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How to Start a Home Health Agency: A Complete Guide

Natasa Djalovic
Last update on:
September 8, 2023 9:07 AM
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If you’re about to embark on a new business venture and looking for in-depth guides and tips on how to start a home health agency - you’re at the right place. 

Starting something new can be daunting, and a little support can make a big difference.

To give you a helping hand and ease the process of starting a home health agency, we’ve researched for you and gathered all the essential information in one place.

We’ve also included a handy “how to start a home healthcare business checklist” at the end of this article so that you can visualize all the steps to your goal without much hassle.

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First Things First: How Much Does It Cost to Run a Home Health Care Business?

Before digging deeper into starting a home health agency, you must get one crucial thing sorted: the finances. The cost structure consists of the necessary up-front investment, start-up expenses, and project costs in the business’s first three years.

The costs of starting a homecare business can differ depending on the state you’ll operate in and the type of home care agency you want to launch. Generally speaking, the non-medical home care agency will cost you the least, while the Medicare/Medicaid Home Health and Hospice start-ups are the most expensive.

Starting a home healthcare business can range anywhere from $40,000 to $350,000, depending on the type of service and the state where it will be provided.  

Take a look at the estimated costs of different types of start-ups:

  • Private Pay Home Care agency: $40,000 - $80,000
  • Licensed Home Health non-MediCare agency: $60,000 - $100,000
  • Medicare Certified Agency: $100,000 - $350,000

PRO TIP: Developing working capital for the first year should be your priority. Not having a working budget for the start-up costs is one of the main reasons new home care businesses fail.

This Industry Is Growing at a Fast Pace

The demand for private caregiver services is rising, and there are several causes for such a trend. For starters, the aging baby boomers are changing the landscape - they account for around 25% of the U.S. population. And by the year 2030, this demographic group will be 65 or older

The longevity of life is yet another factor at play here: with modern-day medicine, life expectancy has increased. This also means some U.S. citizens, especially those with chronic illnesses, require longer care. Chronic disease prevalence has also increased, placing more demand on the healthcare market.

The Percentage of U.S. Senior Population 2016
The Percentage of U.S. Senior Population 2016

U.S, senior population 2016 vs 2060
2016 vs 2060. Source: Population Reference Bureau

But now, it seems we have gone the full circle: more and more seniors nowadays don’t like the idea of nursing homes and care facilities. They would prefer to stay in their own homes as they age - 90% of them, to be exact. This preference greatly impacts the growth of the home health and care industry. 

All of this means that there is a need for more private caregivers and more home health agencies to provide appropriate services to aging citizens. 

Home Health Care Business: What Services Does It Provide?

Home health care is a term used to describe the medical treatment or assisted care provided by trained professionals - either a health care professional or a caregiver/nurse. 

This type of care is tailored for individuals who don’t need hospitalization or facility care but still can’t live safely and independently. 

They need support from medical treatment to assist with daily activities like eating, dressing, or just companionship. Mostly, health care boils down to basic assistance in the comfort of the patient’s home. 

Medical vs Non-Medical Home Health Care Business: The Differences

There are two types of home care agencies, and opting for one is the first step when starting a home health care business. 

Choosing the kind of services you want to offer will impact many things, from the laws and regulations you need to abide by to the qualifications of employees you’ll need. 

Let’s explore what medical and non-medical home care businesses encompass.

Medical Home Health Care Business

As the name implies, medical professionals and home health aides (HHA) provide medical health care services. This type of care goes beyond just supporting normal aging and independence in older adults.

It includes general nursing services (for example, monitoring blood pressure and blood sugar levels), wound care, physical therapy, and palliative care. 

As such, these businesses undergo stricter regulations and may require Medicare certifications. 

Non-Medical Home Health Care Business

Non-medical home care services focus on in-home care: supporting aging and essential daily living. Typically, they include assisting with personal care and hygiene needs, helping in meal preparation, medication reminders, or transportation to and from doctor’s appointments. 

Non-medical home health also encompasses companionship care and keeping elderly individuals sharp and cognitively engaged by playing cards and board games. Professional caregivers, home care aides, or certified nursing assistants provide them. 

How to Start a Home Health Care Business: The Roadmap

Now that we’ve covered the budgeting and the types of services available, it’s time to take an in-depth look into the steps to starting a home health agency.

How to Create a Business Plan for a Home Health Care Agency?

Formulating a business plan is critical for every enterprise. Starting a home health care agency is especially advantageous when improving the strategy or seeking funding. 

Think of it as a blueprint or a roadmap to structuring, running, and growing your business. 

And there’s more to this plan - it can also help you secure funding or get a new business partner on board. A well-thought-out business plan can convince investors to work with you.

In this phase, you’ll need to decide on the type of care you’ll provide and your services. 

Key elements that every home health care agency business owner to incorporate into their plan are:

  • Executive Summary. 
  • Company Overview. 
  • Services Portfolio. 
  • Target Audience.
  • Leadership Structure. 

