Starting a Home Healthcare Business: Which Home Care Agency is Best for You?

Table of Contents

As the baby boomer generation reaches retirement age, there will be an increase in the need for home healthcare services. The aging generation is met with an increase in health concerns, many of which will require assistance. A home healthcare business is a great business idea for individuals who are entrepreneurial and compassionate.

Home health care is one of the fastest-growing industries in the country, which can lead to an exceptional business opportunity, as long as you take the necessary time to plan.

What is a Home Health Care Agency?

A home health care agency can encompass a few different business models. However, in general, it refers to an agency that offers home care to seniors. Home health care agencies are not always medical in nature. Some seniors require assistance with household tasks, whereas others require assistance with medical tasks. Additionally, some seniors require home care that covers both.

Types of Home Care Services

More seniors are choosing to age in place today. With an increase in medical conditions in seniors, in-home care services can make it possible for seniors to maintain their independence while staying in the comfort of their own house.

In-home care services are generally divided into two categories, medical care, and non-medical home care.

Non-medical home care services might include:

  • Assistance with cleaning tasks
  • Assistance with cooking tasks
  • Transportation to and from medical appointments
  • Personal care assistance
  • Grooming and changing clothing
  • Personal companionship

Non-medical home care services do not require staff to be licensed in nursing and medical care.

Medical home care services might include:

  • Changing and cleaning wounds
  • Monitoring blood pressure
  • Organizing and administering medications
  • Physical therapy and personal rehabilitative care

Some medical care services might also include skilled services like social work or psychological services. While medical care agencies will require experienced and licensed staff, both types of home health care services require that you legally register your business with the state and government. 

Many individuals are surprised to learn that a background in medical care or caregiving is not necessarily a requirement to open an in-home care agency. While previous caregiving experience can help you when hiring caregivers, it is not a requirement.

Starting Your Own Home Healthcare Business

Starting your own home healthcare business requires careful research and planning. It requires the completion of a home care business plan and a good understanding of the in-home care industry. 

Follow these steps as you work toward starting your own in-home care business:

  1. Create a business plan
  2. Research local and federal rules and regulations
  3. Consider available business models
  4. Organize the logistics of the business
  5. Create a manual of operating policies
  6. File for licensing with the state and government
  7. Recruit and hire staff
  8. Find clients and develop a marketing plan
  9. Re-evaluate your business plan

Create a Business Plan

Every business should begin with a carefully detailed business plan. Your business plan should include:

  • Type of business entity: There are multiple types of business entities, and it is important to consider which one makes sense for your business. Options include Sole Proprietor, Limited Liability Company (LLC), Partnership, S Corporation, and C Corporation. It may be useful to discuss your entity options with an accountant or business attorney.
  • Expenses: You will want to include details on your expected expenses and how you will initially cover these costs. You will need to cover costs like hiring fees, medical equipment, office fees, and marketing materials. You might initially cover these costs through a bank loan or investor. This is an especially important step because one of the most common reasons for a failed healthcare agency is a lack of funding.
  • Information about your competitors: Starting a business requires that you analyze your competition and develop a plan on how you will make money. You’ll want to complete a competitive analysis and include these details in your business plan.

Your business plan will become the operating manual as you work toward opening your own in-home care business. It will also be an important resource as you work toward securing financing, either through a bank loan or personal investors.

When writing a business plan, you will also want to include income estimates. This information is often based on market research and will assist potential investors in deciding whether or not to work with you. Fortunately, home health care is one of the most profitable business types. Of course, income projections vary depending on the location, size of the agency, experience, and the type of business model that you choose.

Non-medical home care businesses tend to make less than a home care agency that offers medical services. The biggest difference is in insurance coverage. Most types of insurance will reimburse more for medical services than non-medical ones.

Research Local and Federal Rules and Regulations

Home healthcare agencies, both medical and non-medical, must follow federal and state laws and regulations. In addition to completing the necessary research, you will also want to complete the following steps:

  • Register your business name with the state: You will need a business name, business plan, tax ID number, and National Provider Number (NPI) to register your business.
  • Complete your state’s application: You will also need to file an application with the state if you intend to accept Medicare or Medicaid insurance.
  • Contact the Department of Health and Human Services: The Department of Health and Human Services for your state can provide you with information on licensing requirements.
  • Complete governing body applications: There will be numerous applications that you will need to complete with the state and government.

Researching local and federal rules and regulations is an important step. You might even find it beneficial to work with a business lawyer who can help you understand the rules and regulations of the state in which you want to conduct business.

Give yourself ample time to manage all of the legalities and logistics of the business. While some applications can be approved in just a couple of months, others can take up to a year.

