores the key valuation methodologies, drivers, and risk factors that determine the worth of a hospice.

I. Industry Context: Why Hospices are in Demand

Hospice agencies are in strong demand due to powerful demographic, clinical, and economic forces shaping end-of-life care in the United States. The aging population, and particularly the rapid growth of individuals aged 75 and older, has materially increased the incidence of terminal diagnoses requiring palliative and comfort-focused care. Payers, including Medicare Advantage plans, increasingly favor hospice services because they lower total cost of care by reducing avoidable hospitalizations, emergency department utilization, and intensive end-of-life interventions. Clinically, hospice delivers superior patient and family outcomes, with higher satisfaction scores and better symptom management compared to acute-care settings. From a provider and investor perspective, hospice agencies benefit from recurring, census-driven revenue, predictable reimbursement structures, and scalable interdisciplinary care models. These dynamics collectively drive sustained demand for hospice services and make well-run hospice agencies strategically attractive assets within the broader post-acute care continuum.

Key Growth Drivers

Key growth drivers for the industry include the following:

Aging Population: The rising number of seniors, particularly those over 85, is expanding demand for hospice services nationwide.
Shift Toward Value-Based Care: Hospice is a lower-cost alternative to hospital and acute-care settings, making it attractive to payers focused on cost containment.
Increased Payer Support: Medicare remains the primary payer, but commercial payers are gradually expanding coverage, making services more accessible.
Integration with Home Health and Palliative Care: Consolidation of hospice with adjacent post-acute services provides continuity of care and stronger referral networks.
Public Awareness and Patient Preference: Growing acceptance of hospice as a quality-of-life service (rather than a last resort) is driving earlier utilization.

Reimbursement Outlook

Hospice reimbursement trends for 2026 show modest Medicare payment increases designed to help hospices manage rising costs, with the Centers for Medicare & Medicaid Services finalizing a 2.6% overall payment update for fiscal year 2026, equating to roughly $750 million in additional hospice payments compared with FY 2025. This adjustment reflects an updated inpatient hospital market basket index, tempered by statutory productivity adjustments, and continues the annual pattern of incremental rate growth. However, providers that fail to meet quality reporting requirements may see net reductions, underscoring increasing emphasis on performance-linked reimbursement. The aggregate cap on Medicare hospice payments per patient has also been raised in line with these updates, and stakeholders are watching how wage index changes and quality measurement tools like HOPE will influence future rates and operational costs. Overall, the outlook for 2026 suggests continued moderate reimbursement growth with ongoing regulatory focus on quality and cost-effectiveness.

II. Top Reasons to Get a Valuation of Your Hospice

The following is a list of common reasons for commissioning a valuation analysis or appraisal of a hospice agency:

1. Preparing for a Sale or Strategic Partnership

To establish a defensible asking price when marketing the business
To evaluate offers from private equity, strategic buyers, or joint venture partners
To understand how your practice compares to market benchmarks

2. Internal Ownership Transition

For buy-in or buy-out of partners or associates
To support fair and compliant equity allocation among owners
To plan for generational succession or family transfers

3. Compliance with Healthcare Regulations

To support Fair Market Value (FMV) and Commercial Reasonableness (CR) assessments required by Stark Law and Anti-Kickback Statute in deals involving ownership by other healthcare providers
To document compliance in joint ventures, especially when there is a referral relationships (hospitals, ancillary service providers, or physicians)

4. Estate & Tax Planning

For gift or estate tax reporting to the IRS (especially for closely held businesses)
To support asset protection strategies
To plan for long-term wealth transfer or charitable contributions

5. Litigation or Dispute Resolution

For divorce proceedings involving business asset division
In shareholder or partnership disputes
For economic damages assessments in legal proceedings

6. Business Planning & Strategic Growth

To establish a valuation baseline for performance benchmarking
To support capital raise, refinancing, or line-of-credit applications
To identify value drivers and areas for operational improvement

III. Valuation Approaches for Hospices

Valuation professionals typically apply three core methodologies to estimate the value of a hospice:

Income Approach (Discounted Cash Flow or Capitalization of Earnings)

This approach values a business based on the present value of its expected future earnings or cash flows. It’s most appropriate when a practice has a stable operating history and predictable future performance.

