Executive Brief: Home Health M&A Reshapes in 2025 After a 2024 Slowdown

Deal Volume Hits a Low – Signs of a Rebound Ahead

The U.S. home health M&A market entered 2025 at a crossroads. After a frenzied boom in 2021, deal activity plummeted through 2023 and hit its nadir in 2024. In fact, home-based care M&A volume fell from 183 deals in 2021 to just 72 in 2024, as shown below. The final quarter of 2024 saw only 14 transactions, the lowest level since the pandemic’s onset. This steep drop-off reflects how dramatically the landscape changed over the past few years. Many industry analysts expected 2025 to bring a resurgence in deals, but as the year began, dealmaking remained muted – only about 14 home care acquisitions had closed by early February 2025 (most initiated in 2024).

Despite the slow start, there are promising signals that the deal market is thawing. Industry veterans note that many would-be sellers sat on the sidelines in 2024, waiting out unfavorable conditions. Now, with valuations resetting and some uncertainties clarifying, buyers and sellers are beginning to find common ground. Advisors are cautiously optimistic that 2025 will see a pickup in acquisitions as the year progresses, pointing to plentiful buyer capital and strategic necessity in the home-based care space. In short, the M&A pendulum appears poised to swing upward after a dour 2024 – but it’s doing so in a market that has fundamentally shifted on multiple fronts.

Regulatory Scrutiny and Policy Shake-Ups Are Game-Changers

One of the most significant changes shaping home health M&A is heightened regulatory scrutiny. The clearest example came in late 2024, when the U.S. Department of Justice moved to block UnitedHealth Group’s $3.3 billion acquisition of Amedisys on antitrust grounds. Regulators argued that combining Amedisys with Optum (UnitedHealth’s care delivery arm, which had already absorbed LHC Group in 2023) would eliminate vital competition among two of the nation’s largest home health and hospice providers. This level of antitrust intervention is unprecedented in home health; just a couple of years ago, mega-deals like Optum’s $5.4 billion LHC Group acquisition sailed through. Now, large strategic deals face a tougher road, forcing would-be consolidators to rethink strategy or pursue smaller targets to avoid antitrust red flags.

Policy changes in reimbursement have also shifted the terrain. The Medicare home health benefit has seen annual payment cuts and tweaks that, while modest in net impact, signal ongoing pressure. CMS implemented permanent payment reductions of 3.925% in 2023 and 2.9% in 2024 as behavioral adjustments under the new PDGM payment model, tempering what would otherwise have been inflation updates. For 2025, CMS again applied a ~2.0% cut (half of a 3.95% adjustment) – leaving an overall payment update of only +0.5% for 2025. In short, Medicare rates are nearly flat, lagging far behind cost inflation. This reimbursement headwind squeezed margins in 2024 and is prompting many smaller agencies to consider selling rather than weather further cuts. At the same time, the nationwide expansion of Home Health Value-Based Purchasing and the continued growth of Medicare Advantage (MA) are transforming how home health providers get paid. MA plans now enroll over half of seniors, and they typically pay lower rates and authorize fewer visits than traditional Medicare. These dynamics have pushed providers to seek greater scale and integration. It’s no coincidence that payers like UnitedHealth and Humana have been major acquirers in home health – the need to manage MA pressures and capitated models has fueled vertical integration. But as noted, regulators are keeping a closer watch on such moves now.

Beyond federal reimbursement, state and federal policymakers are introducing new rules that impact investment. For instance, a proposed CMS “Access Rule” would require at least 80% of Medicaid home care payments be spent on caregiver wages, effectively capping providers’ gross margins at 20%. When this rule was floated in 2023, it had a chilling effect on investors in Medicaid-heavy home care businesses, who feared a wave of smaller operators would be driven out. However, by early 2024 many came to believe the final rule would be less draconian or delayed, and investor sentiment recovered. Likewise, some state legislatures have weighed restrictions on private equity in healthcare, and regulators are scrutinizing hospice agency ownership via new licensing and transparency requirements. All told, the policy environment in 2025 is far less permissive than a few years ago – big deals get more eyes on them, and providers face more compliance burdens. This has slowed certain acquisitions (or at least made deal due diligence more complex), but it’s also creating opportunities: for example, companies are buying assets in certificate-of-need states to secure market share that new competitors can’t easily enter.

