2025 was poised to be a comeback year for home-based care M&A, but due to a number of headwinds that have impeded dealmaking activity, this hasn’t quite panned out.

Coming out of the pandemic, buyers and sellers faced inflation, as well as a challenging labor market, but this slowly began to shift throughout 2024, Kris Novak, managing director of Pittsburgh, Pennsylvania-based M&A advisory firm The Braff Group, explained.

“As we worked through 2024, I think the atmosphere, particularly towards the end of the year, was starting to be a lot more optimistic,” Novak said at Home Health Care News’ FUTURE conference. “We were seeing inflation come down. The labor market, at least the numbers that were reported at the time, looked pretty good. There was a ton of dry powder that was accumulating on the sideline that hadn’t been deployed for the last couple of years. With that optimism brimming, deal flow being down for a couple of years, it felt like things were setting the table for 2025, to be that resurgence around M&A.”

Despite having the makings of what looked to be a fruitful year for home-based care M&A, a number of impacting factors emerged. The first of these factors was the presidential election.

“Trump gets in office, we have this optimism from a business perspective, and then the first surprise tariffs,” Novak said. “That certainly disrupted the market, and that immediately started to put concerns around incremental inflation back in focus for everybody.”

In November and December 2024, the Federal Reserve cut interest rates, further fueling optimism. However, additional anticipated cuts never materialized.

“As we know, interest rate cuts, cheaper money that’s going to drive M&A volume,” Novak said. “Unfortunately, given the CPI reads on a monthly basis, and that increased inflation, we just haven’t seen those interest rates cut come to fruition.”

Novak also noted that M&A experts are concerned that we have not yet seen the full effects of tariffs, particularly in relation to inflation.

Typically, the Federal Reserve would consider a rise in interest rates as a response to an increase in the CPI and inflation, according to Novak.

“I think we all know where the Trump administration has been around public comments, and of course, not wanting to increase those interest rates,” he said.

Currently, the 2026 home health proposed payment rule is causing further uncertainty in the home-based care space.

“Everybody’s looking at that final rule, trying to get a read, trying to get some certainty around where home health is going … With that uncertainty comes difficulty from an M& A perspective,” Novak said.

Home-based care deal trends

Over the past five years, Medicare-certified home health has seen decreased deal volume.

“We’re seeing consistent declines,” Novak said. “Unfortunately, this is still kind of a macro issue for home health. I think while there’s rate uncertainty again, there’s pressures from Medicare Advantage. It’s difficult for buyers to assess that risk, to model that risk. Certainly, the final rule may help. It might be counterintuitive, but we could have a rate cut and we could still see M&A pick up.”

Private-duty deals have been a bright spot when it comes to home-based care M&A activity. This segment saw major increases in volume in 2025. Novak noted that this could be because this segment isn’t exposed to reimbursement pressures in the same way.

On the Medicaid side, dealmaking volume is also seeing an uptick. Novak pointed out that there is more certainty in this space, which allows investors to make more informed decisions.

“Just went through the big beautiful bill, just went through $900 billion of cuts, just went through less access to care,” he said. “Why would we see a massive increase, getting into ten-year highs, on track to almost double the highest year of home care volume that we’ve seen. The counterintuitive piece here around reimbursement is that we have certainty, right? We know with the 80-20 bill, there’s quite a bit of time until that’s going to get put into place and be fully enforced. The Big Beautiful Bill gets us to 2027, maybe a little bit more insulation around the populations.”

Looking ahead to the next 12 months, The Braff Group predicts that buyers will direct more resources to hospice to limit their exposure when it comes to home health rate cuts. The M&A firm also believes that the Federal Reserve will reduce interest rates, leading to more dealmaking activity.

Meanwhile, buyers will, largely, stick to their current strategies around Medicaid. Plus, activity will remain strong in the private duty market, according to Novak.

“I think there’s a lot of reason for optimism, as we work through the back half of this year and into 2026,” he said.