Home Health Agency Due Diligence: Buyer Checklist

Start with a decision list, not a document dump

Organize diligence around what the buyer must decide: whether the acquisition can proceed, what sustainable earnings support the price, how much cash is needed, and who will run the agency. Assign a reviewer and a due date to each decision. An unread folder of reports does not answer those questions.

Use a request tracker with the reporting period, responsible seller contact, file version, reviewer and unresolved issue. Agree on a financial cutoff date so payroll, claims, receivables and deposits can be compared. Identify missing evidence early enough to change the diligence timetable without a last-minute confrontation.

Separate a seller's explanation from the document that supports it. For example, an assertion that denials are temporary needs a denial inventory, appeal status and subsequent cash evidence. The useful result is a supported conclusion, not merely confirmation that the seller responded.

Verify the enrollment chronology before pricing continuity

Collect the agency's initial Medicare enrollment effective date, prior ownership changes, current ownership structure and relevant contractor correspondence. Match the legal entity to its identifiers and licensed locations. Include branches and proposed relocations in the review instead of assuming the main office record covers every change.

The federal majority-ownership rule can require new enrollment when a covered home health transaction occurs within the relevant 36-month period, unless an enumerated exception applies. Asset sales, stock transfers, mergers and consolidations can be involved. Document the factual basis for any proposed exception. (Source: 42 CFR 424.550, current 2026)

CMS's nationwide HHA and hospice moratorium, effective May 13, 2026, affects initial applications including non-exempt changes in majority ownership. This can be a feasibility issue, not just an extra processing delay. Have counsel and the Medicare Administrative Contractor evaluate the actual application pathway before the buyer relies on uninterrupted billing. (Source: CMS moratorium FAQs, revised July 2026)

Build a claims-to-cash bridge by payer

Request monthly billed amounts, contractual adjustments, denials, cash receipts, refunds and ending receivables for a consistent period. Reconcile totals to the general ledger and bank deposits. Explain cash relating to earlier services so an unusually strong collection month is not mistaken for improved current operations.

Review Medicare fee-for-service, Medicare Advantage, Medicaid and other contracts separately when present. Their payment arrangements and collection processes may differ. Inspect the actual agreements and remittances before selecting a forecast assumption for a payer group.

Use AR aging by payer to distinguish old balances from current billing. A balance can remain on the ledger after its realistic collection prospect has deteriorated. Request adjustment history and subsequent receipts rather than accepting a general statement that all receivables are collectible.

Interpret PDGM without turning it into a visit target

CMS describes a 30-day period payment framework under the Patient-Driven Groupings Model. Periods below the applicable visit threshold receive per-visit treatment. Certification and plan-of-care review periods are a different concept. A buyer should understand which period each report actually measures. (Source: CMS Home Health PPS, retrieved 2026)

Ask reimbursement and clinical reviewers to explain changes in payment-period mix, low-utilization adjustments and the agency's cost to deliver prescribed care. Investigate whether a financial variance arises from patient mix, documentation, payment changes, staffing or an accounting classification.

Do not use a diligence model to recommend unnecessary visits or withholding needed care. The purpose is to understand payment and operating performance for the care patients require. Any proposed improvement must be operationally and clinically supportable before it enters the buyer's forecast.

Review quality and payment timing together

Obtain the agency's available expanded Home Health Value-Based Purchasing reports, including applicable payment adjustments and their performance periods. CMS explains that performance in one year affects payment in a later year. A buyer can therefore inherit payment consequences associated with care delivered before closing. (Source: CMS expanded HHVBP model)

Have the reviewer connect each forecast year to the applicable adjustment and its evidence. Keep uncertain future performance separate from a confirmed payment determination. A favorable score does not justify assuming the same adjustment indefinitely.

Compare quality reports with survey findings, complaints, corrective actions and the agency's internal response. Public information can help identify questions, but it does not replace complete agency records or prove that a prior finding has been resolved.

Test whether clinical capacity supports the reported business

Map the roles of the administrator, clinical leadership, nurses, therapists, schedulers, intake staff and billing team. Identify qualifications, employment or contractor status, vacancies, coverage arrangements and owner duties. Avoid assuming one retained employee can absorb several departing responsibilities.

Reconcile payroll and contractor invoices to actual service delivery and administrative support. Include travel, nonproductive time, recruiting, training, supervision and necessary backup. A proposed labor saving needs a workable explanation of who will perform the affected tasks.

Examine referrals that the agency declined or could not staff, where records are available. Those reports can reveal capacity constraints that an admissions total misses. A growth plan needs both demand evidence and a credible way to deliver additional care.

Examine referral dependence without buying a promise of patients

Measure referral concentration using a defined period and denominator. Separate inquiries, accepted admissions and collected revenue so the buyer knows what the concentration percentage represents. Inspect changes over time and the reasons behind them.

Identify referral relationships tied closely to a departing owner or employee. Review relevant contracts and arrangements with healthcare counsel. An introduction can support continuity, but it cannot guarantee patient choice or future referrals.

OIG's General Compliance Program Guidance provides a voluntary framework for evaluating compliance infrastructure. Use it to organize questions about reporting channels, oversight and responses to concerns; do not label the agency compliant merely because it has a written policy. (Source: OIG General Compliance Program Guidance, 2023)

Control patient-record access during review

Start with aggregate reports and appropriately limited data. Identify the purpose and legal basis before permitting patient-level review. Determine who needs access, how it will be logged, how reviewers will communicate findings, and what happens to copies if the transaction does not close.

HHS minimum-necessary guidance supports limiting applicable uses and disclosures of protected health information. An NDA alone does not resolve HIPAA or other privacy obligations. Use the records-custody guide to plan access and post-closing responsibilities with counsel. (Source: HHS minimum necessary guidance)

Convert findings into a funded transition plan

Estimate the cash needed for payroll, benefits, vendors and collections during the change. Distinguish acquired receivables from seller-retained receivables and clarify who will collect each balance. A negotiated working-capital adjustment is not automatically the same as the cash the buyer needs to operate.

For each unresolved finding, specify the evidence needed, responsible adviser, expected resolution and effect on closing. Some matters belong in representations, escrows or indemnities; others require operational action or regulator confirmation. Counsel should determine which contractual tools fit the actual exposure.

Review the final issue list alongside the letter of intent and first 90 days plan. A coherent acquisition should connect its price assumptions to its staffing, payment, authorization and patient-continuity plan. Where those elements do not agree, resolve the inconsistency before committing to the closing mechanics.

What should the final diligence memorandum contain?

Summarize the proposed structure, confirmed facts, material unresolved items and recommendations by reviewer. Include a bridge from reported earnings to supported earnings and a separate schedule of one-time transition costs. Identify exactly which forecasts depend on approvals, staff retention or future performance.

Record the information cutoff and any events after that date. If collections change, a key clinician resigns or new regulatory correspondence arrives, update the decision rather than relying on an older clean report. Both parties benefit when the final recommendation describes the business that will actually transfer.

Connect the operating evidence

Where the agency delivers Medicaid services subject to EVV, use the visit-verification transition guide to review scope, exceptions, provider configuration and historical records. Medicare certification and the applicable Medicaid reporting process are distinct workstreams.