Starting A Home Health Care Agency: What You Need To Know
July 9, 2020 | Last Updated on: July 22, 2022
July 9, 2020 | Last Updated on: July 22, 2022
Home care agencies have quickly become a lucrative business opportunity as the population of the United States continues to age. Elderly patients require a more patient-centric medium of healthcare and often have difficulty visiting the hospital. These patients, as well as a growing number of younger people, also prefer more personal care from their healthcare providers. Because of this, home care agencies, health care providers that send practitioners to a client’s home rather than having the client come to them, are becoming more and more popular.
The home health care industry’s market size is expected to grow, by some estimations, about 7% per year. By 2026, the total market is expected to be around $173 billion. This aggressive expected growth significantly outpaces the expected growth of other large sectors of the health care market including hospital care and physician services. Some experts are pointing to the COVID-19 pandemic as another source of growth as patients’ anxiety about visiting the hospital for non-emergency care grows.
Entrepreneurs and medical professionals armed with the right information are in an excellent position to tap into this burgeoning market and meet its growing demand. Below, we’ve outlined all of the essential things that you need to know to get started on your home care business journey.
A home health care agency is a licensed business that employs home care providers, ranging from registered nurses (RN) and certified nursing assistants (CNA) to non-skilled providers, and sends them to the home of patients to provide in-home care. There are two main types of home health care agencies that differ across an important dimension: the ability to provide medical care.
Home health agencies are able to deliver licensed and certified nursing, physical therapy, rehabilitation, and other skilled medical care to their patients, usually under physician’s orders. These agencies have strict licensing requirements, as they are providing professional medical care, and often require Medicare and Medicaid certifications.
Home care agencies do not provide professional medical care. They, instead, provide a number of services that are necessary for keeping patients safe and comfortable in their home outside of any treatments they may be getting. This can include things like helping patients with hygiene, meal preparation, housekeeping, transportation, and other daily living activities.
According to industry experts, many of those who are looking to start a home health care agency either don’t put enough thought into the cost of going into business. It’s common to either neglect to budget out start-up expenses, project costs in the first three years of the business, or underestimate the necessary up-front investment.
An analysis from Kenyon HomeCare consulting, drawn from their experience assisting a large number of home health care agencies, gives us a good idea of the cost structure of a typical home health care agency. Let’s break down these costs into two main buckets: start-up and operational costs.
Understandably, different types of home health care agencies have different associated start-up costs.
Private home care agencies are the least expensive to start as they don’t require expensive licensure and certification. They require between $40,000 and $80,000 to get going depending on the scale of the operation and services offered.
Home health agencies, those that provide medical home care services, are a much bigger investment. Home health agencies that are not Medicare-certified will require $60,000 to $100,000 in working capital. Those with Medicare certification, which is far more common, require anywhere between $150,000 to $350,000 (depending on which state you plan to operate in).
To be more specific, the start-up costs can include any of the following:
Another important consideration is the day to day costs of running your business both at the outset and projected into the future.
This can include software subscriptions, disposable materials like gloves and masks, utilities, rent, how much you will pay your employees and how many employees you expect to have, and (importantly!) how much you expect to pay yourself. All of these costs are critical to understanding if you hope to launch a successful home health care business.
A best practice, for this and for any business, is to build a basic projection of how these costs may (or may not) change over the first 3 years of being in business and how this relates to your expected revenues.
We’ve gone over some of the most important parts of starting a home health or home care agency, now let’s walk through the process of getting started.
You’ll notice that many of these steps, especially regarding legal requirements, are a bit vague. This is on purpose! Licensing requirements and other regulations vary from state to state, and it’s important that these steps are considered on a case-by-case basis to ensure success.
The first step in any business venture is to plan for and establish your business. In this step, you will write a business plan, incorporate your business, and obtain a federal employer identification number (EIN).
You need to define the type of care you will give, your suite of services, and how you plan to deliver those services and in which markets. These are all important considerations that should not be taken lightly when planning to launch.
If you ever want to actually start providing care, you’ll have to make sure that you are totally licensed and certified in accordance with your state, city, and/or locality requirements. Contact your local and state health departments to make sure that your business is ready for licensure and certification. The types of licenses and the process to get licensed will differ if you are starting home health or home care agency.
This blog post has a comprehensive list of state-by-state licensing contacts.
In this step, it’s time to find qualified caregivers for your business. This is a very important step in the process. The caregivers you hire, whether they be medical professionals delivering professional care or non-skilled professionals delivering basic care, are the face of your business and the “money-makers”. The best way to run a successful home health care agency is to have consistent, competent employees interacting with your patients.
You may also want to set up a website and establish referral relationships with local doctor’s offices and long-term care agencies.
Once you’re all set to launch, don’t hesitate to get going! Over time as you operate your business you’ll learn where you need to improve and how to make your home health care business more successful.