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How To Start A Medical Transportation Business

How To Start A Medical Transportation Business

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How To Start A Medical Transportation Business

How To Start A Medical Transportation Business

Getting to and from medical appointments can require a lot of driving and waiting, which is a challenge for people who cannot drive themselves. Typical systems, such as bus routes or Uber rides, may be unavailable if the individual needs a specialty vehicle to accommodate wheelchairs or oxygen tanks. Fortunately, non-emergency medical transportation is a popular service that provides a solution to customers needing frequent, non-emergency rides to medical appointments.

With an aging population and growing demand for non-emergency medical transport, this essential service presents serious profit potential. In this guide, we will walk you through the steps to establish your own medical transportation business and provide valuable insights into this growing industry.

Business Description

A medical transportation business offers the essential service of transporting patients who require non-emergency medical assistance. This includes transporting individuals with mobility limitations, elderly patients, those undergoing medical treatments, and individuals with disabilities. By ensuring their safe and timely transportation to medical appointments, rehabilitation centers, hospitals, and other healthcare facilities, your business plays a vital role in the overall healthcare system.

Unlike standard taxi services, these vehicles are specially equipped to handle various medical needs, including wheelchairs and stretchers. The business earns revenue by charging fees for these services, which may be covered by the patient, insurance companies, or government health programs.

Industry Summary

With healthcare needs continuing to rise along with longevity and chronic conditions, analysts project robust continued growth in the coming years. The number of people in the U.S. over 65 is expected to double by 2050. This expanding demographic with more intensive medical requirements will drive further demand for shuttles, wheelchair vans, and ambulances tailored to patient needs.

Steps To Start A Medical Transportation Business

Step 1: Write a Business Plan

Writing a business plan is an important step when starting a medical transportation business. This document is more than just a formal statement of business goals or something you do to get a loan; it’s a roadmap that guides you through the establishment and growth of your business. There are several important sections, but here’s a few things to focus on:

To start with, there are different types of medical transportation businesses, such as non-emergency transport (NEMT) and ambulance services, and each requires different vehicles, staff, training, and certification. To determine the best fit for your business, you should start by conducting market research to understand the demand for medical transportation services in your area. This will also help you identify competitors and ensure that your business can offer something different or better than theirs.

After defining your services, you can also start on developing a marketing plan for your business. This plan should help you reach potential customers and create awareness of the services that your business offers. It may include advertising in local healthcare facilities, creating a website or social media accounts, and networking with related businesses.

Finally, there is the financial projections section in the plan. This section should provide a realistic forecast of how your business will generate revenue and turn a profit. Include startup costs, operating expenses, pricing strategies, and revenue projections. This financial forecast not only helps in securing funding but also serves as a a way to see the financial feasibility of the business.

Related: How to write a business plan

Step 2: Source Funding

Securing the necessary funds to start a medical transportation business is the next step in the journey. Many entrepreneurs find the biggest challenge in starting a medical transportation business is finding the right funding, but here is a list of common sources to consider.

Personal investment: Before seeking outside funding, take a look at your personal savings. Assess how much you have available to finance your business. If your savings aren’t enough to cover the startup costs, you’ll need to explore other funding sources.

Lenders: Banks and financial institutions can provide loans to support your medical transportation business. Typically, they require borrowers to invest at least 15% of their personal funds towards the total project cost, in addition to having a good credit score and sufficient collateral. In some cases, if the bank requires additional security for the loan, they may use a Small Business Administration (SBA) loan guarantee.

Leasing: Instead of purchasing vehicles or equipment outright, leasing allows you to make smaller monthly payments. This option can be beneficial for businesses aiming to conserve cash flow in the initial stages.

Friends and family: Another source of funding can be friends and family, but put any such agreements in writing to protect relationships.

Microloans: For smaller funding requirements or when traditional lending options are unavailable, consider exploring microloans. These loans are provided by local economic development organizations, and some may even offer business training in addition to the funding.

Related: Finding the money to start a business

Step 3: Register the Business

Starting a medical transportation business involves navigating through various legal and regulatory requirements to ensure your business is properly registered and compliant. Here’s an overview to help you through the process.

Business structure: First, you’ll choose a business structure. Each structure has its own advantages and disadvantages. These include:

Sole proprietorship:

  • Simplest form of business with easy startup and lower costs.
  • Best for small, low-risk businesses.
  • Owner has complete control but is personally liable for business debts.

General partnership:

  • Similar to a sole proprietorship but with two or more owners.
  • Easy to establish and operate.
  • Partners share profits, losses, and liabilities.

Corporation:

  • A more complex structure that provides liability protection to the owners.
  • Higher filing fees.
  • Requires more administrative upkeep.

Limited Liability Company (LLC):

  • Combines the benefits of a corporation (liability protection) and a partnership or sole proprietorship (less administration).
  • Flexibility in management and profit distribution.

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

State licensing: Licensing requirements for non-emergency medical transportation businesses vary by state. In general, you’ll need to certify that all drivers and attendants have completed a safety program, possess CPR certifications, maintain a clean driving record, passed a criminal background check, and have a negative drug test.

In addition, some cities have licensing requirements to operate as a medical carrier or a medical transportation service.

Healthcare regulations: Ensure compliance with healthcare regulations such as the Health Insurance Portability and Accountability Act (HIPAA). Also, be aware of any vehicle and driver safety standards you need to meet.

