PE is dumping billions into home care despite 79% caregiver turnover. Heres why.

Fourth industry deep dive Ive posted here. Already covered pest control, HVAC, and restoration. Several people asked me to look at home care next and Im glad I did because the thesis is completely different from the other industries Ive covered. This isnt a fragmented blue-collar trade with recurring revenue and route density economics. This is a labor business where your entire competitive advantage comes down to one thing: can you keep caregivers from quitting.

Heres what I found.

Why the demographic math is undeniable

$156 billion market. 17.5% of Americans are now 65 or older, thats roughly 60 million people. By 2030 all baby boomers will be over 65 and one in five Americans will be retirement age. By 2040 that share hits 22%. The baby boomer wave into the 75-85 age cohort, which is when home care utilization spikes, happens between 2026-2035. Nearly 9 in 10 seniors say they want to age in place rather then move to a nursing home or assisted living facility.

This isnt a bet on growth. The demand is already here and its accelerating on a timeline that doesnt depend on economic cycles, housing markets, or weather events. People get old regardless of whats happening in the economy. Thats about as recession-proof as it gets.

Two very different businesses under one umbrella

This tripped me up at first. "Home care" actually means two fundamentally different business models:

Non-medical personal care (helping with daily activities, companionship, meal prep, transportation, bathing). Lower regulatory burden, Medicaid HCBS funding + private-pay upside, simpler operations. PE loves this segment. Multiples at scale are 5x-8x EBITDA.

Medical home health (skilled nursing, physical therapy, wound care). Medicare-certified, higher revenue per visit ($95-$165 vs $25-$35/hr for personal care), but way more regulatory complexity, CMS reimbursement pressure, and compliance overhead. Multiples are actually lower at 3x-6x EBITDA because of the Medicare rate risk.

If your a first-time buyer, non-medical personal care is the play. Lower regulatory barrier, more predictable funding, and PE is actively buying platforms in this segment which means your exit liquidity is real.

What buyers are actually paying

• $500K-$1.5M revenue: 2.0x-2.5x SDE (owner-operator, single location)
• $1.5M-$3M revenue: 2.5x-3.0x SDE (small multi-location, some management team)
• $3M-$5M revenue: 2.8x-3.5x SDE (regional operator, diversified payer mix)
• $5M-$10M revenue: 3.0x-4.5x SDE (PE add-on candidates, multi-regional)
• $10M+ revenue ($5M+ EBITDA): 7x-15x EBITDA (scaled platforms, strategic buyers)

Non-medical personal care averages about 2.86x SDE according to Scope Research 2025. The spread between where you buy (2.5-3.5x SDE) and where PE exits (7-15x EBITDA) is massive. But theres a reason for that gap and its spelled out in the next section.

The 79% problem

Caregiver turnover averages 79% annually. Let that sink in. Four out of five caregivers leave within a year. The 2025 benchmarking report showed a slight improvement to 75% which is the lowest its been in three years, but thats still insane by any normal business standard.

Median caregiver wage is about $34,900 a year ($16-17/hr). Thats poverty-level in most metros. They can make the same or more at Target or Costco without the physical and emotional demands of caring for elderly patients. Less then 20% get employer-sponsored health insurance. The average caregiver costs $2,600 to replace. Do that math across a team of 30 caregivers losing 75% annually and your spending close to $60K a year just on turnover.

This is the single biggest risk AND the single biggest opportunity in home care acquisitions. The operators who crack retention, paying top quartile wages, offering real benefits, building career paths from aide to CNA to nursing, structured 90-day onboarding, are seeing turnover drop to 30-40%. Thats a massive competitive moat because it means consistent service quality which means higher client retention which means higher revenue per caregiver.

Agencies paying above the 75th percentile wage ($40K+ vs $35K median) saw 35% lower turnover. Yes it compresses margins 3-5 points. But it reduces training costs, improves client satisfaction, and lets you actually grow instead of spending all your energy replacing people who just quit.

PE is all over this space

105 deals in 2025, up 25% year over year. PE accounts for 50-60% of all home care M&A. Some of the notable activity:

• Waud Capital merged Senior Helpers + MedTec Healthcare into Altocare (April 2025), building a multi-state personal care platform
• Addus HomeCare spent $350M on Gentiva's personal care division plus smaller tuck-ins
• UnitedHealth closed a $3.3B acquisition of Amedisys (had to divest 164 locations across 19 states post-DOJ review)
• Kinderhook Industries is acquiring Enhabit for $1.1B (249 home health + 117 hospice locations across 34 states)
• Help At Home built out 3+ acquisitions across PA, GA, OH, IN

The strategic buyers (Optum, Addus, BrightSpring) are building multi-service continuums that combine home health + personal care + hospice under one roof. Thats the ultimate exit play because they'll pay a 10-20% strategic premium over financial buyers for operators that fit into their continuum.

The one metric that separates premium from discount multiples

Payer mix. Specifically, what percentage of revenue comes from private-pay or Medicare Advantage vs straight Medicaid.

Medicaid-only operators are exposed to state budget risk, low reimbursement rates, and the continuous eligibility unwinding thats happening right now post-COVID. Private-pay clients ($4-8K/month out of pocket for quality care) and Medicare Advantage contracts are where the margin and stability live. Operators with 30%+ private-pay or MA revenue command a 0.5x-1.0x multiple premium over Medicaid-dependent shops.

When evaluating a home care business the first thing I'd look at is the payer mix breakdown. If its 90% Medicaid in a state with budget pressure, thats a fundamentally different risk profile then a 40% private-pay / 30% MA / 30% Medicaid mix.