Key assumptions include:

Normalized EBITDA or owner’s discretionary earnings
Growth rate assumptions (organic and acquisitive)
Risk-adjusted discount rate (typically 10–20% for hospice)

Pros: Based on the business’ future earning power

Cons: Sensitive to forecasting errors and discount rate subjectivity

Market Approach (Comparable Transaction Method, e.g. Market Multiples)

This method uses observed EBITDA multiples or revenue multiples from recent M&A transactions or public companies in the hospice space. Typical multiples for small to medium -sized hospice agencies are within the range of 5x to 8x EBITDA, depending on a wide variety of factors.

This article includes more details and information about hospice valuation multiples.

Pros: Easy to benchmark; useful in active M&A environments

Cons: Requires access to quality private market data and careful adjustment for size, margin, geography, and a variety of other factors

Asset-Based Approach

Used only when the business is underperforming or being liquidated. The value is derived from the net assets (e.g., equipment, leasehold improvements) minus liabilities.

Pros: Useful in distressed scenarios

Cons: Intangible value of the practice can be difficult to quantify under this method

IV. Key Value Drivers in Hospice Valuation

Several specific factors can materially influence a hospice’s valuation multiple:

Earnings Quality

Buyers and valuation professionals place significant emphasis on normalized EBITDA and / or cash flow. Adjustments often include:

Owner compensation (if above/below market)
Non-recurring revenue or expenses
Related-party arrangements
Post-transaction adjustments
Out-of-period adjustments

Growth Potential

Discount rates and valuation multiples are a function of perceived risk and growth. Key considerations within the hospice industry related to growth include the following:

Demographic- and referral-driven census growth: Valuation is highly sensitive to sustainable patient census expansion, which depends on aging population trends, hospital and physician referral relationships, and penetration within Medicare Advantage and ACO networks. Buyers assess whether growth is organic and defensible versus referral-concentrated or marketing-driven, as the latter carries higher durability risk.
Regulatory and reimbursement scalability: Growth must be evaluated in the context of Medicare reimbursement updates, aggregate cap exposure, length-of-stay mix, and increasing scrutiny around eligibility and compliance. Agencies that demonstrate disciplined admission practices, balanced diagnosis mix, and strong quality reporting are better positioned to grow without disproportionate regulatory risk, supporting higher valuation multiples.
Operational leverage and labor availability: Hospice growth is constrained by access to clinical staff (nurses, social workers, aides) and the ability to scale interdisciplinary teams efficiently. Valuations favor platforms that can add census with limited margin compression through strong care models, geographic density, and back-office scalability, as these factors directly enhance incremental EBITDA from growth.

Risk Factors

Key considerations within the hospice industry related to risk include the following:

Regulatory and compliance exposure: Hospice valuations are highly sensitive to regulatory risk given heightened scrutiny from CMS, OIG, and DOJ around eligibility determinations, length of stay outliers, and diagnosis mix (e.g., dementia and “failure to thrive”). Agencies with weak documentation, aggressive admission practices, or prior audits face elevated downside risk from payment recoupments, civil penalties, or loss of referrals, which directly impacts sustainable cash flow.
Reimbursement and payer concentration risk: Heavy reliance on Medicare fee-for-service exposes hospices to rate pressure, aggregate cap limitations, sequestration risk, and potential policy shifts, while growing Medicare Advantage penetration can introduce lower rates and delayed payments. Valuations discount providers with high exposure to a small number of MA plans or referral sources due to reduced pricing power and volatility in cash collections.
Labor and margin compression risk: Persistent shortages of hospice nurses and aides drive wage inflation, overtime, and contract labor usage, which can materially compress margins as census grows. Agencies lacking geographic density, efficient staffing models, or strong clinical leadership are less able to manage labor risk, increasing earnings volatility and reducing valuation multiples.

