Our work is reader-supported, meaning that we may earn a commission from the products and services mentioned.

How To Start A Home Healthcare Business

How To Start A Home Healthcare Business

Advertising Disclosure

Advertising
Disclosure

How To Start A Home Healthcare Business

How to Start A Home Healthcare Business

The home healthcare industry is a lucrative and growing field, offering entrepreneurs the chance to tap into a market that caters to an aging population and a societal shift towards in-home care. While the potential for profit and fulfillment in helping others is significant, starting a home healthcare business requires more than just expertise in healthcare.

To help you get started, this guide will provide an overview of the business, steps to get started, and answers to critical questions.

Business Description

A home healthcare business provides medical and non-medical assistance to individuals in their homes. This can range from skilled nursing care to basic daily living activities like bathing, dressing, and meal preparation. Professional services may also specialize in caregiver assistance, medical and psychological assessments, pain management,  companionship, speech therapy, and physical therapy, hospice care, or transportation to appointments. 

The business model typically involves hiring healthcare professionals and caregivers who visit clients at home, with the agency earning money by billing clients directly, through private insurance, or through government programs like Medicare and Medicaid.

Industry Summary

The home healthcare business industry in the United States is a strong sector, with great growth potential. The industry generated $136.2 billion in 2022, and it is expected to grow by 7.48 annually by 2030.1

More than 10,000 baby boomers turn 65 every day, and by 2050, 88 million will be aged 66 to 84.2  An aging population means an increasing number of individuals will need medical care and assistance, and many prefer to receive this care in the comfort of their own homes. Additionally, home healthcare is often a cost-effective alternative to hospital or nursing home care. This demographic shift underscores the potential for growth and profitability in the home healthcare sector.

Steps To Start A Home Healthcare Business

Step 1: Decide What Services To Offer

One of the first decisions aspiring home healthcare entrepreneurs need to make is determining which services to offer. There are two main categories – non-medical home care services and skilled home health services.

Non-medical home care services are non-skilled services that include personal care, meal preparation, and transportation to doctor’s appointments. These services are usually offered by home healthcare businesses that don’t provide skilled nursing or therapy services. You may choose to focus on non-medical home care services if you want to start your business with minimal licensure requirements.

Skilled home healthcare services, on the other hand, are nursing and therapy services provided by licensed healthcare professionals. These services typically require specific licensing and accreditation requirements, such as certification from the Centers for Medicare and Medicaid Services (CMS) or state health departments.

Before deciding on the services you want to provide, be sure to thoroughly research state and federal regulations to determine the required licenses and regulatory compliance steps. Compliance requirements are much higher for skilled home health services compared to non-medical care.

Once you’ve narrowed down your services, the next task is to research the market to identify the needs and preferences of your potential clients. Are there more seniors requiring assistance with daily living activities, or is there a higher demand for skilled care for individuals with chronic illnesses? Knowing these details can help you tailor your services to meet the market’s demands. In addition, market research can provide insights into your competition. Identify other home healthcare agencies in your area, the services they offer, their pricing strategies, and their strengths and weaknesses. This information will help you position your business in a way that sets you apart from the competition.

Step 2: Write a Business Plan

After getting clear on what your business will provide, writing a business plan is the next step. The business plan is your guide. It helps you define what you want to achieve and the steps you need to take to get there. It’s like your own personal guidebook to starting a business.

In addition to working through the steps to start your business, there are financial considerations too. There are licenses to get, medical equipment to buy, and other costs that are specific to this type of business. Your business plan can help you figure out how much all this will cost so you know how much money you need to start. Your business plan will also have you looking at how much you think you’ll earn (the projected income) and how much you’ll spend (the expenses), to show if your business has a good chance to make money.

Related: How to write a business plan

Step 3: Source Funding

Starting a home healthcare business requires capital, and securing that funding can often be one of the most challenging steps in starting your business. Here’s a breakdown of the most common funding types for this industry:

Personal investment: The first place to look for funding is your personal savings. If personal savings aren’t enough to cover the startup costs, outside funding sources will be needed.

Bank loans: Traditional bank loans are a common outside funding source for businesses. Banks typically require a good credit score, collateral, and a solid business plan. If the bank needs additional security to back the loan, they can use a Small Business Administration (SBA) loan guarantee, which reduces the risk for the lender.

Friends and family: You can consider asking your friends or relatives for a loan. To avoid misunderstanding, it’s important to put all agreements into writing. This way, everyone’s clear about repayment terms.

Microloans: Microloans might suit your needs if you’re seeking a smaller sum of money or can’t access conventional loan options. Some local economic development organizations offer these loans, and some even provide helpful business training.

