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Although home-based care providers and industry experts initially entered 2025 with a renewed level of optimism regarding transactions and valuations, this sentiment has since waned.
In 2021, home health, home care and hospice transactions reached an all-time high with 223 deals closed. For the most part, home-based care dealmaking continued to trend up in the following years. Thus far in 2025, dealmaking has continued to increase and is on track to outpace the number of deals completed in 2023 and 2024.
Still, several economic threats hover on the horizon, casting uncertainty over the future of home-based care dealmaking.
Providers are experiencing payer-driven consolidation within the market and an ongoing staffing crisis. Compounding these challenges are rapidly evolving macroeconomic factors, including uncertain tariff policies, stubborn interest rates and heightened regulatory oversight. These factors are set to shape M&A activity throughout the remainder of the year, according to industry experts, though their precise impact remains difficult to forecast.
2025 economic drivers
While dealmaking has been off to a promising start, tariffs have emerged as a factor that could drastically transform the home-based care landscape.
The Trump administration’s aggressive use of tariffs could have a spillover effect as the country continues to face inflationary pressures, according to Mark Kulik, senior managing director at The Braff Group.
“It’s not so much tariffs that are the enemy, it’s the unpredictability,” he said at Home Health Care News’ Capital + Strategy conference. “The IPO window is shut, and private equity has portfolio companies. One way to exit and monetize their investment is to go IPO. That’s going to be shut for the foreseeable future, because no one can predict what’s going to happen relative to tariffs, and the cost of goods coming into the country, or our goods going overseas. This is a disruption, just like supply chains were disrupted in COVID.”
Unpredictability makes it difficult for stakeholders, particularly PE firms, to determine the optimal time to go to market. These are decisions that could lead to the loss or gain of millions of dollars, Kulik noted.
“If you’re in private equity, you know this — risk is the enemy,” Kulik said. “You want to eliminate all kinds of risk, if possible, in doing a transaction. Tariffs cause risk to pop up.”
Interest rates are another influential factor and economic driver set to impact 2025 home-based care M&A activity, according to Kulik
Even though interest rates have decreased, the month-over-month change in the consumer price index has spiked.
Inflation peaked in the summer of 2022 at almost 9%. The Federal Reserve took action to increase the federal funds rate and attempt to curb inflation. There were 11 increases at an almost monthly pace until the beginning of 2024, when it dropped to 4%.
It’s unlikely that the Federal Reserve will cut rates in the near future, according to Kulik.
“The level of cost of capital is kind of where it is right now, and the Fed is not looking to change it, because they fear inflation spiking up again,” he said. “That fear is brought on by the tariffs.”
Increased regulatory oversight can also complicate home-based care dealmaking. While most providers are aware of an increase in surveys and the stricter focus on compliance, the fact that states are adding their own level of scrutiny to transactions has gone underreported, Kulik said. .
Currently, there are 14 states that have an additional layer of additional requirements on health care transactions.
Medicaid spending cuts also threaten to derail the positive dealmaking trend.
“We’re looking at the headlines — $880 billion of Medicaid spending cuts over 10 years,” Kulik said. “You’ve got the Democrats saying we’re not going to stand for this. Now, you’ve got Trump saying no one’s going to touch your benefits for Medicare and Medicaid. We’ll see, but that level of uncertainty is another reason for tapping the brakes, or adding some caution.”
Despite all of the uncertainty, Kulik believes there are reasons for providers to be optimistic.
“If you look at our business — home health, hospice, home care, the public companies — almost five times the revenues companies were trading at during the peak of COVID,” he said. “That’s like a software company trading at that level. You can see that we have much more of an active curve relative to the valuation of our industry.”
Kulik explained that these home-based care companies are trading at multiples that are significantly higher than those of hospitals and payers.
“That’s important to note, relative to thinking about your business and the value of your company, if you’re in our sectors,” he said.
Home-based care market trends
Increased payer consolidation, specifically the spike of Medicare Advantage (MA) volumes, has emerged as one of the most crucial concerns for home-based care providers. These shifts can have a significant impact on providers’ bottom lines.
“For the first time in 2025, we’re seeing [MA] become the primary payer,” Luke Rutledge, president of Homecare Homebase, said at the Capital + Strategy conference. “We’re all watching the political landscape as well. Dr. Oz is very much a Medicare Advantage proponent, so I don’t know if that’s going to slow anytime soon.”
The increasing percentage of MA patients spells danger for providers.. Homecare Homebase points out that providers are seeing a -11% margin.
“Medicare is actually raising [margins] to a net 2.3%, 2.5%, so those are interesting dynamics for the home health organizations,” Rutledge said. “When we look at Homecare Homebase data, there’s a delta of about 27% when you look at revenue per day. Medicare [rates are] $74, $75 on a revenue per day average compared to $55. I think that’s why you see some of these headlines, news of people dropping certain payers out there, to renegotiate contracts or to force that conversation. So that rate has to come up.”
Indeed, home health companies like Jet Health, Amedisys and Enhabit Inc. (NYSE: EHAB) have been public about their decision to step away from unfavorable MA contracts.
In the case of Enhabit, the company was eventually able to form a new contract with UnitedHealth Group’s (NYSE: UNH) UnitedHealthcare, the largest MA administrator in the country.
Further compounding matters, home health and hospice providers continue to face a clinician shortage.
One of the impacts of the clinician shortage is that the number of home health visits per episode is trending downward. Providers are forced to serve patients with fewer staffing resources, and are relying on technology solutions, such as remote patient monitoring, to help, Rutledge noted.
While industry-specific challenges and macroeconomic factors require careful consideration, industry experts maintain that the home-based care sector remains an attractive investment opportunity.
“This industry is scrappy and figures out ways to care for its patients,” Rutledge said.
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