Certificate of Need (CON) States Home Health M&A Guide

Certificate of Need (CON) regulation is one of the most consequential — and often misunderstood — variables in home health and hospice M&A. In approximately 15 states, CON requirements limit new agency entry, creating scarcity that materially affects valuation, transaction structure, and buyer behavior.

This guide explains how CON works in home-based care, which states have meaningful CON regimes, how CON affects valuations, and what sellers and buyers should understand about transactions involving CON-supported licenses.

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What Certificate of Need Actually Does

CON regulation requires that a healthcare provider seeking to enter a market (open a new home health agency, expand into a new service area, or in some cases significantly expand existing capacity) demonstrate to the state regulator that the new service is needed in the proposed area.

The state evaluates CON applications using criteria including:

• Demonstrated demand in the proposed service area
• Existing capacity and utilization
• Quality and access for the population
• Financial feasibility
• Provider qualifications

For home health and hospice in CON states, the practical effect is that new agency entry is restricted — sometimes severely. In some service areas, CON applications are rarely approved; in others, they are approved only when specific demographic or access criteria are demonstrated.

The economic consequence is scarcity. Existing licensed agencies in CON states operate in markets with limited new competition, which supports stronger pricing, higher operating margins, and premium acquisition multiples.

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Which States Have Meaningful CON for Home Health and Hospice

The CON landscape changes regularly as states reform or repeal their regimes. As of 2026, states with notable CON requirements affecting home health and hospice include:

• Alabama
• Arkansas
• Connecticut
• Georgia
• Hawaii
• Kentucky
• Maryland
• Mississippi
• North Carolina
• Tennessee
• Vermont
• Virginia
• Washington
• West Virginia
• District of Columbia

Several states have repealed CON for some or all home-based care services in recent years. Florida repealed hospice CON effective 2025. Other states have ongoing reform discussions.

Within CON states, requirements vary:

• Home health CON only — some states have CON for Medicare-certified home health but not hospice
• Hospice CON only — and vice versa
• Both — some states regulate both
• Service-area-based — CON evaluated by specific service area or planning region rather than statewide
• Population-based formulas — CON tied to demonstrated need formulas based on population and existing supply

The practical effect of any CON regime depends on how restrictively the state actually evaluates applications, not just whether CON exists on paper.

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How CON Affects Valuation

Multiple Premium

CON-state home health and hospice agencies commonly command 1.0× to 2.0× EBITDA multiple premiums vs. comparable non-CON state agencies. The premium reflects:

• Defensible competitive position — buyers acquire scarcity-protected market position, not just operations
• Pricing power — limited new entry supports payer rate negotiation and private pay pricing
• Lower customer acquisition cost — referral source competition is reduced
• Margin sustainability — operating margins are structurally protected
• M&A as the primary growth path — buyers building scale in CON states must acquire, which intensifies competitive bidding

The premium is most pronounced in tightly restricted CON jurisdictions where new entry is rarely approved, and in service areas with strong demographic growth.

Valuation Mechanics

Buyers in CON states evaluate:

• Service area density — how many CON-supported licenses exist in the service area
• Application history — has the state approved or rejected recent CON applications in this area?
• Utilization headroom — does the agency have capacity to grow within its existing CON?
• Service area reputation — the position of the specific agency within its protected market
• Regulatory trajectory — is the state’s CON regime stable, reforming, or facing repeal pressure?

The agencies that command the largest CON premiums are well-run incumbents in stable CON service areas with growing demand and high utilization.

CON Repeal Risk

If a state repeals CON, the scarcity premium erodes over time as new entry occurs. Buyers underwriting CON-state acquisitions consider:

• Probability of CON repeal in the relevant state
• Timeline of new entry if repeal occurs
• Defensibility of agency position under increased competition

States with active reform discussions (or recent repeal action in adjacent states) may see partial discounting of the CON premium even before formal repeal.

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Transaction Mechanics in CON States

License Transfer in CHOW

The CON itself is generally tied to the licensee, but the underlying agency license transfers in a change of ownership process. Buyers acquire the licensed agency entity (or assets including the license), and the CON-supported license stays in service.

CHOW mechanics vary by state. Some states require:

• Notification to the CON-issuing agency
• Approval of the CHOW by the licensing board
• Demonstration of buyer qualifications
• Continuity-of-operations commitments

CHOW timelines in CON states can be longer than in non-CON states. Plan accordingly in transaction structure.

Asset vs Stock Purchase Structure

Whether a transaction is structured as asset or stock purchase has implications for license and CON continuity:

• Stock purchase — the entity stays intact; license and CON continuity is generally cleaner; CHOW is at the entity ownership level
• Asset purchase — license transfer mechanics need to be carefully managed; some CON states have specific requirements for asset-purchase structure

Healthcare M&A counsel with CON state experience is essential for getting structure right.

Diligence Considerations

Buyers in CON state transactions diligence:

• The CON itself (scope, conditions, restrictions)
• Compliance with CON conditions (some CON approvals come with conditions on volume, service mix, or operational requirements)
• Recent CON application activity in the service area (proxy for new entry pressure)
• State CON reform legislation (proxy for premium sustainability)

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Strategic Implications for Sellers

If You Operate in a CON State

Your CON position is one of your most valuable assets. Treat it as such:

• Document the CON in detail — scope, conditions, history
• Demonstrate strong utilization — buyers value CON licenses being actively used
• Show service area defensibility — competitive landscape, referral source relationships, market reputation
• Address any CON conditions or compliance concerns before going to market
• Pre-empt the CON-repeal-risk question — have a credible answer about state regulatory stability

A CON-state agency that demonstrates these well can capture the full multiple premium. An agency that takes CON for granted often leaves the premium on the table.

If You Operate in a State Recently Repealed CON

The market has changed. Pre-repeal valuation expectations no longer apply, and the buyer pool has shifted:

• More out-of-state buyers entering via acquisition
• More competitive pricing pressure on operating margins
• Different defensibility argument (operational quality and density rather than license scarcity)
• Active near-term M&A activity as buyers scramble to establish position

Sellers in recently-repealed states should re-anchor expectations and lean into the temporary surge in buyer interest.

If You Operate in a State Considering Reform

CON reform discussion in your state is a relevant strategic input. If reform is likely within your sale planning horizon, going to market before reform can capture the full premium.

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Strategic Implications for Buyers

CON-state acquisitions are attractive for the same reasons they are valuable to sellers: defensible market position, pricing power, sustainable margins. The question for buyers is whether the premium being paid reflects appropriate underwriting of:

• Continued scarcity (low repeal probability, low new-entry probability)
• Operational quality of the specific agency
• Integration and growth opportunity within the protected market
• Alternative investment available in non-CON states

Sophisticated buyers build state-by-state CON intelligence as part of their acquisition strategy.

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CON in Hospice vs Home Health vs Other Services

CON regimes treat services differently. Some states have CON for Medicare-certified home health but not hospice, or vice versa. Some states regulate hospice inpatient capacity (GIP beds) under CON but not routine hospice. Some have CON for skilled nursing but not home-based services.

Understanding the specific CON applicability in your state and to your service line is essential. Generic “CON state” assumptions miss the actual regulatory mechanics that drive valuation.

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Strategic Implications

CON regulation creates real, measurable value for home health and hospice agencies in restricted states — typically 1.0× to 2.0× EBITDA multiple premiums. Capturing the full premium in a sale requires understanding and documenting your CON position, addressing any compliance or condition issues, and engaging buyers who understand and value CON-protected market position.

If you operate a CON-state home health or hospice agency and would like to understand how to position your CON value in a sale process, contact us for a confidential conversation.