Home Health & Hospice Valuation Guide: What\'s Your Agency Worth?
Home health agencies sell for 3.5 to 5.0 times profit. Hospice businesses sell for 3.5 to 6.0 times profit. Star ratings, census, and compliance are the biggest drivers. Here\'s how to figure out what yours is worth.
2026 Valuation Snapshot
3.5x – 5.0x
Home Health Multiple
3.5x – 6.0x
Hospice Multiple
+1-2x
Star Rating Premium (4+ Stars)
Critical
Medicare Mix Impact
How Agencies Are Valued
Home health and hospice agencies are valued on Seller\'s Discretionary Earnings (SDE), your total profit plus your salary and any personal expenses running through the business. A buyer multiplies your SDE by a number (the "multiple") to get your agency\'s value.
What counts as SDE? Start with your net profit, then add back these common healthcare owner expenses:
Owner's clinical salary, if you're also working as a nurse or administrator, that salary gets added back because a buyer would hire someone for that role
Personal auto expenses running through the business
Personal health, life, and disability insurance premiums paid by the business
Family members on payroll who won't stay after the sale
Excess management fees or consulting fees to related parties
One-time expenses like legal fees, equipment purchases, or office buildouts
Our free valuation calculator walks you through these add-backs and gives you a range in about 5 minutes. No email required.
What Drives Your Multiple
- Star ratings (the #1 driver), CMS star ratings have the single biggest impact on your multiple. A 4+ star agency can command 1-2x more than a similar agency with low ratings.
- Census growth, A growing patient count over the past 12-24 months signals a healthy business with strong referral relationships.
- Compliance history, Clean survey history with no deficiencies is a major value driver. Recent deficiencies or open corrective action plans bring your multiple down.
- Payer diversification, Agencies with a mix of Medicare, Medicaid, private insurance, and private pay are less risky and worth more than those dependent on a single payer.
- Staff retention, Low turnover among nurses, aides, and therapists is hugely valuable. Buyers know recruiting is expensive and difficult.
- Referral network depth, Multiple referral sources (hospitals, physicians, nursing facilities) reduce risk. If one source dries up, the business keeps going.
- Operational systems, Documented processes, EHR systems, and trained staff that can run without the owner make the agency more transferable and valuable.
Want to see where your agency falls?
Our calculator factors in your star rating, census, payer mix, and compliance to give you a personalized range.
Real-World Valuation Examples
These are simplified examples based on typical transactions. Your agency\'s value will depend on its specific characteristics.
$150K SDE x 3.5x
$525,000
Single-location home health agency. 3-star rating, stable census, mostly Medicare. Owner is also the clinical director. Solid business but room for improvement on star rating.
$400K SDE x 5.0x
$2,000,000
Established hospice with 60+ patients on census. Good ALOS, clean compliance, multiple referral sources. Strong medical director. Diversified payer mix.
$700K SDE x 5.5x
$3,850,000
Combined home health and hospice agency. 4+ star rating, growing census, excellent compliance. Strong referral network and experienced management team that stays post-sale.
Home Health vs. Hospice Valuations
Hospice businesses typically command higher multiples than home health agencies. Here\'s why:
Home Health
- Multiples: 3.5x-5.0x SDE
- Episode-based Medicare payment (PDGM)
- Margins: 8-15% EBITDA typical
- More labor-intensive per patient
- Star ratings drive significant value variation
- Referral relationships are critical
Hospice
- Multiples: 3.5x-6.0x SDE
- Per diem Medicare payment (more predictable)
- Margins: 15-25% EBITDA typical
- Lower visit frequency per patient
- ALOS and census are the key metrics
- Compliance history is the #1 risk factor
The bottom line: Hospice commands higher multiples because the revenue model is simpler and more predictable (per diem vs. episodic), margins are typically higher, and the aging population creates strong tailwinds. That said, a well-run home health agency with great star ratings can absolutely command premium multiples.
Common Valuation Mistakes
These mistakes can cost you hundreds of thousands of dollars. Avoid them:
- Using revenue instead of SDE, buyers pay based on profit, not top-line revenue. A $3M revenue agency with $200K SDE is worth less than a $1.5M revenue agency with $400K SDE.
- Forgetting add-backs, if you don't add back your salary, personal expenses, and one-time costs, you're understating your SDE and leaving money on the table.
- Ignoring star rating impact, a low star rating can knock 1-2x off your multiple. If you can improve your rating before selling, it's worth the effort.
- Valuing based on what you need, not what the market pays, your retirement goals don't change what buyers will pay. Your value is based on your financials and market multiples.
- Not accounting for compliance risk, open deficiencies, pending investigations, or poor survey history will lower your multiple significantly, even if your financials look good.
- Comparing to dissimilar agencies, an agency in a Certificate of Need state with limited competition is worth more than a similar agency in an open-market state. Location and market dynamics matter.
Frequently Asked Questions
What is SDE and how does it apply to home health and hospice?
SDE stands for Seller's Discretionary Earnings. It's your total profit plus your salary and any personal expenses running through the business. For healthcare agencies, common add-backs include the owner's clinical salary, personal auto expenses, family members on payroll who won't stay post-sale, personal insurance, and excess management fees. SDE is the number that gets multiplied to determine your agency's value.
Why do hospice businesses typically sell for more than home health?
Hospice typically commands higher multiples because of per diem Medicare reimbursement (more predictable revenue), higher profit margins (15-25% EBITDA vs 8-15% for home health), and growing demand from an aging population. The revenue model is simpler and more predictable, which reduces risk for buyers.
How much does a star rating affect my agency's value?
Star ratings are the single biggest driver of multiple variation. A 4+ star home health agency can command 1-2x more in multiple than a similar agency with 2-3 stars. For example, a 2-star agency might sell at 3.0x while a 4.5-star agency with similar financials could sell at 4.5-5.0x.
What are the most common add-backs for home health and hospice valuations?
Common add-backs include: owner's clinical salary (if the owner also provides patient care), personal auto expenses, personal health and life insurance, family members on payroll who won't continue post-sale, one-time legal or consulting fees, excess rent if the owner owns the building, and any personal expenses running through the business.
Should I get a professional valuation or use a calculator?
Start with a calculator to get a ballpark range, it takes 5 minutes and gives you a solid starting point. If you're seriously considering a sale, a professional valuation from a healthcare M&A advisor gives you a more precise number based on comparable transactions, your specific market, and detailed financial analysis. Most advisors offer a free initial consultation.
What\'s Your Agency Worth?
Free. Confidential. Takes about 5 minutes. No email required.