Is Selling a Home Health Agency or Hospice Like Selling a House?

When owners of home health agencies or hospices consider selling their business, they often wonder if the process is similar to selling a house. On the surface, both transactions involve finding a buyer, negotiating terms, and closing a deal. However, selling a home health agency or hospice is often far more complex, requiring regulatory approvals, due diligence, and strategic planning. Not surprisingly, when you dig into it, there are far fewer similarities than differences.

Below, we’ll explore some of these similarities and differences.

Similarities Between Selling a Home Health Agency or Hospice and Selling a House

1. Preparation is Key

Just as a homeowner prepares a house for sale by making repairs, staging, and ensuring curb appeal, a home health agency or hospice owner must prepare their business before selling. This includes organizing financial records, ensuring compliance with regulatory requirements, and optimizing operations. A well-prepared business, like a well-maintained home, attracts more buyers and often secures a higher price and better deal terms.

2. Finding the Right Buyer is Crucial

Whether selling a house or a healthcare business, finding the right buyer is essential. The buyer pool and profile will look very different in real estate versus a healthcare transaction. However, maximizing price and deal terms will often hinge on fostering a competitive process and identifying the most motivated buyer with the strongest interest. Just as homeowners work with real estate agents to market their property to qualified buyers, home health and hospice owners work with M&A advisors or brokers to run a competitive process and identify serious, financially capable and motivated buyers.

3. Negotiation is Part of the Process

Price and deal term negotiation is common in both sales processes. Buyers make offers and counteroffers based on their assessment of the business or property’s value. In both scenarios, the seller’s ability to justify their valuation—whether through comparable home sales in real estate or solid business financials and performance in healthcare transactions—affects the final deal.

4. Inspections/Due Diligence

Both real estate and healthcare deals will go through an “inspection” process, though the processes themselves look very different. These differences will be discussed in greater detail in the next section.

Key Differences Between Selling a Home Health Agency or Hospice and Selling a House

1. Confidentiality

When selling a house, listings are made public to attract buyers. In contrast, selling a home health agency or hospice requires strict confidentiality. If employees, competitors, or referral sources learn about the sale too soon, it can create disruptions and uncertainty within the business. Sellers work with M&A advisors to market the business discreetly, utilizing a blind listing to engage potential buyers and requiring them to sign Non-Disclosure Agreements (NDAs) before receiving sensitive information.

2. Valuation

A home’s value is typically based on location, condition, and comparable property sales (comps) in the area. In contrast, valuing a home health or hospice business involves analyzing financials and the company’s profitability. For healthcare businesses, unlike in real estate, there is no Multiple Listing Service (MLS) in which to draw comps. Most healthcare deals are private transactions with no reporting requirements, making it nearly impossible to find comps. But an M&A advisor that focuses on home health and hospice transactions will work through the valuation process, expertly calculate EBITDA and corresponding adjustments, and pinpoint the appropriate multiples.

3. Time on Market and Impact on Valuation

In real estate, there is an indirect relationship between time on market and valuation; a house that lingers on the market for too long often leads to price reductions. As days on market goes up, price of the house goes down. Typically, at the right price, a house will eventually sell. In the healthcare M&A world, there is no correlation between time on market and valuation. If the Seller’s valuation expectations are reasonable, reducing price will not increase the buyer pool or buyer interest. As valuation is based on financial performance, a healthcare business that stays on the market for a period of time will see an increase in valuation if the business grows and profitability increases during that time. Of course, the inverse is true if the business declines and profitability decreases.

4. Buyer Pool

The pool of potential buyers for a home is vast, including individuals and investors looking for personal or rental properties. However, the buyer pool for a home health agency or hospice is much more limited, consisting of strategic buyers and private equity firms, also known as “financial buyers.” These buyers have varying degrees of experience in the healthcare space and closing similar types of transactions. Unlike in residential real estate, there are often no financing contingencies, but identifying these buyers is a more challenging process, which makes working with an experienced M&A advisor with these specific industry contracts crucial to maximizing value and getting to a successful close.

5. Due Diligence Process

When selling a house, the due diligence process primarily consists of home inspections and title searches. On the other hand, selling a home health agency or hospice requires extensive financial, operational, and legal due diligence. This process takes 90-120 days on average and is typically covered by an exclusivity period, during which the Seller cannot interact with other potential buyers. In contrast to the limited scope of diligence required when selling a home, selling a healthcare agency involves a far more detailed and time-intensive review to ensure all aspects of the business—financial, operational, and regulatory—are thoroughly vetted.

6. Regulatory and Licensing Complexities

Selling a home health agency or hospice involves compliance with state and federal regulations. For example, agencies that are selling must undergo a Change of Ownership (CHOW) process with Medicare, state health departments, and/or accrediting bodies. This regulatory approval process takes time and effort, adding a layer of complexity that doesn’t exist in real estate transactions.

7. Time Frame

The time required to sell a house typically ranges from a few weeks to a few months, depending on market conditions and buyer demand. After a buyer is identified, the buyer’s financing often controls the time to close. In contrast, selling a home health agency or hospice can take 6-12 months or longer due to the complexity of the process. After a buyer is identified, the due diligence, legal, and regulatory processes control the time to close, and unfortunately, delays are not uncommon. An experienced M&A expert will guide the seller through the process and any unexpected roadblocks to reach an expedited close.

Final Thoughts: A More Complex Process Than Selling a House

While selling a home health agency or hospice shares some similarities with selling a house, the processes have far more differences. Selling a home health agency or hospice is a complex and unique process that includes maintaining confidentially, calculating valuation, identifying a limited buyer pool, and navigating the complexities of due diligence and regulatory compliance. Working with an experienced M&A advisor can help streamline the process, minimize risks, and ensure that sellers achieve the best possible outcome.

If you’re considering selling your home health agency or hospice, it’s essential to plan ahead, understand the unique challenges, and work with professionals who specialize in home health and hospice transactions. By doing so, sellers can navigate the complexities, maximize value, and successfully transition their business to the right buyer.