Writing a good business plan is the foundation that will guide you when starting your business and later on - when you need to manage it.

Draft a Budget & Secure Funding 

We’ve already emphasized the importance of securing a solid financial plan and a working budget for a year. This is because it takes six months and a year before your business starts making a profit. 

To set yourself and your new enterprise for success, have a budget for your personal and business needs. Overhead costs, hiring staff, and business equipment - to mention a few expenses, tend to add up quickly.  

Also, you’ll need a business checking account and accounting software. 

Create a Business Entity

This term refers to different types of business structures. For example, one can establish a corporation, partnership, sole proprietorship, or LLC - Limited-Liability Company. 

Each of these types will impact your business in the future - the personal obligations you’ll have, the amount of taxes you’ll be required to pay, and the organizational structure of your enterprise.

So, research well and check which of the available business entities ticks the most boxes for you.

Get Your Employee ID Number (EIN)

The Internal Revenue Service (IRS) issues a unique 9-digit number to every business entity operating within the borders of the U.S. The EIN is used for identification, also known as FEIN or, the Federal Employer Identification Number or the Federal Tax Identification Number.

Whatever the name, you need to apply for an EIN. Note that it’s a free service, and you can apply via multiple channels: online, by mail, by fax, or by phone (for international applicants).

Register With the Secretary of State

This step may sound intimidating, but it’s not! In most cases, you must file your business name with state and local governments, and you are good to go to the next step. 

But before you get to the filing part, check whether the name you’ve chosen for your business is available. 

Also, don’t forget to browse the web and check the availability of the domain name for your website, too!

Obtain Required Licenses and Certifications 

Your business needs to be in line with state and federal health departments. You’ll need licensure and certificates required by your state, city, and/or locality. 

For example, in some states, it’s required for home health agencies to undergo a certain number of hours of approved training from local licensing bodies and Medicare/Medicaid certifications. 

Only after they meet these licensing requirements can they provide appropriate services. Different states have different legislation, so it’s best to contact your local and state health departments and learn about the license application procedure. 

Also, something to be aware of is that according to the 21st Century Cures Act, all Medicaid personal care services (PCS) and home health services (HHCS; by January 1, 2023) that require an in-home visit by a provider need to implement EVV system (Electronic Visit Verification).  

How Long Will It Take to Get a Home Health Care License?

The wait time will depend on your state, but generally speaking, it can range anywhere from less than three months to 12 or even 18 months.

Contact the state regulatory authorities to confirm how long the licensing process takes.

Get Proper Insurance

We can’t stress enough how important it is to obtain the right insurance, as this is a risky industry. After all, you’ll be working with vulnerable individuals. 

Accidents and unpredictable events happen no matter how careful you are, so make sure to get this step right and protect your business and assets. You’ll need the following insurance policies:

  • Professional liability insurance (also known as “errors and omissions” insurance) - This policy will cover you if malpractice, negligence, or incompetence claims arise. 

Depending on the services your agency will provide, you may also need:

  • General liability insurance protects your business from claims that it caused bodily injuries and property damage.
  • Cybersecurity insurance  - In today’s tech world, this type of insurance has become indispensable. If your business happens to be under a malicious online attack and you experience a breach or a hack, this insurance will protect you against some HIPAA penalties related to exposing PII (Personal Identifiable Information)

Aside from that, unemployment insurance, workers’ compensation, and disability insurance are usually required by the law (it varies from state to state, though). 

Hire the Right People & Develop a Plan to Retain Them

Now that you’ve tackled the paperwork and all the legal requirements, your business name, and your entity are approved, it’s time to focus on finding qualified people for your business.

Your employees are the face of your business, so hire people who reflect your company’s values and can provide the best care possible. 

To achieve this, it will help develop a caregiver recruitment plan and a retention one. After all, you want to have competent professionals interacting with the patients, and you’ll want to keep the top talent in your company. You can employ various tactics to reduce nurse turnover, but for the most part, providing training and recognition will keep your clients satisfied with the service. 

Performing background checks before hiring is just one of the safeguards to avoid problems with care from employees.

Get the Clients: Have a Sales & Marketing Plan in Place

This may be the most challenging step in setting up a home health agency until you build a trusted brand. To obtain clients, you’ll need to adopt effective marketing strategies. Here are some of the best ways to do so.

Connect with Reputable Referral Sources In Your Community

Partner with hospitals, rehab centers, and community organizations in your area. Such partnerships can help you expand your reach, gain referrals, and increase your client base.

Build an Online Presence

Growing your business without a website is impossible in today’s business world. To get more exposure, you’ll need a professional-looking site with content catering to older adults and seniors, adult children of seniors, as well as other relatives of older citizens and individuals with disabilities. 

Set up a Google Business Profile (Formerly Known as “Google My Business”)

This is a really important step in boosting your online visibility and acquiring clients. Once you get listed in Google Business, your business address, hours, phone number, and ratings will be available for potential clients and anyone searching for a home health agency within local searches.

