How to Increase Value When Selling a Hospice Agency
April 7, 2025
When it comes to preparing your hospice agency for an eventual sale, the best time to start is when you first get certified or as soon as possible. There are certain things that increase the value of your company to investors and focusing on them will not only increase the value of your hospice agency in a sale but will also help you increase profitability, efficiency, and reduce turnover while you own the company.
Your hospice agency has its own corporate culture and “secret sauce” that sets you apart from your competitors. This is the foundation for everything you put in place to build and grow your company. Clearly identify the culture you are building and embed it into every aspect of the agency. Your employees, patients, clients, vendors, and partners should all have a clear understanding of what sets you apart and above the competition. When buyers invest in a hospice agency, they are investing in a culture that has proven to be successful.
Strategic buyers, private equity firms, family offices, and individual investors look for specific qualities that drive value in a hospice agency. These value drivers include length of time in business, size, profitability and growth, efficient technology, compliance with regulatory requirements, stable workforce, and a broad and diverse network of referrals. (If you are interested to know the current market Value of your Business, please Contact Us Here to schedule your completely confidential introductory call with the Fleetridge Team.)
Length of time in business. The Centers for Medicare and Medicaid require certified hospice agencies to be certified for three years before they can be sold, also called the thirty-six-month rule. Besides the legal requirement, being in business and able to show a track record for at least three years provides the buyer with some assurance of stability and franchise value gained from years of building a solid reputation within the community.
Size. Size matters. In the world of M&A, the larger a company is by revenue, profitability and workforce, the more buyers it will attract. As revenue and profitability increase above certain thresholds, the value increases not only in a straight line calculation but the multiple of earnings buyers are willing to pay and banks are willing to lend also increases.
Growth and Profitability. Consistent growth and increasing profitability are paramount for investors. Hospice agencies that have a stagnant or declining census and revenue are valued lower than agencies that have a steady growing census. Buyers prefer companies with financial statements that show consistent, sustainable growth and profitability year over year.
Technology. To remain competitive in today’s world, technology should be implemented to increase efficiency. Using cutting edge end to end management tools will increase the value of your company and also help you make prudent management decisions and avoid common mistakes. Efficient technology provides a seamless platform between intake, staffing, point of care and billing and will benefit your patients and staff.
Compliance. A strong focus on following the rules set forth by CMS and your individual state will add value to your agency. Keeping out of the crosshairs of regulators will also save you time and money. Keep an eye on your hospice cap to make sure you stay within it will save you a lot of headaches as well as time and money. Keeping your agency within the recommended cap can also increase the value of the agency in a sale.
Qualified and stable workforce. Having a strong management team that can run the business with or without you will add value in a sale. If a buyer or investor doesn’t have to replace positions and immediately train new staff, they will likely value your agency higher. Providing a workplace that is attractive to clinicians and managers will help your company grow in the near term and will add value in a sale.
Broad network of referrals. The broader and more diverse your network of referrals is, the less perceived risk it presents to an investor. Less risk often translates to a higher valuation. The best scenario is to have so many diverse referral sources that if your top referral source would leave, it would not have a material impact on the agency.
As you build and grow your hospice agency, keep these things in mind. When the time is right for you to part with your company, you will be in a good position to receive competitive offers from multiple buyers.
Beth DaSilva is the President of Fleetridge Pacific and M&A Transaction Advisor with over 20 years of experience helping business owners sell their companies.