Home Care M&A Due Diligence: The Complete Seller's Checklist

Due diligence is the phase of a home care agency sale where the buyer’s team — accountants, lawyers, and operational consultants — systematically examines every aspect of your business. It typically runs 45–90 days after LOI execution.

Most sellers experience due diligence as stressful and reactive — fielding requests for documents they can’t find, explaining items they don’t understand, and watching buyers use discovered issues to reprice the transaction downward.

It does not have to be this way.

Sellers who prepare a complete, organized data room before due diligence begins:

• Close transactions faster (30–45 days less diligence time)
• Receive fewer late-stage price reduction requests
• Build buyer confidence that reduces the cost-of-uncertainty premium buyers apply to messy deals
• Are perceived as more sophisticated and trustworthy counterparties

This checklist covers every major category of due diligence a home care seller should prepare for. Not every item will apply to every agency — the relevant checklist depends on your license type, payer mix, state of operation, and transaction structure. Use this as a starting point.

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Section 1: Corporate and Organizational Documents

• Certificate of Incorporation or Organization for each legal entity
• Articles of Incorporation / Operating Agreement / Partnership Agreement
• List of all current shareholders/members/partners and ownership percentages
• Capitalization table
• All amendments to operating documents
• Board or manager meeting minutes (last 3 years)
• All prior acquisition agreements, seller notes, or prior equity transactions
• List of all subsidiaries and related entities
• State qualification documents (foreign qualification for multi-state operators)
• Any applicable buy-sell agreements between owners
• Pending or threatened litigation involving the company or its owners

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Section 2: Financial Statements and Accounting

• Full P&L and balance sheets — 3 years, plus trailing 12 months monthly detail
• Federal and state tax returns — 3 years
• Accounts receivable aging by payer — current plus trailing 12 months
• Accounts payable aging — current
• Working capital calculation workup (assets and liabilities)
• Bank statements — 12–24 months
• Chart of accounts and accounting system description
• EBITDA bridge from reported to adjusted (normalized add-back schedule with documentation for each)
• Revenue by service line and payer — monthly for 24 months
• Payroll records and summary — 24 months
• Workers’ compensation and general liability insurance history including claims

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Section 3: Revenue Cycle and Payer Documentation

• List of all payer contracts with current executed copies
• Explanation of benefits (EOB) samples by payer type
• Revenue cycle management SOP or process documentation
• Claims denial rate by payer — monthly for 12 months
• Days sales outstanding (DSO) by payer — trailing 12 months
• Outstanding credit balances by payer
• Any payer termination notices or contract non-renewals (last 3 years)
• Any CMS audit letters, request for information (RFI), or ADR (Additional Documentation Request) for home health
• Any Medicare or Medicaid Targeted Probe and Educate (TPE) results
• Explanation of any open cost report settlements (Medicare-certified agencies)
• Recovery Audit Contractor (RAC) activity, if any

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Section 4: Licensing and Regulatory Compliance

• All current state and local operating licenses with expiration dates
• Medicare provider number(s) and certification documentation (CMS 855A or 855B)
• Medicaid provider enrollment records by state
• CHAP, ACHC, or Joint Commission accreditation (if applicable)
• Certificate of Need (CON) documentation (if applicable in your state)
• All survey/inspection reports (last 5 years)
• Plan of correction responses for any cited deficiencies
• State licensing complaint history and resolution documentation
• OIG exclusion list check history
• OSHA inspection history (if any)
• Workers’ compensation audit history
• Wage and hour compliance documentation (FLSA, state rules)
• Anti-kickback and Stark Law compliance program documentation

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Section 5: Clinical Operations and Quality Metrics

