Demand for well-managed, profitable, technology-enabled healthcare businesses remains strong among companies looking to grow through mergers and acquisitions (M&A). Strategic acquirers and private equity investors are focused on organizations that demonstrate scalable operations, diversified referral sources, and recurring revenue.
“Many of today’s transactions are centered around building integrated healthcare delivery platforms that leverage automation, artificial intelligence, advanced analytics, and digital patient engagement to improve clinical outcomes while increasing operational efficiency,” says Jonathan Sadock, managing partner/CEO, Paragon Ventures. “Buyers are seeking businesses that not only generate attractive financial returns but also strengthen their ability to deliver care across the rapidly expanding home-based healthcare ecosystem.”
While there are still relatively “clean” transactions to be had, M&A hit a snag when CMS blocked new Medicare enrollments for specific DMEPOS medical supply companies for a period of six months. The moratorium ended last week on Aug. 27 *, but another road block prevents the transfer of Medicare billing privileges if a business underwent a change in majority ownership within the prior 36 months.
The return of the competitive bidding program, with contracts anticipated in 2028—add another layer of uncertainty for buyers. “These are most definitely disrupters to M&A,” confirms David Siegel, CEO, Nationwide Medical. “We have personally come across a number of potential acquisition opportunities that have either delayed or stalled because recent PTANs were enacted, companies were in their first 36-month period, or potential sellers wanted to see if the moratorium will end or be extended.”
As a family-owned and operated business, Nationwide Medical has grown organically over many years. However, late in 2024 the company partnered with a private equity firm called Heritage Group, which provided the financial backing for inorganic growth through acquisition.
While “Nationwide” is indeed a national, Siegel (pictured right) contends that regional DMEs can compete (and make acquisitions) by maximizing their advantage of agility. “Since COVID, virtual care, which has numerous forms, has become a lot more accepted which further underscores the ability to be nimble,” Siegel says. “We modeled our company in a virtual format long before COVID because we didn’t have the financial wherewithal to build some 300+ locations, and that model has enabled us to scale growth and deliver personalized care.”
When looking for potential acquisitions, Siegel says company size is critical because the time needed to perform diligence and integration will roughly be the same whether the company is big or small. “Finding sellers who haven’t been able to scale their company but have a good reputation, do things the right way, and have talented individuals are the types of companies we covet,” he says. “These companies offer the chance for incumbent employees to grow into their full potential, their patients to get a wider range of products and services, and acquirers to gain business growth and scale as well as leverage in vendor negotiations.”
“We remain highly optimistic about the outlook for the DME and broader home healthcare M&A market,” Sadock enthuses. “Demand for quality healthcare assets continues to be supported by favorable demographics, expanding home-based care initiatives, significant available private equity capital, and strategic buyers pursuing growth through acquisition.”
The continued expansion of direct-to-patient care models is a trend that Sadock’s team anticipated several years ago. “As providers, payers, manufacturers, distributors, and technology companies become increasingly integrated, we expect transaction activity to remain robust across the healthcare continuum,” Sadock predicts. “That said, optimism must be accompanied by thorough preparation. Achieving a premium valuation requires more than operating a successful business—it requires entering the market with realistic valuation expectations and a well-executed transaction strategy.”
According to Sadock, one of the most valuable investments an owner can make before launching a sale process is completing a quality of earnings (QoE) review. A proactive QoE strengthens buyer confidence, identifies potential issues before diligence begins, supports valuation, and significantly improves the probability of reaching a successful closing.
In addition to the optimism, Sadock offers these words of caution: “Although billions of dollars of acquisition capital remain available from strategic acquirers and financial sponsors, successfully closing a transaction has become increasingly demanding. Buyers are conducting more comprehensive financial, operational, legal, regulatory, cybersecurity, reimbursement, and compliance diligence than ever before.”
The companies that achieve the best outcomes are those that prepare well in advance of going to market. “Financial reporting should be clean and defensible,” he adds. “Compliance programs should be thoroughly documented with contracts organized, operational metrics validated, and management prepared to respond quickly throughout diligence.”
* CMS confirmed the end of the six-month moratorium last week. The announcement from CMS included a note to suppliers planning to bid in Round 2028 of the DMEPOS Competitive Bidding Program recommending they complete enrollment applications as soon as possible to allow Medicare Enrollment Contractors the maximum time to process applications before the bid window opens.