From Medicare cap exposure to referral source concentration, this guide covers every critical due diligence item for hospice and palliative care acquisitions.
Find Hospice & Palliative Care Acquisition TargetsHospice acquisitions carry unique regulatory, clinical, and billing risks that standard business due diligence frameworks miss entirely. Medicare certification, annual cap calculations, OIG scrutiny, and referral anti-kickback compliance require specialized review before closing any deal in the $1M–$5M revenue range.
Validate reported revenue, normalize EBITDA, and quantify Medicare overpayment and cap exposure hidden in historical cost reports.
Review the last three Medicare cost reports and calculate current cap position. Approaching or exceeding the annual cap materially limits future revenue and signals potential billing compliance risk.
Adjust for owner compensation, related-party rent, personal expenses, and one-time costs. Hospice EBITDA margins of 20–30% are achievable but frequently obscured in owner-operated agencies.
Analyze average daily census trends, payer mix, and live discharge rates over 24 months. Declining ADC or rising live discharges can indicate eligibility documentation problems or referral instability.
Assess CMS certification status, survey deficiency history, and OIG exposure before assuming any liability tied to prior billing practices.
Pull all state survey reports and condition-level deficiency findings from the last three years. Active enforcement actions or unresolved plans of correction are deal-stopping red flags.
Request documentation of any OIG investigations, RAC audits, or Medicare recoupment demands. Undisclosed overpayment liabilities routinely surface post-close and can exceed hundreds of thousands of dollars.
Review all referral source agreements, marketing contracts, and medical director arrangements for AKS safe harbor compliance. Non-compliant referral relationships create federal liability that transfers with the business.
Evaluate census quality, staff stability, and the strength of referral relationships that determine post-acquisition revenue sustainability.
Verify active licensure for all RNs, social workers, and the Director of Nursing. Identify key personnel flight risk, as clinical staff departures directly impact census capacity and Medicare compliance.
Map admissions by referral source for the prior 24 months. Any single hospital, SNF, or physician practice exceeding 20% of admissions represents significant revenue concentration risk post-close.
Review Quality Assurance and Performance Improvement meeting minutes and interdisciplinary team documentation. Gaps signal compliance weakness and increase post-close survey deficiency risk.
Verify the Hospice & Palliative Care 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 Hospice & Palliative Care 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 Hospice & Palliative Care 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.
Undisclosed Medicare overpayment liability and cap exposure. These often don't appear in standard financials but can result in six-figure recoupment demands surfacing months after closing.
Medicare-certified hospices with clean compliance records and stable ADC typically trade at 4–7x EBITDA, with higher multiples for agencies with diversified referrals and strong clinical leadership in place.
Yes. SBA 7(a) loans are commonly used for hospice acquisitions. Lenders will scrutinize Medicare certification status, compliance history, and normalized cash flow before approving healthcare service business loans.
The CMS CHOW process for hospice typically takes 90–180 days. Buyers cannot bill Medicare under the new ownership until CMS approves the novation, making deal structure and timing critical.
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