Consider Available Business Models

You might choose to buy into a franchise or take over an existing company. Consider which available business model is right for you:

  • Build your own company: Building your own company will take a lot of preparation and planning, but it allows you to design your own business name and goals.
  • Become a franchise owner: Becoming a franchise owner will typically require franchising fees, but you are given a business model that is already working.
  • Buy a company: You might also consider buying a company that a seller no longer wants to operate. Depending on the business, it may come with a business plan, physical locations, existing employees, and current customers.
  • Network: Joining a network of other home care agencies and senior care providers can help you grow both your own start-up or franchise business.

The business model that you choose will depend on your individual business goals and available resources. Entrepreneurs with minimal in-home care experience might prefer a business plan that is already established. Individuals with previous home health care and business experience might prefer the challenge of starting their own healthcare agency from scratch.

Organize the Logistics of the Business

Even though you are helping people, a home health care agency is still a business. You will need a business bank account and payroll process. You will need to determine how much you will charge for each service and how you will collect payment. You will also need to decide how you will pay your employees. Organizing the logistics of the business includes:

  • Determining how much you will charge
  • Determining how much you will pay employees
  • The method in which you will accept payment
  • The method in which you will pay employees
  • Choosing a location in which you can offer services
  • Determining what training you will offer employees

Depending on your business plan, you might also need a business space. While the majority of your services will likely be offered in the client’s house, you may need a physical location for your representatives and administrative staff to work.

Create a Manual of Operating Policies

After you have developed your business plan and determined the logistics of your in-home care business, you will want to create a manual of your operating policies.

 This might include:

  • How many clients you will accept at one time
  • Who will determine each client’s care plan
  • How you will schedule and monitor employees
  • How much you will pay employees
  • How you will recruit new employees
  • How you will train new employees
  • The process in which you will bill your clients
  • Expectations of the client

It is important to consider each of these in detail. You might also include things like your mission statement and objectives in your policy manual. If you have chosen to go the franchise route, it is possible that these policies will be given to you. It can also be useful to work with a professional copywriter and business lawyer to complete your policy manual.

File for Licensing With the State and Government

In-home care businesses must be licensed and registered with the state and government. You will find that the majority of your target base uses Medicare or Medicaid as their primary health insurance.

 It is important to understand what each one offers:

  • Medicare Part A: Medicare Part A covers hospital insurance. This includes inpatient care, nursing care, rehabilitation, and some home in- health care services.
  • Medicare Part B: Medicare Part B is medical insurance that covers physician visits, preventative medical care, vaccinations, and ongoing medical care.
  • Medicaid: Medicaid is a general type of health insurance that covers both hospital and ongoing medical care.

Obtaining Medicare Licensing and Accreditation

Medicare accreditation requires a three-day audit. The auditor will look at the logistics of the business and the clinical records of patients. It is important to have completed your business plan and operational guidelines before this audit.

Some home agencies might choose a different route that involves getting a “Deemed Status.”

By working with accreditation commissions like the Accreditation Commission for Health Care (ACHC) and the Community Health Accreditation Program (CHAP), you can work toward accepting Medicare and Medicaid payments from clients under a “Deemed Status.”

In-Home Care Agency Requirements for Accepting Medicare

In order to accept Medicare, your home care agency must meet the following requirements:

  • Each patient must be under the ongoing care and supervision of a physician
  • The physician must report that the patient requires therapy or nursing care
  • The agency must already be pre-approved by Medicare
  • The patient must be described as homebound
  • The patient’s needs cannot exceed part-time nursing care

It is important to keep in mind that each state has its own regulations and requirements. It is important to know the specific laws of the state in which you plan to work.

Recruit and Hire Staff

Your staff is a crucial part of your business. Whereas other businesses might sell a product, a home care agency sells the services of your team. You will want to determine how you will find and hire staff ahead of time. Consider each of the positions you will need to fill and the ideal candidate you would prefer in each type of position. Just a few positions that you might need to fill include:

  • Customer representatives: Customer representatives are the first point of contact between you and your customers. Your customer representatives should be friendly and helpful.
  • Clinical supervisor: Clinical supervisors will monitor your caregivers. They will act as a consultant on the licensing and training requirements of your caregiver employees.
  • Billing specialist: Your billing specialist will be responsible for charging customers and their insurance provider.
  • Administrative assistant: An administrative assistant can be valuable in any business setting. They will manage all paperwork and applications, keeping the office organized.
  • Home caregivers: Home caregivers are the first line of your business. They will work directly with your customers, guiding the reputation of your business.
  • Compliance consultant: Government and state regulations are constantly changing. Having a compliance consultant on staff who can notify you of these changes can be valuable. Depending on the size of your home care agency, you might have your own compliance team or outsource consultation services.

