Home-based care has long been an attractive sector in health care mergers and acquisition (M&A) and private investment, thanks to growing demand, a highly fragmented landscape of homecare providers, longer-term nature of patient and client relationships and lower capital requirements compared to other parts of the health care ecosystem. Between 2021 and 2023, the segment saw a surge in investment, with more than 100 M&A deals annually.
But today, the story has changed. The pace of roll-ups and platform acquisitions has slowed, replaced by a more thoughtful, disciplined approach. In 2024, deal volume fell to just 72 transactions—a clear signal that the market has entered a new phase. Investors are learning that census growth alone doesn’t guarantee success, particularly in a sector as complex and localized as home-based care.
From Roll-Ups to Strategic Growth
Given the fragmented state of the industry, it is tempting to apply a typical roll-up strategy to scale a homecare business: acquire aggressively, build market share quickly and centralize operations to drive efficiencies. On paper, this strategy makes sense. In practice, integration challenges call for a more nuanced approach.
Medicaid funding, payer sources and compliance requirements vary across states—and even within states at the county level in some cases. What works operationally in one market may be entirely unfeasible in another. Centralizing shared services such as referral intake or billing can drive efficiency, but often reveals more complexity than cost savings. Standardizing operational technology seems logical yet frequently ends with a backlog of system enhancements needed from a software vendor or unwieldy changes to business processes. Referral dynamics and payer relationships are similarly localized, limiting the effectiveness of one-size-fits-all strategies. Following a typical tuck-in playbook can feel like trying to fire on all cylinders when each one requires a different type of fuel.
As a result, buyers are becoming more selective, focusing less on sheer volume and more on strategic fit and ability to saturate local and state-level markets. They are asking tougher questions before deals close: How should integration look in this market? Do we know this market and its payers? Do we have the same or different payers? Are our existing operational processes and technology sound? What are the workforce dynamics? The answers to these questions increasingly determine whether a deal moves forward.
The Workforce Challenge: Key to Value
Among the biggest lessons for investors has been the central role of the workforce in determining post-deal success. Home-based care is a labor-intensive business, and staffing challenges can quickly derail even the best-laid plans. Turnover remains as high as 80% and replacing workers is costly, time-consuming and disruptive to operations, care quality and client satisfaction.
The path to long-term value hinges on workforce stability. Agencies that invest in their caregivers offer clear career development opportunities and those that foster a sense of mission and belonging see stronger retention and better operational performance.
Creating this stability requires more than filling vacancies. It means rethinking the caregiver experience, positioning these professionals as vital contributors to the health care system rather than as “unskilled labor.” The organizations that succeed are those that recognize, reward and support their workforce as the heart of their business.
The Reimbursement Squeeze
While operational integration and workforce resilience are crucial, they aren’t the only challenges facing home-based care providers and their investors. The financial environment has grown more difficult, particularly as Medicare and Medicaid payments come under pressure.
Structural changes have required providers to rapidly adapt to new models to preserve margins. Medicare rate cuts and Medicaid funding constraints add further strain and uncertainty to rates and enrollment in home and community-based services programs. Continuing to rely on volume in legacy reimbursement arrangements sets providers on a course of diminishing returns.
Forward-looking organizations are responding by exploring new ways to generate revenue. Direct contracts with risk-bearing physician groups and health systems, and other value-based arrangements that reward homecare providers for achieving specific outcomes are gaining traction.
Growth in Medicare Advantage (MA) plans, which now enroll over half of Medicare beneficiaries, opens opportunities to demonstrate ways homecare can support success in MA capitation. Homecare businesses serious about pursuing alternative revenue models must be able to continually demonstrate the value home-based care contributes to stakeholders in the broader health care system through data, analytics and coordination capabilities.
A To-Do List for Sustainable Growth
Success in this more complex environment calls for a more tailored approach. The following priorities can help investors and operators build sustainable, high-performing home-based care organizations:
- Look beyond the financials: Learn how care is delivered in each market and what local payors require.
- Know who controls referrals: Build trusted relationships with referral sources and demonstrate value to them.
- Don’t centralize just because you can: Standardize processes and technologies only if they clearly improve efficiency without disrupting how local teams operate and grow.
- Keep payments flowing: Ensure billing, authorizations and payer communication stay on track during integrations.
- Invest in actionable data: Prioritize tools that highlight where things are going wrong—or right—across staffing, scheduling and patient outcomes.
- Lead with a strong workforce proposition: Create clear career paths and build a culture where care workers feel respected and supported.
- Let technology solve genuine problems: Choose tools that reduce headaches for staff or improve care—not just those that sound good to investors.
A Smarter Path Forward
Home-based care remains a promising sector for investors. But the standard playbook has run its course. The future will favor those who approach growth with precision—buyers who understand local market dynamics, invest in operational excellence, and build resilient, high-performing organizations.
This evolution represents a necessary maturation of the sector. As home-based care continues to play an increasingly important role in the health care system, the bar for success is rising. Investors who adapt will find significant opportunity—but it will come not solely from accumulation, but rather from the strength of their operations, the quality of their care and their ability to think differently about their place in the broader health care system.