Valuations Recalibrate and Deal Structures Evolve

Perhaps nothing shifted more between 2021 and 2024 than valuation trends. In the ultra-low-rate environment of 2021, home health and hospice assets were trading at frothy multiples – high-profile deals fetched well above 20× EBITDA. Fast forward to 2024, and valuations had come back down to earth. Market experts reported typical home health agencies changing hands at roughly 4×–8× EBITDA for smaller deals, with only the larger, higher-acuity providers commanding multiples in the mid-teens – still rich, but notably lower than the peak years.

In 2025, however, we’re seeing a re-alignment of expectations. After a slow 2024, more sellers recognize that the market has shifted and are adjusting their price ambitions. At the same time, buyers are again willing to pay a premium for high-quality strategic assets – albeit with creative deal structures. Earn-outs, contingent payments, and minority equity rollovers have become common tools to bridge valuation gaps in home health deals. This trend started in 2024 as a way to get deals done despite uncertainty, and it continues into 2025. Another adaptation is the rise of “buy and build” strategies: rather than pay top dollar for a large platform, some investors are acquiring smaller agencies at lower multiples and rolling them up to create scale.

Outlook: A New Era Takes Hold

As we look ahead, the home health M&A landscape has undergone a profound transition from 2024 to 2025. The most dramatic change is simply the reset from an overheated sellers’ market to one marked by measured, pragmatic deal-making. 2024 was a reality check; 2025 is about moving forward with eyes wide open. We have lower (and more realistic) valuations, slightly easier financing conditions, and an imperative for scale due to tight margins – all of which lay the groundwork for an uptick in consolidation.

Overall, the forward-looking picture for home health M&A is one of cautious optimism. The fundamental need to consolidate and innovate in home health is still there. As 2025 unfolds, we can expect a pickup in deal activity that is data-driven and purpose-driven – focused on building the networks and capabilities required to deliver cost-effective, high-quality care at home. In the long run, that disciplined approach will likely benefit patients, providers, and investors alike.

Sources:

• Home Health Care News – “After Hitting Lowest Level Since Pandemic, Home-Based Care M&A Poised for Rebound”​ homehealthcarenews.com (industry M&A data)
• KFF Health News / Modern Healthcare – “Uncertain Times Delay Private Equity Investments In Home Care”​ kffhealthnews.org (PE trends and factors)
• U.S. DOJ Press Release – “Justice Department Sues to Block UnitedHealth’s Acquisition of Amedisys”​justice.gov  (antitrust action on large deal)
• CMS Fact Sheets – CY2024 & CY2025 Home Health PPS Final Rules​ cms.gov, cms.gov (Medicare payment updates and cuts)
• Healthcare Appraisers 2024 Outlook​ healthcareappraisers.com, healthcareappraisers.com (valuation multiples and deal examples)
• PwC Health Services Deals Outlook​ pwc.com (market resilience and capital availability)
• Healthcare Finance News – “Expectations for lower interest rates to spur healthcare investment in 2024”​ healthcarefinancenews.com, healthcarefinancenews.com (interest rate outlook and effects)
• Stoneridge Partners Home Health Index Dec 2024​, stoneridgepartners.com, stoneridgepartners.com (industry commentary on consolidation; stock performance)
• Capstone Partners Home Care M&A Report Mar 2024​, capstonepartners.com (buyer composition of 2023 deals)
• Additional industry news via Home Health Care News, Hospice News, and company releases for specific deals​ fiercehealthcare.com, stoneridgepartners.com