Do you want to start a home health agency? It’s a booming industry due to an aging population, the need for increased health services, and clients’ desires to stay in their own homes. It can be a smart business choice for you.

However, there may be some challenges ahead of you. The home health agency landscape is filled with competition. You need to know how to start a home health agency that’s going to be successful — one that’s going to survive the initial start up, stands out from the crowd, and attracts clients.

Determine your business’ structure

What kind of business will you be? LLC? S Corporation? C Corporation? Partnership? Consult with an attorney who specializes in corporate structure to figure out which  one is best for you. It’s complicated to revise your business structure once you’ve chosen, so choose carefully.

Take note of the competition and the estimated number of potential clients in your area

One of the biggest mistakes with starting a home health agency is overestimating how much your services are needed in a given area. If you’ve got a lot of competition,  and/or if the area you intend to serve doesn’t have enough clients to support you, rethink your strategy and set up in an area that needs you.

Size up any competition, take note of their pricing and the services offered.  Differentiate yourself as much as possible.

Make sure you’ve got enough working capital

One of the major reasons new home health agencies fail is because they don’t have enough working capital to fund their start-up phase. It’s not worth it to try to cut corners “until you have income coming in.”

Ideally, you should have about:

$40,000 to $80,000 if you are a private-pay homecare agency with nonskilled employees

$60,000 to $100,000 if you are an agency that specializes in licensed home health care but don’t accept Medicare

$150,000 to $350,000 if you want to be Medicare-certified (costs vary depending on the state you’ll have your agency in)

Make a budget that will include expected costs for the first year

Include realistic costs for things like:

– Your “brand” development (name, logo, etc.)

– Development of policies and procedures if applicable for Medicare and licensing

– Sales and marketing costs

– “Office” costs like computer hardware and software, furniture, filing cabinets, phones, pens, paper, and the necessary connectivity (telephony, Internet) for proper function

– Recruiting, paying, and retaining employees and management staff

– Rent or mortgage payments for office space

If you’re going to serve Medicare clients, you have to have paid clinical staff able to care for a minimum of 10 patients. You will NOT be reimbursed by Medicare for these start-up costs.

Your budget must also include a necessary, specified “cushion” of money in your bank account to prove that your organization is financially viable.

Don’t forget to pay yourself

This is an often overlooked part of the budget by new owners, but absolutely necessary and an important element as you consider how to start a home health agency. You’re undertaking a full-time job and need to be paid in order to survive. You cannot wait until your agency starts to generate income to pay yourself.

Need to know how to start a home health agency and not sure where to begin? Kenyon HomeCare Consulting can help you. Contact us today. 

HOW TO START A HOME HEALTH AGENCY IN TODAY'S COMPETITIVE MARKETPLACE first appeared in Kenyon HomeCare Consulting blog.

Ginny Kenyon is the founder and CEO of Kenyon HomeCare Consulting, a home health consulting firm that gives agencies a market advantage, promotes creative product development, and offers viable ways to achieve and sustain organizational and fiscal success.