V. Current Market Trends in Hospice M&A

Hospice has been one of the most active subsectors in post-acute healthcare M&A for the past decade. While overall deal activity moderated in 2023–2025 due to rising interest rates and tighter credit, hospice remains a priority for private equity and strategic buyers. Consolidation is expected to remain strong as buyers seek scale and market density.

According to Scope Research’s database, 2024 hospice deal volume declined about 15% from the 2022 peak and has yet to show strong signs of sustained recovery in 2025 (although there has been an uptick in activity so far in Q3). Large strategics such as Amedisys, VITAS, and AccentCare continue to compete alongside private equity-backed platforms, often driving up valuations in competitive bidding processes.

Hospice EBITDA Multiple Trends

Larger hospice platforms typically command higher EBITDA multiples than smaller independent clinics due to their scale, diversified revenue base, and reduced operational risk. These platforms benefit from centralized management and robust referral networks, factors that enhance profitability and stability. Additionally, buyers place a premium on the platform’s ability to support future growth through acquisitions or de novo expansion. This combination of scalability, infrastructure, and lower risk profile makes larger platforms more attractive and valuable in the eyes of strategic and financial buyers.

According to our database, multiples for larger hospice platforms with EBITDA of over $5 million annually range from 8x to 16x EBITDA.

Cash Flow Multiples for Small Hospice Agencies

There are a number of small hospice agency listed for sale at any given time, but it's difficult to glean much useful information from data on smaller businesses where context around the level of owner involvement is unavailable. A hospice agency making $200k per year in cash flow for an absentee owner is much different from a hospice agency making $200k per year in take-home for a full-time owner-operator. Our study of current and recently removed businesses for sale shows a range of multiples from 3x cash flow to 5x cash flow at the 25th and 75th percentiles, with a median of 3.54x.

VI. Final Thoughts: Keys to Maximizing Value

If you're a hospice business owner or executive planning to explore a sale or equity partnership, consider the following strategies to enhance your valuation:

Strengthen compliance, documentation, and audit readiness: Proactively invest in clinical documentation, eligibility support, and internal audits to demonstrate defensible length-of-stay management and diagnosis mix, reducing regulatory risk that buyers heavily discount in valuation.
Diversify and formalize referral relationships: Reduce dependence on a small number of hospitals, physicians, or facilities by building broad, contract-backed referral channels, including Medicare Advantage plans, ACOs, and health systems, to improve revenue durability and growth visibility.
Improve margin quality and labor efficiency: Optimize staffing ratios, reduce contract labor, and build geographic density to show buyers that incremental census growth translates into EBITDA rather than margin compression.
Demonstrate consistent, organic census growth: Establish a multi-year track record of steady admissions growth supported by normalized marketing spend and repeatable processes, signaling sustainable performance rather than one-time or owner-dependent results.
Professionalize operations and reporting: Upgrade financial reporting, KPIs, and management depth (clinical leadership, operations, compliance) so the business can scale post-transaction without reliance on the owner, supporting higher multiples and smoother diligence.

About HealthFMV

HealthFMV specializes in appraising healthcare businesses and services arrangements, including hospice agencies.

Business Valuation: We perform independent, third-party valuations of healthcare businesses to document regulatory, tax, and financial reporting compliance, resolve ownership disputes, and help ensure both parties to the transaction are comfortable with the financial terms.
Transaction Advisory: We work with healthcare business owners, organization executives, providers, and their health lawyers to develop transaction structures and deal terms that further their business objectives while maintaining compliance with the complex healthcare regulatory environment.
Services Arrangements: We prepare fair market value and commercial reasonableness opinions for a variety of healthcare services arrangements including management services, hospital-based specialty stipends, case rates and PC/TC splits, block leasing, and shared savings distributions, among others.

Contact Will Hamilton at whamilton@healthfmv.com with questions about our healthcare valuation services or to discuss your specific situation. Visit scoperesearch.co for more information about our healthcare M&A research services.