Related: Finding the money to start a business

Step 4: Register the Business

Registering a home healthcare business is complicated because of state regulations and receiving reimbursement from Medicare and Medicaid. Every state is going to be different, but in general, here are the things to do:

Business structure: The first task is to determine your business structure. There are four main types:

  • Sole proprietorship: This involves the least complexity and cost for setup, making it the simplest of structures to establish. However, the owner is personally liable for the business.
  • Partnership: This allows you to share the burden of the business with a partner, including the risks and the responsibilities.
  • Corporation: This structure is more complex and offers protection to the owners from personal liability but involves higher set up and administration costs.
  • Limited Liability Company (LLC): Combining features of a corporation and a partnership, an LLC offers owners protection from personal liability like a corporation, with the tax advantages and operational flexibility of a sole proprietorship.

Related: Comparison of business structures

Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.


Some popular LLC formation services include:


IncFile - $0 plus state fees & free registered agent for 1 year!

ZenBusiness - Best for beginners. $0 plus state fees & free registered agent for 1 year!

Northwest - Best privacy protection. $39 plus state fees & free registered agent for 1 year!

Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.

During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.

Related: Finding a domain name for your business

Health care licensing: You’ll need to obtain the required licenses and permits to operate your home healthcare business. Details vary by state and the type of services you plan to offer. Therefore, it’s essential to check with your state’s health department or business licensing division. Also, some states limit the number of companies based on the needs of the community.

Business licenses: Depending on your location, there will likely be a variety of general business registrations needed before opening. These could include a business license, seller’s permit, and Employer Identification Number (EIN).

Related: State guides for general business licensing

Medicare and Medicaid certification: If you’re planning on accepting Medicare or Medicaid, you’ll need to get certified by the Centers for Medicare and Medicaid Services (CMS).3 This process calls for compliance with several health and safety standards

Regulatory compliance: Home healthcare providers are extensively regulated at both the state and federal levels. These regulations cover a wide range of issues, including licensure, care standards, medication distribution, and documentation.

Step 5: Set Up Operations

After securing funding and registering your business, the next phase in starting a home healthcare business is setting up operations.

The first decision is to choose between a home office and a commercial space. Many home healthcare agencies operate as virtual offices, with staff traveling directly to patients’ homes. This approach minimizes overhead costs and can be highly efficient. However, leasing a modest office space might be beneficial depending on your business needs, such as staff size or the desire for a physical presence. If considering a home office, be sure to check local zoning laws, as certain areas may have restrictions on the types of business activities conducted from a home.

Once your location is set, the next step is to equip your business. This might include medical equipment such as blood pressure monitors, glucose meters, and first aid kits, as well as personal protective equipment for your staff. The specific equipment and supplies you’ll need will depend on the types of services you plan to offer. Additionally, you may want to invest in management software to handle scheduling, billing, electronic health records (EHR), and communication with clients. The right software can simplify complex tasks and reduce paperwork, so you can focus on client care.

Step 6: Hire Staff

If you’re planning to hire employees, there are some important responsibilities to consider. On top of finding the right people for the job, you, as a new employer, also have obligations to meet certain legal requirements.

One of these requirements is obtaining an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). This EIN will be your business’ special identification number for tax purposes.

Additionally, you’ll need to verify the eligibility of your employees to work. This includes ensuring your employees have the proper documents that show their identification and employment authorization.

In addition, each state has its own set of hiring requirements. These may include additional forms to be completed and reporting requirements to be met. Be sure to familiarize yourself with the specific requirements in your state.

Another requirement in most states is providing workers’ compensation coverage for your employees. The laws around workers’ compensation differ by state, so you should familiarize yourself with your specific state’s rules.

Last, you’ll need to understand and abide by the labor laws in your state. These laws cover areas like minimum wage, overtime, meal periods, and more.

Related: State guides for hiring your first employee

Step 7: Prepare to Launch!

After completing the core steps of securing funding, registering your business, setting up operations, and hiring staff, there are still several tasks to complete when starting a home healthcare business. While these tasks will vary based on individual needs, we have listed a few of the more common ones:

Business insurance: For a home healthcare business, common types of insurance might include general liability insurance, professional liability insurance, and workers’ compensation insurance. These types of insurance can protect your business from financial losses related to lawsuits, employee injuries, and other unexpected events.

Billing and coding systems: Managing documentation, coding, and billing for third-party payers can be complex. Most home healthcare businesses use computerized information systems to store and process this information. These systems can help you customize reimbursement claims and quickly adapt to changes in regulations or reimbursement rates.

Setting Up bookkeeping: You’ll need to set up an accounting system to handle daily transactions, taxes, and financial statements. This could involve hiring a bookkeeper or using accounting software.

