Valuing Intellectual and Developmental Disability (IDD) Providers in 2025: A Comprehensive Guide for Owners, Investors, and M&A Professionals

Valuing intellectual and developmental disability (IDD) service providers requires a nuanced understanding of the diverse care settings and reimbursement environments that define this segment of the healthcare and social services sector. IDD services encompass a wide array of models, including residential and group homes that offer 24‑hour support, adult day programs focused on habilitation and community engagement, adult foster care and shared‑living arrangements, as well as school‑based and home‑based supports tailored to individual needs. These provider types differ in licensing requirements, staffing models, funding streams, and operational risk profiles, all of which materially influence cash flow sustainability and risk‑adjusted earnings. As a result, valuation professionals must carefully assess service mix, regulatory complexity, reimbursement stability, and growth prospects to develop credible fair value indications for owners, investors, and M&A stakeholders in this evolving sector.

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

I. Industry Context: Why IDD Providers are in Demand

IDD services are in strong demand due to a combination of demographic trends, policy support, and evolving care preferences. The prevalence of individuals with developmental disabilities is rising, and families increasingly seek specialized, community-based programs that support independence, skill development, and quality of life. Public funding through Medicaid waivers, state programs, and private insurance provides relatively stable reimbursement streams, making these services financially sustainable for providers. There is also growing emphasis on deinstitutionalization and community integration, which drives demand for residential, day, and in-home IDD services. From an operational perspective, providers with well-trained staff, scalable service models, and robust compliance programs are able to meet the complex needs of this population while maintaining predictable revenue. Collectively, these factors make IDD service providers attractive both to families seeking care and to investors evaluating growth and acquisition opportunities.

Key Growth Drivers

Key growth drivers for the industry include the following:

• Increasing prevalence and diagnosis rates: Greater awareness, earlier identification, and improved diagnostic capabilities for developmental disabilities drive demand for specialized services.

  
  

• Aging population of individuals with IDD: Many individuals with lifelong disabilities are living longer, creating sustained demand for adult day programs, residential services, and long-term supports.

  
  

• Policy and funding support: Medicaid waivers, state programs, and other government initiatives provide stable reimbursement streams and incentives for community-based services.

  
  

• Shift toward community integration and deinstitutionalization: Emphasis on home- and community-based services over institutional care expands the market for residential, day, and in-home support programs.

  
  

• Expansion of specialized service offerings: Growth in therapy programs, vocational training, behavioral supports, and technology-assisted care enhances service capacity and attracts additional families and referrals.

Reimbursement Outlook

Medicaid remains the primary source of reimbursement for IDD service providers, with most supports (including residential habilitation, day programs, and in‑home services) delivered through state Home and Community‑Based Services (HCBS) waivers, creating a funding environment that is heavily dependent on state budget decisions and federal matching funds. Rates for many waiver services have seen periodic increases and adjustments to better reflect costs and workforce needs, and some states are proposing further rate changes and wage enhancements for direct support professionals (DSPs) in 2026 to address labor market pressures and improve service access. However, providers also face downward pressure where reimbursement growth fails to keep pace with rising costs, staffing shortages, or shifting policy priorities, with staffing deficits already causing some organizations to turn away new clients and tighten capacity. Looking forward to 2026, the outlook will vary by state as waivers are amended, rate structures are recalibrated, and policymakers balance fiscal constraints with long waitlists and advocacy for expanded services; providers that can adapt billing practices, engage in rate discussions, and align service delivery with evolving waiver requirements will be better positioned to sustain revenue and manage risk.

II. Top Reasons to Get a Valuation of Your IDD Business

The following is a list of common reasons for commissioning a valuation analysis or appraisal of an IDD service provider:

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 clinicians

• 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 IDD Services

Valuation professionals typically apply three core methodologies to estimate the value of an IDD provider:

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 10–25% for IDD)

• Capital expenditure needs

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 IDD space. Typical multiples for small to medium -sized IDD businesses are within the range of 4x to 8x EBITDA, depending on a wide variety of factors.

