How to Start a Home Health Agency: A Complete Guide

Vesna Mihajlovic
Last update on:
February 10, 2023 6:09 AM
Published on:

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. We know that new beginnings can be challenging, and every little support on that sometimes road counts. 

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

We’ve even added a “how to start a home health care business checklist” at the end of this article, so you can visualize all the steps to your goal without much hassle.

Timeero is designed to serve the home healthcare business

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

Those of you looking to learn how to open a home health agency need to get one important thing sorted before you can dig deeper into the process: the finance. The cost structure consists of the necessary up-front investment, the start-up expenses, and projecting costs in the first three years of the business.

Costs of starting up a homecare business can differ depending on the state you’ll operate in and the type of homecare agency you want to launch. Generally speaking, the non-skilled 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 health care business can range anywhere from $40,000 to $350,000, depending on the type of the 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

Have Your Working Capital Sorted Out

Developing working capital for the first year should be your number one priority. Not having a working budget for the start-up phase is actually one of the main reasons why new home care businesses tend to 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 that some U.S. citizens will require longer care, especially those with chronic illnesses. 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

Things have changed in the last few decades with how seniors spend their final years of life, and it’s hardly a surprise. When I was a child, it was common for the grandmas and grandpas to stay at their homes for their entire lives. Then the nursing homes came into the picture. 

But now, it seems that we have gone the full circle: more and more seniors nowadays prefer to stay in their homes as they age - 90% of them to be exact. This preference greatly impacts the growth of the home health business 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 medical professional or a caregiver/nurse. This type of care is tailored for individuals who aren’t in need of hospitalization or facility care but still can’t live safely on their own. 

They need support that can range from medical treatment to assisting with daily activities like eating and 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 of them is the first step when you’re about to start a home health care business. Choosing the kind of services you want to offer will impact a number of 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 itself implies, medical home health is provided by medical professionals. This type of care goes beyond just supporting normal aging and independence in the elderly. 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 be required to obtain Medicare certifications. 

Non-Medical Home Health Care Business

Non-medical home care services focus on supporting aging and essential daily assistance. Typically, they include assisting with personal care and hygiene needs, helping in meal preparation, medication reminders, or providing 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. They are provided by professional caregivers, home care aides, or certified nursing assistants. 

How Do I Start a Home 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 exact steps to starting a home health agency.

Set up a Clear & Comprehensive Business Plan

Whatever business endeavor you take, the first step is always the same: drafting a formal plan on how to establish your enterprise. Writing a good business plan is the foundation that will guide you when you’re starting your business, and later on - when you need to manage it.

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. Also, you’ll need to define the markets you’ll target and operate in. And, of course, there’s the question of finances. 

Draft a Budget & Secure Funding 

We’ve already emphasized the importance of securing a solid financial plan and a working budget for a year. The reason for this is that it takes between six months and a year before your business starts making a profit. To set yourself and your new enterprise for success, make sure to have a budget for your personal and business needs. Overhead costs, hiring staff, and business equipment - just 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 choose to 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, as well as the organizational structure of your enterprise.

So, do your 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, and it’s 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 actually not! In most cases, all you need to do is 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, make sure to 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 to obtain licenses 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. 

It’s only after they meet these criteria they can provide appropriate services. Different states have different legislation, so it’s best to reach out to your local and state departments of health. 

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 3 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 carefully 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 in case claims of malpractice, negligence, or incompetence arise. 

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

  • General liability insurance - it 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 of the legal requirements, your business name and entity are approved, it’s time to focus on finding qualified people for your business. Your employees are the face of your business, so make sure to hire people who’ll reflect your company’s values and who’ll be able to provide the best care possible.

To achieve this, it will help to develop a recruitment plan, as well as 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. There are various tactics you can employ, but for the most part - providing training and recognition will work in keeping your 

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

This may be the most challenging step in the entire process of setting up a home health agency, at least 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 

Build an Online Presence

In today’s business world, it’s impossible to grow your business without a website. 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 

To get even more online visibility at the right place, make sure to post your agency listing on prominent elder care websites.

Run Google Ads & 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. 

Define Formal Policies and Procedures

There is a number of formal policies and procedures you’ll need to have in place. You can either write them yourself (make sure to consult a legal advisor) or purchase them. They should address important 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

To make sure your day-to-day operations run smoothly, you’ll also need to set up certain office operations. Most importantly, you’re going to need workforce management software for scheduling, time and mileage tracking on one side, and a set of 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

To help you get around and start a home health care business as efficiently as possible, we’ve created a checklist for you. 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


Steps to Starting a Home Health Agency: The Summary

To sum up, to secure a successful start of your home health agency, you’ll need to plan in advance and secure working budget, at least for the first year. Remember, this is where many businesses fail and as a result - don’t stay afloat. 

Aside from that, you’ll need to meet a number of legal requirements, get insured against the most common types of claims and unexpected events, and fill your company with superb caregivers that will help lift your business off the ground.

Finally, make sure to build an online presence and take advantage of ads, social media, and other online channels to promote your brand and get clients.

Timeero: Your Trusted Partner in Running a Successful Home Health Agency

Timeero app is designed to serve the home health care business. That’s why it provides multiple essential solutions - with our software you can track time, mileage, and caregiver schedules in one place. For example, you can easily assign them shifts, and they’ll get a notification on their phone.

To hear more about how we can help your business grow, book a free 30-minute demo, start a free 14-day trial, or find out how one home health agency managed to streamline their operations (time, mileage, scheduling, and payroll) using Timeero. 

Grow your home health business with Timeero

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Vesna Mihajlovic

Vesna is a psychologist, researcher, and writer with a wide range of interests focused on one goal: utilizing digital solutions to take businesses to the next level. Her expertise in human resources and workforce trends combined with her understanding of software’s role in business optimization is invaluable in helping them stay on top of the curve.

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