Opening a business bank account: A separate business bank account can help you keep your business finances organized and make tax time easier.

Creating a marketing strategy: To let potential clients know about your new business, you’ll need a marketing strategy. This might include creating a logo and website, using social media, and advertising in local publications.

Establishing patient referral relationships: Building relationships with hospitals, physicians, and case managers can help you obtain referrals for your business. These relationships are often built on trust and a demonstrated commitment to high-quality care.

Common Questions When Starting A Home Healthcare Business

How much does it cost to start a home healthcare business?

You can start your own home healthcare business on a relatively low budget, and the total start-up costs can average around $15,000 to $40,000, depending on a variety of factors. Here are the major costs to consider.

Initial office setup: If setting up a commercial office space, figure on deposits and any renovations to the space. For a small office, the initial deposit might range from $1,000 to $5,000.

Equipment and supplies: This includes purchasing computers, office furniture, medical equipment, and home health care supplies. A reasonable estimate for this category could be between $10,000 and $15,000.

Business insurance: Initial costs for insurance can be significant. General liability insurance, professional liability insurance, and workers’ compensation insurance are common types of insurance for a home healthcare business. Initial costs for these insurances can range from $3,000 to $7,000.

Marketing: Spreading the word about your business may require you to invest in creating a logo, website, flyers, and other marketing items. The cost for initial marketing efforts varies widely, but you should budget at least $2,000 to $5,000 to cover these expenses in the beginning.

Business registration: Registering your business involves costs. These costs can vary from state to state but are typically about $100 to $800, depending on your state and the type of business entity.

Licensing and permits: Licensing and permit fees can range from $500 to $3,000, depending on the state and the services offered.

How profitable is a home healthcare business?

The profitability of a home healthcare business can vary widely based on factors such as the size of the operation, the services offered, and the local market conditions. However, industry data can provide some insights into potential profitability.

According to industry statistics, the average billable rate for home healthcare services is around $24 per hour.4 To estimate potential revenue, you would first need to project the number of billable staff hours you expect to have. For example, if you have 10 full-time staff members, each working 40 hours per week, your weekly billable hours would be 400. At a rate of $24 per hour, your weekly revenue would be $9,600. Over a year, this would amount to approximately $499,200 in revenue.

Next, you would need to estimate your expenses. Based on industry data, all expenses for a home healthcare business amount to about 73% of total revenue. This would equate to approximately $364,416 in annual expenses.

Subtracting your estimated expenses from your estimated revenue gives you your estimated profit. In this example, that would be $499,200 – $364,416 = $134,784.

What skills are needed to run a home healthcare business?

Professional certification: When you are offering home healthcare – as opposed to home care – you will need medical training and meet certification requirements. These requirements might differ from State to State and depend on the healthcare services you provide, but you must always verify your competency as a healthcare professional. Home healthcare approval may take up to one year, so ensure you incorporate a realistic timeline into your planning.
 
Relevant Resources:
National Association for Home Care & Hospice
CMS – Centers for Medicare and Medicaid Services

Interpersonal and problem-solving skills: Empathy, patience, and excellent communication skills are as essential as your professional medical skills. You will be working alongside patients who are grappling with losing independence or may be in considerable pain. You will need to be able to discuss treatment plans in a way that is understandable to patients. Good listening skills, adaptability, and professionalism will be equally important. 

Business management experience: Business management skills are a definite advantage when starting a home healthcare business. It will support managing staff and contract care aids, adhering to all regulations and requirements, and communicating with private insurers, therapists, other healthcare providers, social services, etc. You may also be dealing with medical equipment distributors. Taking specific business classes may be a great way to help you with these skills.

Sources

  1. Grand View Research ↩︎
  2. AARP ↩︎
  3. Center for Medicare & Medicade Services (CMS) ↩︎
  4. Seniorliving.org ↩︎

Author

  • Greg Bouhl

    With over two decades as an entrepreneur, educator, and business advisor, Greg Bouhl has worked with over 2,000 entrepreneurs to help them start and grow their businesses. Fed up with clients finding and acting on inaccurate and outdated information online, Greg launched StartUp101.com to be a trusted resource for people starting a business.

How To Start A Home Healthcare Business

How To Start A Home Healthcare Business

Leave a Reply

Your email address will not be published. Required fields are marked *

Some (but not all) of the links on StartUp101.com are affiliate links. This means that a special tracking code is used and that we may make a small commission on the sale of an item if you purchase through one of these links. The price of the item is the same for you whether it is an affiliate link or not, and using affiliate links helps us to maintain this website.

StartUp101.com is also a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

Our mission is to help businesses start and promoting inferior products and services doesn’t serve that mission. We keep the opinions fair and balanced and not let the commissions influence our opinions.