Example of Google Business Listings
Example of Google Business Listings

Take Advantage of Established Elder Care Websites 

Post your agency listing on prominent elder care websites to get even more online visibility at the right place.

Run Google Ads and Engage in Social Media

You can get immediate exposure for your most relevant searches by using Google ads. It’s a great way to get noticed quickly, especially when you’re still establishing your brand. For instance, you’ll want your website to show at the top of Google when someone types in search terms like “[your location] home health agencies.” 

You can also engage with your target audience on relevant social media channels and provide them with helpful content related to home health services. 

To learn more about strategies you can use, read our guide on How to get private home healthcare clients.

Define Formal Policies and Procedures

You’ll need to have many formal policies and procedures in place. You can either write them yourself (make sure to consult a legal advisor) or purchase them. They should address essential parts of your business operations like: 

  • New client admissions
  • Care plans
  • Scheduling
  • Hiring Process
  • Employee and payroll records
  • Training
  • Client billing
  • Client rights and responsibilities 

Prepare for Operations: Scheduling, Accounting, Time & Mileage Tracking

You’ll also need to set up certain office operations to ensure your day-to-day operations run smoothly. 

Most importantly, you will need home health care workforce management software for scheduling, time and mileage tracking on one side, and finance-related tools for accounting, billing, and payroll.

You’ll be glad to know that some of these apps provide multiple solutions and third-party integrations. For instance, Timeero integrates with the accounting software QuickBooks, meaning you can save payroll time by simply exporting your timesheets and mileage to it. 

How to Start a Home Health Care Business: The Checklist

We’ve created a checklist to help you get around and start a home health care business as efficiently as possible. We’ve recapped everything we’ve already explained in this article and listed all the necessary steps you need to take in chronological order.

home care business checklist

DOWNLOAD YOUR COPY OF HOW TO START A HOME HEALTH AGENCY CHECKLIST

Starting a Home Health Agency: Chose Timeero as Your Trusted Partner 

Timeero app is designed to serve the home health care business and is a reliable partner to many home health agencies.

Here are some of the crucial reasons why you should consider partnering up with Timeero when starting your home healthcare business:

  • GPS time and attendance tracking. Timeero app will let your nurses and caregivers track their hours, breaks, and attendance with ease using their mobile apps. As soon as they clock in, their time cards are created automatically, so they don’t need to log their hours manually.

timeero GPS time clock mobile preview
With the Timeero mobile app, your caregivers can track their hours, in-home visits, and mileage effortlessly.

  • Mileage tracking. Timeero automatically tracks caregivers’ mileage driving from one in-home visit to another. Again, there is no need for manual data entry, and as mileage records are accurate, so will their reimbursement.

timeero mileage tracking overview
Easily replay your caregivers' daily routes and see more details using breadcrumbing technology

  • HIPAA & EVV compliance. Timeero has taken the necessary steps to meet the standards set by the Health Insurance Portability and Accountability Act (HIPAA) for protecting sensitive patient data. And, if some of your services are Medicare-funded, your agency must be compliant and have an electronic visit verification system. Timeero ensures that compliance, too.

Timeero segmented tracking feature
Segmented Tracking: See the timeline of an employee’s shift, in-home visits, and business travels with all the information you need

  • Who’s Working. Real-time GPS tracking lets you see the locations of all your available field staff on a single dashboard. With such insight, you can easily find the nearest nurse or caregiver to react to a potential emergency.

Who’s working feature preview
Have a real-time view of your available employees, their locations and jobs.

  • Scheduling and PTO tracking. Timeero’s robust scheduling technology lets you easily assign jobs and create caregiver shifts. Not only will your staff be notified immediately, but you can also allow them to accept or deny shifts and prevent possible problems. Timeero also simplifies and centralizes the PTO request and approval process, so you can completely forget the hassle surrounding it.

Timeero Scheduling feature preview
Create and edit schedules easily in a few clicks.

  • Notifications, alerts, reminders. You can set up the app to send notifications and alerts to what you find essential. For example, managers can receive an alert when a caregiver hasn’t logged in for their shift or when they clocked in off-site.

  • Easy integrations with payroll and accounting solutions. The accurate and reliable data from Timeero can be easily shared with the most popular payroll solutions using integrations with software such as QuickBooks, ADP, Viventium, etc.

Timeero integrations screenshot
Transfer your employees’ hours and mileage expenses data to your payroll software for a quick and accurate reimbursement 

To learn more about how Timeero can help your home business grow, read our comprehensive Timeero review. Or, subscribe for the free trial and see the benefits yourself.

Whether you have a few caregivers or hundreds, Timeero will help you improve your efficiency and quality of care.

Start your free 14-day trial
AUTHOR
Natasa Djalovic

Natasa is a writer specializing in the IT and software industry with 6+ years of experience in content writing and online marketing. During that period, she wrote more than 1,000 articles and several ebooks. She majored in English language and literature and loves cats, sneakers, and candy. When she's not working, she's probably binge-watching Netflix.

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