How to Increase Hospice Profitability Before Selling

Hospice owners aiming to enhance value before selling must focus sharply on several key areas: optimizing revenue cycle management, controlling costs, leveraging technology, improving quality reporting, and positioning for future growth. The U.S. hospice industry is expected to reach around $30 billion in 2024 and grow at a compound annual growth rate (CAGR) of 4.6% through 2030. Therefore, increasing profitability now can greatly raise business value. Moreover, hospice utilization among Medicare decedents rose to 51.7% in 2023, demonstrating a ripe opportunity. This guide presents actionable, data-driven strategies plus an additional expert perspective on attrition management, making it both unique and comprehensive.

Revenue Cycle Optimization

Improving the revenue cycle begins with efficient patient intake, coding accuracy, and claims submission. Utilizing precise hospice item set documentation, including levels of care and election dates, can prevent denials and maximize daily reimbursement. The 2025 Medicare hospice payment update increased routine home care from $218 to $224 per day and introduced a revised cap limit of $34,465 per patient. Actively tracking utilization and triggering alerts when patients approach cap thresholds prevents clawbacks and loss of revenue. A real-time dashboard that flags overdue or denied claims enables faster action. By reducing billing cycle days and denial rates, hospice businesses can unlock hidden cash flows, improving EBITDA and attractiveness to buyers.

Strategic Cost Management

Tackling cost structure is the next priority. Labor constitutes a majority of expenses, adjusted by CMS wage index changes (the the FY2025 wage index increased by 2.9%). Conducting a department-level expense review covering staffing models, overtime, per diem staff usage, and mileage uncovers optimization opportunities. Group purchasing for medical supplies and leveraging telehealth for remote visits reduce supply and travel costs. Facility costs can be managed by revisiting lease terms and renegotiating utility contracts. Creating a cost‑per‑patient dashboard compared to similar-sized hospices allows leadership to benchmark performance. Lowering costs without sacrificing quality positions the organization for a better multiple at sale.

Technology Integration & Virtual Hospice

The hospice sector’s rapid adoption of technology, telemedicine, predictive analytics, and AI offers both clinical and financial upside. Virtual care solutions reduce unnecessary travel and enhance caregiver satisfaction, while telehealth visits expand access to rural patients. Implementing electronic health records (EHRs) with hospice-specific templates ensures compliance with CMS’s Hospice Quality Reporting Program (HQRP) and public rating tools like Care Compare.

High-risk patients may need more skilled nursing visits or other services, which could shift the level of care to continuous home care with higher reimbursement. Predictive analytics helps identify these patients. A well-executed technology strategy improves margins and demonstrates innovation, making the hospice more attractive to tech-savvy buyers.

Quality Reporting & Public Transparency

Quality metrics now drive both patient choice and reimbursement. Hospice Compare (now Care Compare) uses HIS and CAHPS hospice surveys to publicly rank providers. Optimizing survey response rates and implementing continuous quality improvement initiatives improve patient satisfaction scores and referral volume. Highlighting quality data in marketing materials, such as "90%+ Would Recommend Our Hospice," differentiates the organization. Moreover, strong clinical outcomes can justify selective participation in value-based partnerships, enhancing revenue predictability. Potential acquirers assess quality ratings as a proxy for patient experience, reputation, and compliance, all critical due-diligence factors.

Market Differentiation & Strategic Growth

To maximize profit and value, hospice providers should identify and fill market gaps. Over 80% of hospices are for-profit and serve 57% of Medicare beneficiaries, suggesting room for growth in rural or underserved urban areas. Consider launching dementia-focused programs or pediatric hospice care, which are high-growth segments within the projected $39 billion market by 2030. Expanding into home-based general inpatient care or respite care can capture additional reimbursement tiers. Partnering with hospitals and skilled nursing facilities builds referral pipelines and strategic scale. Highlight any expansion plans or successful pilots in marketing materials, increasing enterprise value by showcasing future revenue streams.

Unique Focus: Staff Attrition & Retention

While cost and revenue are often analyzed, staff attrition remains an often-overlooked risk during due diligence. High turnover among nurses and aides leads to increased hiring costs. decreased continuity of care, and potential compliance issues. Tracking metrics like turnover rate, average tenure, and employee satisfaction allows leadership to intervene proactively. Implementing initiatives such as career laddering, mentorship, flexible schedules, and wellness supports creates a resilient, experienced workforce. Buyers value organizations with stable, engaged teams that require lower onboarding expensess and deliver consistent care—which translates into sustained profitability and fewer regulatory risks. This additional lens strengthens your positioning beyond typical strategies.

Financial Benchmarking & Valuation

Quantitative performance signals value to buyers. Use comparative dashboards showing your hospice's EBITDA margin, days in accounts receivable, cost per admission, and average length of stay relative to regional or national norms. For example, if average denial rates are 10%, reducing this to 5% improves cash flow by $300K annually on $30M revenues. Demonstrating consistent revenue growth, improving margins, and efficient cash conversion supports a higher valuation multiple sometimes adding 0.5× to 1× enterprise value. Highlight past growth and forecasted performance based on implemented optimization projects. Transparency and strong financial controls build trust and drive better deal outcomes.

Conclusion:

Optimizing hospice profitability before sale requires a full-spectrum approach—revenue cycle excellence, cost discipline, technological innovation, quality transparency, expansion strategy, and staff stability. With the hospice market on a strong growth trajectory and utilization rising, those ready to act can enhance profitability, distinguish themselves competitively, and command top valuation multiples.

Consider using the infographic above to benchmark performance or share it with your board and advisors. By taking these steps now, you not only boost today’s margins but also prepare your organization for a seamless, high-value exit.