Some positions might require background and reference checks, especially the positions in which the employees will be working with clients in their houses. It is also important to know any rules or regulations according to your registered state to know if the caregivers that you hire require any certain licenses/ regulations. You will also want to determine the type of employment that you will offer to your employees. You might offer full-time, part-time, contractual, or temporary work opportunities.

The method in which you hire staff is also important when considering Medicare and Medicaid payment opportunities. During the upcoming audit, the auditor will also look at your hiring procedures to ensure that all staff is up-to-date on the latest state and federal laws.

Your Caregiver Employment Options

There are two methods in which you can hire caregivers, which include:

  • In-house: When you choose to hire in-house, you will need enough capital to cover hiring costs and salaries until you receive payment from customers. Depending on the laws in your state, you might be required to offer other benefits, such as health insurance and time off, to full-time employees.
  • Contractual employees: When you hire employees on a contractual basis, you will only pay when they complete work.

Some agencies might choose a mix of the two at first. You might bring on one or two skilled caregivers or clinical supervisors and then outsource extra work to contractors.

Find Clients and Develop a Marketing Plan

Without clients, you don’t really have a business. Creating a marketing and sales plan is just as important as determining the logistics and hiring practices of your home care business. 

Market your home care agency with the following techniques:

  • Build a website: Designing a website that is informative and user-friendly is important in today’s digital times. Your website should clearly list the in-home services that you offer, the qualifications of your employees, what payment methods you accept, and how interested clients can reach you.
  • Reach out to referrals: Networking with local hospitals, social workers, and other medical professionals can help you reach prospective clients. By attending healthcare conferences and networking groups, you can grow your referral potential.
  • Design educational materials: Educational materials can give you something physical to give interested clients and potential referrals. Include your business’ name, logo, location, available services, and contact information on each one of your materials. Always carry ample materials with you because you never know who you’ll come across.
  • Hire good employees: The quality of your employees affects your brand’s overall reputation. Experienced and compassionate caregivers will please your customers, leading to word-of-mouth referrals. Good customer representatives who are able to answer potential customers’ questions can lead to an increase in business also.

Effective marketing also requires that you consider your competitors. Because you and your competitors both offer the same product, it is important to always be aware of the other in-home care agencies in your location. Conducting a competitive analysis can provide you with valuable business and marketing information. Find what makes you different from them. Do you offer more flexible scheduling? Do you offer services that the other agencies don’t?

You can use this information to set yourself apart from your competitors and find a unique placement in the industry.

Re-Evaluate Your Business Plan

Successful businesses continue to re-evaluate their business plan and goals. While home healthcare agencies can be very beneficial to elderly patients, you won’t be able to help much if you are not making money

Re-evaluating your business plan allows you to:

  • Keep up with the latest compliances rules and regulations
  • Re-evaluate your market competition
  • Update your business plan to reach new investors
  • Determine which parts of your marketing plan are working and which need adjusted
  • Better understand your financial plan and make necessary changes
  • Edit your target market and expand your in-home care services
  • Evaluate the quality of your current staff and make any necessary changes
  • Edit your mission statement and adjust to make it more relevant

The home healthcare agency business is constantly evolving. Re-evaluating your business plan at different points in the process will allow you to monitor your overall progress and make any changes as needed.

How to Hire the Right Employees for Your Home Care Agency Business

Your employees can directly affect the success of your home care agency business. Unlike other types of businesses, home care agencies are not selling a product. Instead, you are selling the services and assistance of your employees. This means that it is crucial to develop a hiring process that attracts and retains the best employees.

These tips can help you as you build your staff:

  • Complete a thorough background check: Not only are your employees the front of your business, but failing to complete the necessary background checks can leave you liable for legal concerns, which can get very expensive and damage the business’ reputation.
  • Conduct multiple interviews with home healthcare aides: Conducting multiple interviews when considering a home caregiver allows you to get the perspective of others.
  • Build your team from the top-down: Clinical supervisors will play an important role in hiring and training your caregivers. Focus on choosing clinical supervisors that are leaders and that have the ability to train a great team.
  • Provide training to employees: It might be difficult to encourage existing caregivers to leave their current position and work with your agency instead. By providing training and licensing assistance to employees, you can reach a new target market of eager and interested caregivers.
  • Create a contractual model: If funds are limited at first, consider using a contractual business model to reach experienced caregivers. You won’t have to cover additional costs like training or benefits, but you can still take advantage of the skills that existing caregivers offer.
  • Hire a good support staff: Your support staff is just as important as your caregiving employees. By recruiting and hiring good support staff, you can give your caregivers the tools they need to provide exceptional customer care and to additionally meet the needs of your clients.