7 things I'd verify before writing an LOI

1. Payer mix. 30%+ private-pay or MA is the threshold. Medicaid-only operators face reimbursement risk and state budget exposure. Verify MA contract terms and renewal rates.
2. Caregiver turnover by cohort. Get 24-month data broken out by tenure. Industry average is 75-79% but 4 out of 5 caregivers who leave do it within the first 100 days. If the first-100-day attrition is under control the rest usually follows. Ask whats in place for onboarding, mentorship, and ongoing training.
3. Client concentration. If a single hospital system or physician group accounts for more then 15% of referrals thats a red flag. You want 5+ active referral sources (hospitals, ACOs, MA plans, senior living facilities). Also watch for 24/7 high-acuity clients that represent outsized revenue. If one client death or hospitalization drops revenue 10%+ thats too concentrated.
4. Regulatory and audit history. Review last 3 years of state surveys, Medicare/Medicaid audit results, and OASIS assessment accuracy (if medical home health). ADR requests from Medicare can delay reimbursement or trigger repayment. Clean audit history is worth a premium. Dirty audit history should be a dealbreaker for first-time buyers.
5. Tech stack. 68% of Medicare-certified agencies now use telemonitoring. EHR integration, AI scheduling, remote patient monitoring, these arent nice-to-haves anymore. Tech-enabled operators reduce hospital readmissions 20-30% and see 2-4% organic growth premium over shops still running on paper and spreadsheets.
6. Management depth. If the owner is running all scheduling, all client intake, and managing caregivers directly, your buying a job. You need at minimum an operations manager and a lead scheduler in place. Budget $80K+ if you need to hire post-close.
7. Geographic density within state. Roll-ups work in home care because back-office consolidation (payroll, billing, compliance, HR) creates real savings of 5-10% overhead reduction. But only if the locations are contiguous. Scattered single-location operators in different states create regulatory complexity without the density benefits.

Where to buy

Top markets based on senior population density, population growth, private-pay demand, and MA penetration:

1. Phoenix (rapid senior migration, Medicaid HCBS expansion, high private-pay)
2. Tampa-St. Pete (22% population 65+, strong MA penetration)
3. Dallas-Fort Worth (business-friendly, PE activity, strong economy)
4. Atlanta (growing senior population, lower competition outside major metro)
5. Charlotte and Raleigh-Durham (growing, business-friendly, lower competition)

Markets to avoid: NYC (extreme competition, $50K+ caregiver wages, CON requirements), San Francisco ($60K+ caregiver wages, housing crisis, regulatory burden), Detroit (declining population, high Medicaid dependency), Chicago city proper (saturated, regulatory complexity, suburbs are better).

The Medicare rate cut risk

This is the elephant in the room for medical home health specifically. CMS 2026 final rule cut payments 1.3%. Doesnt sound like alot but the proposed cut was 6.4% which would have been devastating. The fact that CMS even proposed a 6.4% cut tells you the direction of travel. Smaller providers under $3M revenue are going to struggle with margin compression on the medical side.

This is another reason non-medical personal care is the better entry point for most buyers. Your not exposed to CMS rate decisions in the same way. Medicaid HCBS waivers are actually expanding in most states as policy shifts funding from institutional settings to home-based care.

The SBA math

$3M revenue personal care agency, $450K SDE, buy at 3.0x for $1.35M. SBA 7(a) at 90% LTV means $135K out of pocket. Year 1 cash flow around $85K after debt service and owner salary. Focus on caregiver retention (top quartile wages), diversify referral sources, implement scheduling tech. By year 3 your looking at $175K cash flow as organic growth kicks in and margin improves from 15% to 18%. Exit at 3.5x SDE to a regional PE platform in year 5 for $2.1M. Thats a 32% IRR.

The PE platform math is where it gets really interesting. Buy 5 agencies in contiguous counties within one state, consolidate back-office (saves 5-10% overhead), centralize tech and training, shift payer mix to 40%+ private-pay. $10M combined revenue, $900K EBITDA at purchase. Improve margins 2-3 points thru consolidation and add a couple bolt-ons. Exit at 12x EBITDA to a strategic buyer in 5 years. Thats a 45% IRR.

The honest risk assessment

Im going to be more direct about the risks here then I was in my other posts because home care has real structural challenges that pest control and HVAC dont:

• 75-79% caregiver turnover is not just a statistic its an operational nightmare that consumes management bandwidth every single day
• Medicaid reimbursement is a political football and one bad state budget cycle can compress your margins overnight
• CMS rate cuts on the medical side are trending in the wrong direction
• Client mortality is a revenue risk that doesnt exist in home services (your customers literally die and you lose that revenue permanently)
• PE platforms from the 2018-2021 vintage are hitting their exit windows in 2026-2027 which could create valuation pressure

That said, the demographic wave is real and undeniable. 60 million Americans 65+ today, heading to 77 million by 2034 and 82 million by 2050. The operators who solve the labor problem will own this market.

TLDR

$156B market with structural demographic tailwinds that dont depend on the economy. Buy non-medical personal care at 2.5-3.5x SDE, solve the caregiver retention problem (top quartile wages reduce turnover 35%), diversify payer mix to 30%+ private-pay or MA, build geographic density for back-office consolidation, exit at 7-15x EBITDA to strategic buyers building multi-service continuums. 105 deals closed in 2025. PE has proven the playbook works. But this is harder to operate then pest control or HVAC because your entire business depends on keeping $17/hr workers from leaving for Costco. If you can crack that you have something incredibly valuable. If you cant its a treadmill.

This is the fourth deep dive Ive posted here after pest control, HVAC, and restoration. Home care is the one where the thesis is most obvious (demographics) but the execution risk is highest (labor). Planning to cover laundromats next. If theres interest I'll keep posting these.

What industries are you all looking at? Anyone here running a home care agency?