• CMS STARS ratings history (home health agencies)
• OASIS/CAHPS outcome data and trends (Medicare home health)
• Rehospitalization rate by payer and diagnosis type
• Average length of stay and ADC trends (hospice)
• Episode management and certification data (home health)
• Clinical policy and procedure manual (current version)
• Physician order management and authorization process documentation
• Incident reporting history and resolution (last 3 years)
• Infection control protocols and COVID-19 compliance documentation
• Medical director/supervising physician agreement(s)
• Quality assurance and performance improvement (QAPI) program documentation
• Any SIR (serious incident reporting) history (for IDD or residential providers)

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Section 6: Human Resources and Workforce

• Complete employee roster with tenure, title, FTE/PTE status, and compensation
• Job descriptions for all key positions
• Caregiver/DSP headcount and turnover data by month — 24 months
• I-9 file compliance audit results
• Background check policy and log of checks conducted
• Employee handbook (current version)
• Any employment claims, EEOC complaints, or investigations (last 5 years)
• Key employee agreements (non-competes, non-solicitations, confidentiality)
• PTO accrual balance report
• Benefit plan documents and current enrollment
• Independent contractor (1099) agreements and classification compliance documentation
• Workers’ compensation loss run — 3 years

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Section 7: Client and Census Data

• Client census by service line — monthly for 24 months
• Client roster by payer type (anonymized for initial review)
• Top 10 referral sources and estimated referral percentage
• Client satisfaction survey data (if collected)
• Average hours per client per week and trends
• Client disenrollment/discharge rates and reasons (last 12 months)
• Waiting list or unfilled demand, if any
• Geographic service area maps

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Section 8: Technology Systems and Infrastructure

• List of all technology platforms and licenses (EHR, billing, scheduling, payroll)
• Technology vendor contracts with term and renewal dates
• Data security and HIPAA compliance policy documentation
• Any data breach history (including incidents not rising to reportable threshold)
• IT infrastructure description (cloud-based vs. on-premise)
• Electronic visit verification (EVV) system and compliance status

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Section 9: Facilities and Equipment

• List of all office and facility locations with lease agreements
• Lease expiration dates and renewal options
• Security deposits and any landlord relationships disclosure
• Fixed asset schedule with depreciation schedule
• Vehicle inventory and related insurance
• Capital expenditure history (last 3 years) and planned capex

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Section 10: Material Contracts and Third-Party Relationships

• All material vendor contracts (clinical supplies, staffing agencies, billing vendors)
• Real property leases and any related-party arrangements
• Any management agreements, marketing agreements, or referral agreements
• Any non-compete or non-solicitation agreements with prior owners or employees
• Accountant/CPA engagement letters
• Legal counsel engagement letters
• Insurance policies — D&O, E&O, general liability, professional liability — with coverage limits

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Organizing Your Data Room

A well-organized virtual data room is the difference between a smooth due diligence and a chaotic one. Best practices:

1. Use a professional VDR platform. Box, Datasite, or DealRoom provide appropriate security, user access controls, and activity tracking.

2. Mirror the sections. Organize your data room folders to match the due diligence request list your buyer sends. Makes cross-referencing easy.

3. Audit readiness before upload. Review every document before loading it. Missing pages, documents that refer to unnamed exhibits, or conflicting information will generate follow-up questions.

4. Name files clearly. “2024 Federal Tax Return.pdf” is better than “Doc_147_final_v3.pdf.”

5. Manage access levels. Start with a limited document set for initial diligence; unlock sensitive items (employee names, client details) only after appropriate NDA protections are in place.

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Pre-Sale Preparation Is Your Highest-ROI Activity

For most home care owners, the investment of time in building this data room before receiving an LOI pays for itself manyfold — in faster closing, higher price, and fewer post-LOI surprises.

Our experience: sellers who prepare their data room before an offer consistently close 30–45 days faster than those who collect documents reactively. At a 10-12x EBITDA multiple, that time is worth hundreds of thousands of dollars in operational income during the close period — and the cleaner process builds confidence that translates to price.

Work with Hendon Partners to prepare your sale — start with a confidential consultation →

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Hendon Partners is a specialized M&A advisor for home-based care. We guide sellers from preparation through funded close.