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 IDD Valuation

Several specific factors can materially influence an IDD provider’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 lease 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 IDD industry related to growth include the following:

• Census growth and service mix expansion: Sustainable growth is driven by increasing the number of individuals served across residential, day, in-home, and community-based programs. Valuations favor providers that demonstrate consistent, defensible census growth supported by referral networks, waitlist management, and scalable program offerings.

  
  

• Payer and funding stability: Growth potential depends on diversification and reliability of funding sources, primarily Medicaid waivers, state programs, and private pay. Providers with stable, multi-year funding agreements and strong relationships with state agencies face lower revenue volatility and higher valuation multiples.

  
  

• Operational scalability and workforce capacity: Expanding services requires sufficient qualified staff, efficient scheduling, and administrative infrastructure. Agencies capable of scaling programs without significantly compressing margins or compromising quality are viewed as more valuable and better positioned for growth-driven valuation.

Risk Factors

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

• Regulatory and compliance risk: IDD service providers are subject to extensive state and federal regulations, including licensing, HCBS waiver requirements, and quality reporting standards. Noncompliance can lead to funding reductions, fines, or loss of licensure, which directly impacts revenue and valuation.

  
  

• Funding and reimbursement risk: Heavy reliance on Medicaid waivers and state funding exposes providers to potential rate cuts, delayed payments, or changes in eligibility criteria. Agencies with concentrated funding sources face higher volatility and lower valuation multiples.

  
  

• Workforce and operational risk: Recruiting and retaining qualified direct support professionals (DSPs) is a persistent challenge that can limit service capacity, increase labor costs, and reduce margins. Providers unable to maintain adequate staffing levels or operational efficiency may experience constrained growth and diminished financial performance.

V. Current Market Trends in IDD M&A

Over the past five years, the IDD services sector has experienced steady M&A activity, fueled by growing demand for residential, day, and community-based supports and stable public funding through Medicaid waivers. Private equity and strategic buyers have targeted platform providers with scalable operations, diversified service types, and strong compliance and referral networks. Valuation multiples have remained relatively strong, reflecting predictable cash flows, labor and operational barriers to entry, and the fragmented nature of the market, which continues to attract consolidation opportunities.

IDD EBITDA Multiple Trends

Larger IDD 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, robust referral networks, and greater negotiating leverage with payers and vendors, 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, while smaller clinics may be more dependent on a single provider or location. 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 IDD platforms with EBITDA of over $5 million annually range from 6x to 10x EBITDA.

Cash Flow Multiples for Small IDD Providers

There are a number of small IDD providers 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 business making $200k per year in cash flow for an absentee owner is much different from a business 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 3.5x cash flow to 6.47x cash flow at the 25th and 75th percentiles, with a median of 4.95x.

VI. Final Thoughts: Keys to Maximizing Value

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

• Strengthen compliance and documentation: Implement robust internal controls, quality assurance programs, and audit-ready documentation to minimize regulatory risk and demonstrate defensible service delivery.

  
  

• Diversify and formalize funding sources: Expand relationships with multiple state programs, Medicaid waivers, and private payers, and secure formal agreements or contracts to reduce revenue volatility.

  
  

• Demonstrate consistent census growth: Establish a multi-year track record of sustainable growth across residential, day, and in-home programs, supported by referral networks and waitlist management.

  
  

• Optimize operational efficiency and workforce management: Improve staffing models, scheduling, and administrative processes to scale services without significant margin compression, highlighting operational leverage to potential buyers.

  
  

• Professionalize financial reporting and management depth: Maintain accurate, transparent financial statements and develop a strong management team capable of operating independently of the owner, increasing buyer confidence and supporting higher multiples.

About HealthFMV

HealthFMV specializes in appraising healthcare businesses and services arrangements, including IDD service providers.

• 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.