Hospice Agency Due Diligence: Buyer Checklist

Establish separate clinical, financial and transaction reviews

Begin by identifying who will review care and eligibility, who will reconcile reimbursement and earnings, and who will assess legal structure and authorization. Give these reviewers a shared issue log. A financial analyst may find an unusual trend that requires clinical explanation; a clinical finding may change the receivable or liability analysis.

Agree on the periods and locations in scope. Include acquired operations, branches, contracts and any separately licensed inpatient component actually involved in the sale. Confirm that the legal entity in the purchase documents matches the entity in enrollment, payroll, banking and payer records.

The seller should identify known reviews, disputes and material operating changes at the beginning. Early disclosure gives the buyer time to evaluate a specific issue instead of using a broad risk discount for information that arrives too late.

Reconcile patient activity with recognized and collected revenue

Request admissions, discharges, patient days, levels of care, billed amounts, adjustments, denials, refunds and cash receipts for consistent periods. Reconcile the operating reports to the ledger and remittances. Explain differences rather than forcing the totals to agree through an undocumented adjustment.

CMS describes hospice payment as generally a daily rate based on the applicable level of care. Included care obligations continue even when the number of services varies from day to day. This makes a census report an incomplete financial picture. (Source: CMS hospice coverage and payment)

Separate changes in patient volume from changes in collected revenue per day and delivery cost. A rise in reported revenue can result from timing, payer adjustments or mix rather than stronger operating performance. Compare like periods and document the treatment of reversals after the reporting cutoff.

Use length-of-stay patterns as questions for reviewers

Review length-of-stay distributions rather than relying only on one average. Ask qualified clinicians to assess whether the selected records support eligibility, certification, recertification and the care provided. Define the sample and its limitations before interpreting the findings.

A long stay does not by itself establish an error, and a short stay does not prove the documentation is adequate. CMS describes continuing benefit periods and recertification requirements. The review should evaluate the actual patient circumstances under applicable rules. (Source: CMS hospice benefit eligibility)

Do not build a forecast around changing admissions, discharges or service intensity to reach a financial target. Model the resources required for appropriate care. If documentation weaknesses are found, evaluate correction, exposure and operating changes through the responsible professionals.

Create a separate aggregate-cap workpaper

Request self-determined cap filings, supporting data, Medicare contractor determinations, repayment evidence, appeals and current estimates. Organize them by cap period. Identify which figures are final, preliminary or dependent on data that can still change.

Under 42 CFR 418.308, the hospice must file its aggregate cap determination within five months after the cap year ends, using data no earlier than three months after period end, and remit an overpayment due. Payments exceeding the cap are refundable. This makes filing status and subsequent settlements material transaction evidence. (Source: 42 CFR 418.308, current 2026)

Have a reimbursement specialist examine both historical obligations and the period spanning closing. Do not assume an accounting accrual fully captures the exposure or that the buyer and seller will agree on a simple calendar-day allocation. The purchase documents need a clear method, access to supporting information and responsibility for later adjustments.

Keep care levels and payment limitations distinct

Examine payment and costs by the care levels actually provided. Review the clinical basis and supporting arrangements for continuous home care, inpatient respite and general inpatient care where relevant. Different payment categories are tied to care requirements; they are not interchangeable margin options. (Source: 42 CFR 418.302)

Ask the reimbursement specialist to address other applicable payment limitations separately from the aggregate cap. A single spreadsheet line labeled “cap risk” may conceal issues with different calculations, periods and documentation needs. Keep each finding identifiable through the negotiation and final settlement process.

Inspect the cost of the entire care model

Review nursing, clinical leadership, medical director arrangements, social work, counseling, aide services and administrative support as applicable to the operation. Reconcile employee and contractor costs. Determine how the agency handles on-call needs, absences and difficult coverage periods.

Examine pharmacy, durable medical equipment, supplies, transportation and inpatient arrangements where used. Inspect contract terms, payment balances and change-of-control or assignment provisions. A vendor relationship should not be valued as secure when its post-closing terms have not been confirmed.

Identify work performed by the owner without a separate market-based expense. The replacement plan must explain qualifications, availability, compensation and supervision. Avoid treating a critical clinical or administrative role as an add-back merely because the seller will leave.

Read oversight correspondence through to resolution

Request survey reports, plans of correction, complaints, medical-review requests, denials, appeals, sanctions and communications with contractors or oversight bodies. Track each matter from initial notice through the latest response and disposition. A submitted corrective plan is different from documented acceptance or resolution.

CMS maintains hospice medical-review and oversight materials separate from any single program announcement. Use those materials to identify applicable questions, then verify the target's actual status. Do not infer that a provider has no exposure because an unrelated program changed. (Source: CMS hospice medical review and oversight)

OIG's voluntary compliance guidance also helps frame questions about responsibility, reporting channels and response to concerns. Policies should be compared with evidence that staff know how to raise issues and that management responds. (Source: OIG General Compliance Program Guidance)

Review enrollment feasibility independently of the offer

Reconstruct initial Medicare enrollment and subsequent majority-ownership changes. Have counsel evaluate the applicable 36-month rule, any documented exception and the proposed transaction form. A stock purchase is not an automatic exemption. (Source: 42 CFR 424.550)

CMS's May 13, 2026 moratorium affects initial HHA and hospice applications, including specified non-exempt majority-ownership changes. Determine whether the proposed transaction would require an affected application before the buyer assumes billing continuity or spends heavily on a closing plan. (Source: CMS moratorium FAQs, July 2026)

State licensing and payer-contract requirements require their own review. A federal enrollment analysis does not grant state operating authority or contract consent. Keep a separate status and evidence field for each relevant approval.

Protect patients and families during diligence and transition

Use aggregate information for initial financial review whenever appropriate. Arrange any necessary clinical-record access through counsel and qualified reviewers with defined safeguards, access rights and disposition of copies. HHS minimum-necessary guidance is relevant to applicable disclosures; a general NDA does not replace that analysis. (Source: HHS minimum necessary)

Plan how staff, patients, representatives and families receive accurate information at the proper stage. Required notices must be addressed even when the sale is marketed confidentially. Avoid promises about unchanged personnel or services that the buyer has not committed and prepared to deliver.

The records-custody guide and first 90 days plan help connect diligence with day-one access, vendor continuity and staff responsibilities.

Turn the issue log into a closing recommendation

Classify findings by their effect: unsupported earnings, collectible receivables, historical liability, transition spending, necessary approval or unresolved patient-care capability. Distinguish a fact from an estimate and describe what evidence could change the conclusion.

Evaluate the working-capital plan alongside potential refunds and settlement obligations. The buyer needs sufficient operating resources after paying the purchase price. A reserve for a specific dispute does not replace the cash needed to fund ongoing care.

Finish with named responsibilities, closing conditions and a process for new information. A useful diligence report explains whether the acquisition assumptions remain supportable, which conditions must be satisfied, and what the incoming team must do first. It should give both parties concrete issues to resolve while respecting the people receiving care.