The decision to start a home health care business is a lucrative opportunity that enables you to positively impact your community. The need for both medical and non-medical care at home is increasing due to the aging population in the U.S., which means those looking to start these types of businesses have an excellent chance at success as well.
However, making your vision of offering care to people come true depends on your understanding of the initial financial resources needed. So, getting an accurate assessment of your projected expenses helps you plan for your business’s long-term growth and ongoing compliance with state and federal regulations.
The Reality of Initial Capital Requirements
There isn’t a specific amount of total investment needed to launch a business. How much you need depends on how much startup expense is expected based on the type of services offered. For example, if you plan to start a home health care business that provides nursing and physical therapy services, you’ll require considerably more capital than someone starting a non-medical companion care agency.
A non-medical companion care agency can typically be started with $40,000 to $80,000, while a Medicare-certified home health care agency typically needs to invest $100,000 to $300,000 in order to get up and running, in addition to allowing enough time to endure the “burn rate” until you receive your first payments. The sooner you understand these financial parameters, the less likely you are to have operational delays during your critical first six months of your new business.
Breaking Down the Key Startup Expenses
When planning to start a home health care business, it is critical to maintain an accurate assessment of your start-up costs within separate operations buckets to minimize cash shortages as they arise.
1. Cost to Obtain Licensing, Certification, and Legal Fees
Every state has its own regulatory process, which will require you to pay an application fee, complete a background check and a state-mandated Jurisprudence exam, and procure legal counsel from a corporate lawyer to draft your Client Service Contracts and Corporate Bylaws. In addition, if you plan to obtain Medicare Certification to start a home health care business, there may be more significant costs associated with surveys and prolonged waiting periods before you can bill for clinical services. Depending upon your state’s regulatory process, you should expect to spend between $3,000 and $15,000 on regulatory costs.
2. Agency Insurance Policies
To protect your staff, clients, and business assets while performing your services legally and safely, you need a thorough insurance portfolio that provides a solid defence to your corporate structure. If your employees are responsible for client financials or sensitive personal belongings, industry experts also highly recommend purchasing a dishonesty bond. Annual premiums for these policies typically require a substantial up-front deposit, which can add up to something like $4,000 – $9,000 during your first year.
3. Recruitment and Initial Staffing Costs
Even before you have signed a contract with your first client, you will have to recruit, vet and possibly hire a core administrative and clinical team. If you are an agency that delivers medical services, you will need to employ a qualified Director of Nursing (DON) and check the credentials of all caregivers against the state’s registry. By spending $5,000 – $15,000 on early recruitment, you will ensure that your workforce is able to deliver quality service to the very first patient referral you receive.
4. Technology, EVV, and Software Infrastructure
Agencies in the present day primarily utilize specialized Electronic Health Records (EHR) systems. You will also need a HIPAA-compliant method for communicating securely to start a home health care business. Other needs will be accounting software (e.g. QuickBooks), a solid scheduling tool for scheduling staff in the field, etc. Once you have secured this technological foundation, you should allocate $3,000 to $8,000 or approximately 30% of your startup costs, toward it to simplify your workflow and make your audits easy.
5. Marketing, Branding and Lead Generation
If you are wondering how to start a home health agency that physicians, discharge planners, and concerned family members can trust requires a professional digital presence and localized outreach materials. You need a website that converts well, printed brochures to support the digital presence you create to target and promote your service locally, and promotional items that you can give away at networking events for your business. To do marketing of your business, you should set aside $5,000 to $12,000 or 50% of your start-up costs for launch marketing to create your base of clients who will continue to refer you to others for service.
Final Words
In order to successfully begin a home health agency, an owner must balance three critical factors: health-care regulations, compassion for people, and solid financial planning. If you’re an aspiring business owner asking how do you start a home healthcare agency successfully, then breaking down your start-up costs into small stages will be the best way to establish a strong basis for success. Although your initial capital outlay may appear overwhelming, understanding how do you start a home health care business with the right reserves before you launch your business will give you peace of mind.
