Year-End Checklist: Five Financial Moves to Increase Your Home Health Agency’s Valuation (Preparing for Q1 2026)

The last quarter of the year is an ideal time for home health and hospice owners to shift from operational management to strategic financial planning. For those contemplating selling a healthcare business in the next 12-18 months, your year-end preparation is the single most critical factor in achieving maximum enterprise value and securing premium EBITDA multiples.

Buyers in the market for home health mergers and acquisitions are looking for accurate financials and quick access to supporting documentation, all of which help streamline the due diligence process. The foundation you lay now, before Q1 2026, will directly determine your agency’s final purchase price.

Here is a focused, year-end checklist of five financial moves to significantly increase your home health business valuation.

1. Identify and Document All Owner Addbacks

Most independently owned home health agencies have items embedded in their profit and loss reports that are specifically related to the owner and will not be necessary expenses for a buyer – think of these as owner perks. Examples include the owner’s automobile or philanthropic donations run through the company. These expenses can often only be identified by the owner but need to be categorized so that they can be added back into the company’s EBITDA (earnings before interest, taxes, depreciation and amortization). When a buyer or a major strategic acquirer evaluates your business they are primarily valuing the historical projected (typically trailing twelve months or TTM) EBITDA, and their offer price will be based on a multiple of this number. This is why capturing owner addbacks and adding them back into the EBITDA can play such an important role in maximizing your company’s sale price. By identifying legitimate ‘Addbacks,’ you effectively prove the true profitability of your agency to a buyer.

Your Year-End Action:

Thoroughly review all non-recurring, discretionary, or owner-specific expenses and properly categorize them. These often include:

• Excessive owner compensation or related-party transactions (e.g., above-market rent paid to an owner entity).
• One-time legal fees or temporary consulting engagements.
• Discretionary expenses that a new, larger corporate owner would not incur.

The Goal: Every Addback must be clearly justifiable and documented. The cleaner your financials look right now, the smoother the due diligence process will be, reducing the risk of buyers heavily discounting your final valuation. (For a deep dive into this topic, read: Understanding Home Health and Hospice Business Valuation: Synergies vs. Addbacks.)

2. Clean Up Your Revenue Cycle Management (RCM) & Accounts Receivable

One area of buyer concern is a messy Accounts Receivable (AR). A high concentration of aged AR suggests systemic issues in billing, collection, and compliance, signaling potential future liabilities. When you go to market, a healthy balance sheet speaks volumes. Buyers will feel much more confident in your agency if the books are clean, even if that clarity comes at the expense of a little short-term revenue.

Your Year-End Action:

Focus on aggressively reducing your AR days outstanding. Specifically:

• Write off uncollectible and aged AR (over 120 days) that you can’t realistically recover. A listing for sale looks far more attractive with a clean balance sheet, even if it slightly reduces a single year’s revenue.
• Standardize RCM processes and document your collection policies. Buyers want to see a predictable, repeatable process, not heroic effort.

The Goal: Presenting a clean and current AR balance helps demonstrate strong internal controls and minimizes buyer concerns about delayed cash flow post-acquisition.

3. Standardize and Track Key Operational Metrics

Financial statements tell the “what” (the profit), but operational metrics tell the “how” (the stability and scalability). Buyers are paying a premium for businesses that show sustained, predictable performance across crucial key performance indicators (KPIs).

Your Year-End Action:

Begin tracking and compiling rolling 12-month reports on these metrics:

• Patient Census Stability: Consistency shows a robust referral network.
• Payer and Referral Mix: Demonstrate a healthy, balanced mix to mitigate regulatory and business risk.
• Cost Per Visit: Ensure you have benchmarks that demonstrate efficient service delivery relative to industry averages.

The Goal: These reports will be included in your confidential information memorandum (CIM) and provide tangible proof of a scalable and well-managed operation – a core component of justifying a high home health business valuation.

4. Ensure Absolute Regulatory and Compliance Readiness

Regulatory non-compliance can be an outright “deal killer.” It doesn’t matter how strong your EBITDA looks; a major regulatory issue can kill a deal instantly. Buyers simply won’t inherit that risk.

Your Year-End Action:

Conduct a proactive internal audit of your highest-risk areas:

• Corporate Compliance Plan: Ensure it is current, documented, and actively enforced.
• Licensure and Certifications: Verify all provider numbers, licenses, and certifications are fully up to date across all locations.
• Medicare & Medicaid Audits: Be prepared to provide clear, organized documentation for any historical or pending reviews.

The Goal: A clean regulatory history provides peace of mind to the buyer, allowing them to focus solely on the financial opportunity. (For guidance on navigating the post-LOI phase, see: Key Strategies for Successful M&A in the Health Sector.)

5. Consult with an M&A Expert Today

Going to market and maximizing valuation and deal terms takes preparation. The more time you have to prepare and organize your information to present to buyers, the better. These transactions are sophisticated and lengthy – preparation is key.

Your Year-End Action:

Begin conversations with an experienced M&A expert that focuses on the home health, hospice, or behavioral health space immediately.

• This relationship is key to targeting the right buyers and maximizing deal terms. There is a specific buyer pool for this segment of health care so a targeted approach is necessary. Developing a relationship with the right partner will ensure that you position your company for the best shot at a smooth transaction.

The Goal: To get to the closing table with the highest valuation, the fewest hiccups, and the best fit for your company to continue the legacy you built.

Start Your Strategic Year-End Planning Today

The process of selling a healthcare business can often be compared to a specialized transaction, where preparation dictates success. (Learn more about the buyer landscape in: How Selling a Home Health or Hospice Agency is Like a Fine Art Auction.)

If you are serious about selling a healthcare business and achieving optimal home health business valuation before the Q1 2026 cycle begins, the time to partner with an M&A expert is now.

Stoneridge Partners specializes exclusively in healthcare M&A and can provide the strategic roadmap and industry contacts you need to turn your year-end checklist into a successful transaction.

Contact us today at www.stoneridgepartners.com or by calling us at 800-218-3944 for a confidential, no-obligation valuation consultation.