Because the overall quality of your employees is important to the home healthcare agency business model, it is also necessary to focus on the retention of existing employees. By offering a good work environment, incentives, access to ongoing training, and helpful supervision, you can meet the needs of both your customers and employees.

Determining Start-Up Costs for Your Home Health Care Business

One of the biggest mistakes that newer home care agencies make is failing to consider the necessary start-up costs. It can take many months, or even years, to earn a profit. In the meantime, entrepreneurs and investors will need to continue putting earned money back into the business to support employee training and the marketing plan.

Predicting and planning ahead for potential start-up costs can help you manage your financial plan. These are just a few of the start-up costs required when opening a home care business:

  • Start-up costs: All new businesses will require start-up costs. This is the cost of developing the business plan, registering the business with the state and government, conducting necessary regulation research, and developing all educational business materials. It also includes costs like networking and developing a website.
  • Hiring costs: You’ll need employees to operate your business when you land your first client. Chances are, you’ll need to cover their payment before you receive customer payment. It is possible that you will need to cover multiple employees’ earnings until you receive customer insurance compensation.
  • Training: Depending on your knowledge and skills in the home care agency business, you might require additional training. Additionally, the employees you hire might need added training to meet the needs of your clients.
  • Marketing: Marketing is an important part of your budget, especially as a start-up. Developing a marketing plan is necessary to reach your target market.

There might be other start-up costs, including office rent, transportation, technology programs, and travel to networking events. Considering each of these costs as a part of your whole financial plan will help you prepare for both expected and unexpected costs.

How to Automate Your Home Health Care Agency Business

Most entrepreneurs know that a successful business requires a good understanding of the industry and the ability to delegate. Focusing too much on certain aspects of the business will prevent you from completing other important tasks, like networking and keeping up with compliance requirements.

Tasks like billing, scheduling, marketing, and networking can be time-consuming. Investing in good programs that automate the process will give you more time to focus on other parts of the business.

Home healthcare entrepreneurs will find the following tools to be useful:

  • ClearCare: This management program was designed specifically for the home health care industry. This program allows you to organize employee skills and credentials, making it easy to match them with customers. You can also use the program to schedule and bill your customers.
  • Bright tree: Brightree Home Health software is another tool that makes it easier to track employees and required documentation. It also tracks compliance documents.
  • AxisCare: AxisCare is a comprehensive software program for use in non-medical care agencies. It allows you to collect both insurance and private payment from customers. You can also use GPS properties to track your caregivers and to create customized reports for each customer.
  • MatrixCare: MatrixCare will assist you in providing your customers with the best possible care by tracking and organizing your patient charts. The program also allows you to divide customer details into categories, like medical information and nutritional needs.

There are many home healthcare agency tools available. You can choose the right one for you by considering your needs and business goals.

Choosing the Right Insurance for Your Home Care Agency Business

Choosing the right insurance is an important step in starting a home health care agency. You will need to choose the insurance coverage that protects you from employee or customer injuries. Mistakes are always possible, and insurance will protect your personal liabilities in the event of a legal lawsuit.

Your insurance types include:

  • Professional liability: Professional liability insurance protects the business and its employees. It covers medical malpractice and clinical misconduct.
  • General liability: General liability insurance covers all other business areas, including employee injury and business mistakes.
  • Workers’ compensation: Depending on the size of your business, you might also consider a workers’ compensation policy. This type of coverage protects your business in the event that one of your employees is injured while on the job. Caregivers will work primarily in the field, putting them at risk of injuries.

Choosing the right insurance plan will ensure that you and your employees are protected in the event of an accident.

Important Skills When Starting a Home Health Care Business

Previous personal care experience is not necessarily a requirement to start a home health care business. 

However, the following skills are useful:

  • Communication: Verbal and written communication skills are important in any business, especially in the home healthcare business. Not only will you need to listen to your employees, but you will also need to clearly understand the individual concerns and needs of your customers too.
  • Mathematics: Basic comfort using mathematics will assist you when writing a business plan and updating a financial plan.
  • Compassion: Compassion is important when working in a home care business. Understanding the challenges of your customers will assist you in providing them with the best care possible.
  • Organization: Successfully running any business requires good organizational and project management skills. As the founder of your business, you will need to organize all licensing applications and filing requirements. You will also need to develop a confidential and organized patient tracking system.

Starting a home healthcare business can be a rewarding and profitable idea, as long as you conduct the necessary research and planning ahead of time. Developing a business plan that includes income projections, hiring practices, adherence to government regulations, and marketing goals will ensure that your business is well-planned.