A structured checklist covering Medicare compliance, payor contracts, rental fleet valuation, and accreditation review for HME and DME acquisitions in the $1M–$5M revenue range.
Find Home Medical Equipment Acquisition TargetsAcquiring an HME or DME business requires scrutiny beyond standard financials. Reimbursement compliance exposure, payor contract transferability, accreditation standing, and recurring rental revenue quality are the defining factors that determine deal value and post-close performance.
Assess the sustainability and composition of revenue, focusing on rental vs. one-time sales, payor mix, and reimbursement rate trends that directly affect future cash flow.
Separate rental revenue from one-time equipment sales across all product lines. High rental mix signals predictable cash flow; low rental concentration increases revenue volatility risk.
Break down revenue by Medicare, Medicaid, commercial insurance, and private pay. Identify reimbursement rate trends and exposure to competitive bidding program rate reductions.
Request GAAP accrual-basis financials with product-line P&Ls. Normalize for owner compensation, personal expenses, and one-time costs to establish true EBITDA.
Evaluate Medicare and Medicaid billing compliance history, accreditation status, and state licensing to identify recoupment exposure and transferability risks that could derail closing.
Request OIG audit history, RAC audit results, and any recoupment demands. Outstanding overpayment liabilities can survive an asset purchase if not properly structured.
Confirm active ACHC or Joint Commission accreditation with no pending corrective action plans. Lapsed accreditation can halt Medicare billing and delay post-close operations.
Verify all state HME dealer licenses, Medicare supplier enrollment numbers, and Medicaid provider agreements are current, transferable, and free of sanctions.
Evaluate equipment inventory condition, referral source relationships, staffing dependencies, and technology infrastructure to understand capital requirements and transition risks.
Obtain a complete inventory list with condition ratings, depreciation schedules, and rental vs. sale classification. Aging or poorly maintained equipment signals near-term capital reinvestment needs.
Identify top 10 referral sources by revenue contribution. Assess whether relationships are owned by the exiting seller or embedded within staff and clinical workflows.
Review employee roster for licensed respiratory therapists, delivery technicians, and billing specialists. High owner dependency without a management layer is a significant transition risk.
Verify the Home Medical Equipment acquisition qualifies for SBA financing, the purchase price is supportable by the verified cash flow, and the deal structure protects the buyer's downside.
Confirm the Home Medical Equipment meets SBA 7(a) eligibility requirements: the business is for-profit, U.S.-based, within SBA size standards, and the buyer meets personal financial requirements. Some industries have specific SBA restrictions — verify before LOI.
Model verified normalized EBITDA against projected SBA loan payments at current rates. A $1M SBA 7(a) loan at 10.5% over 10 years costs approximately $13,000/month. The Home Medical Equipment must generate at least 1.25x debt service coverage after a market-rate manager salary to pass underwriting.
Confirm the seller note is properly subordinated to the SBA loan and goes on 24-month standby as required by SBA rules. If an earnout is included, define exact measurement metrics, time period, and dispute resolution process before signing the purchase agreement.
Before signing a Letter of Intent, request these documents from the seller. Missing or incomplete items are a red flag — not a reason to proceed without them.
Supplier numbers are not directly transferable. In an asset purchase, the buyer must re-enroll, which can disrupt billing for 30–90 days. Structure earnouts and escrow to account for this gap.
Outstanding RAC or OIG audits create recoupment liability that can survive asset purchases. Buyers should escrow a portion of proceeds and obtain seller indemnification covering pre-close billing periods.
Typical multiples range from 3.5x to 5.5x EBITDA. Higher multiples reflect strong recurring rental revenue, diversified payor mix, clean compliance history, and active accreditation in good standing.
Yes. SBA 7(a) loans are commonly used, typically requiring 10–20% buyer equity. Lenders will scrutinize Medicare reimbursement concentration, compliance history, and accreditation status during underwriting.
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