Medicaid and medicare billing: If you plan to serve Medicaid or Medicare patients, you’ll need to apply to become a Medicaid or Medicare provider. This process involves meeting certain requirements and going through the Medicaid provider and National Provider Identifier (NPI) application process.1

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

Related: State guides for general business licensing

Step 4: Set Up Operations

With the funding and registrations out of the way, the next step is to begin setting up operations.

The first task is to acquire a location. The ideal location will vary depending on the demographics and needs of your target market. For instance, if your primary clientele includes elderly patients, being near retirement communities and assisted living facilities is best. This proximity ensures ease of access and quick response times. Conversely, if you plan to cater to pediatric patients, being close to hospitals and clinics specializing in child care is advantageous.

After the location, it’s time to start outfitting your fleet. You’ll need vehicles that are not only reliable but also equipped to handle the medical needs of your clients. Depending on your service focus, this could range from ambulances to vans modified to accommodate wheelchairs and other medical equipment. Each vehicle should be chosen and adapted with the safety and comfort of your patients in mind, ensuring that they are suitable for the type of transportation services you offer. This may also involve installing specialized equipment and technology to support patient care during transport.

Last, you’ll need to get the billing and payment processing system in place. This system should be capable of handling various payment methods and insurance billing requirements.

Step 5: Hire Staff

Another aspect of starting a medical transportation business is hiring employees. Whether you need to hire trained drivers or medical professionals, it’s important to understand your responsibilities as a new employer. Before you start the hiring process, there are a few legal requirements that you’ll need to take care of. These include:

Obtaining an EIN: Before hiring, you’ll need to obtain an Employer Identification Number (EIN) from the IRS. This unique nine-digit number is required for tax purposes and to report information about your employees.

Employment eligibility: It’s your responsibility to verify the employment eligibility of every new hire. This typically involves completing an Employment Eligibility Verification Form (I-9) and verifying the employee’s identification and eligibility to work in the U.S.

State hiring requirements: Each state has its own set of hiring requirements, including different forms and reporting mandates. Familiarize yourself with these to ensure compliance.

Worker’s compensation: Most states require businesses to have worker’s compensation insurance to cover workplace injuries or illnesses. The specifics vary by state, so it’s important to understand your local requirements.

Labor laws: Lastly, be aware of federal and state labor laws that govern aspects like minimum wage, overtime pay, recordkeeping, and youth employment. Compliance with these laws is not optional; it’s a legal obligation.

Related: State guides for hiring your first employee

Step 6: Prepare to Launch!

After covering the core steps of starting a medical transportation business, there are several additional tasks that may still be needed. These will vary by individual, but here are some common ones:

Business insurance: Some common types of insurance for a medical transportation business include general liability insurance, professional liability insurance, and commercial auto insurance.

Setting up bookkeeping: Set up an effective bookkeeping system to handle daily transactions, taxes, and financial statements. Consider hiring a bookkeeper or utilizing accounting software to streamline this process.

Business bank account: This separates your personal and business finances and is crucial for financial management.

Marketing strategy: Develop a strategy to introduce your business to potential customers. This includes creating a logo, building a website, and using marketing channels like local advertising, social media, and partnerships with local doctors, hospitals, and senior living facilities.

Common Questions When Starting A Medical Transportation Business

How much does it cost to start a medical transportation business?

A medical transportation business has some upfront costs—arguably high start-up costs because specialty vehicles with wheelchair accommodations are expensive assets. However, as a general estimate, the initial cost to start a medical transportation business can range from $80,000 to $300,000.

So, let’s discuss some of the main expenses when starting a medical transportation business.

Fleet acquisition: The most significant expense will likely be your fleet of vehicles. Depending on the type and number of vehicles, this can cost between $50,000 to $200,000. This includes the cost of purchasing or leasing ambulances or vans and any necessary modifications for medical transport.

Location: Rent and deposits for a physical location can vary greatly by area, but initial deposits can range from $2,000 to $10,000. This depends on the size and location of the facility.

Business registration: Costs for registering your business, including incorporation fees, can range from $100 to $800, depending on the state and the business structure chosen.

Certifications and licenses: Costs associated with certifications and licenses can range from $500 to $2,500, depending on the requirements in your state or region.

Software and technology:
Utilizing industry-specific software and technology can enhance your business operations. Costs for software solutions, such as scheduling software or fleet management systems, can range from $1,000 to $3,000, depending on the features and complexity of the software.

Insurance: Initial insurance costs, including vehicle, liability, and worker’s compensation insurance, can range from $3,000 to $10,000. This provides coverage for your vehicles, business operations, and employees.

Marketing: Initial marketing costs, such as website development, branding, and promotional materials, can be approximately $2,000 to $5,000.

Miscellaneous costs: This can include items like office supplies, uniforms, and initial staff training. A prudent estimate for these miscellaneous expenses would be around $2,000 to $5,000.

How profitable is a medical transportation business?

Given the industry’s predictable growth, a medical transportation business can expect to turn a profit. Additionally, with multiple vehicles on the road, the profits can scale quickly. 

Medical transportation businesses commonly charge a base price for rides, plus mileage and additional costs like waiting time fees. For example, although prices vary greatly depending on location, demand, and insurance coverage, some medical transportation businesses charge a base rate for wheelchair rides between $25 – $35 for a one-way trip, plus mileage at approximately $3 – $5 per mile. Round-trip rides often double the base rate and mileage. Additionally, the waiting fee generally ranges from $15 – $30.

Let’s assume that one solo-rider round-trip ride takes one hour to complete. Under this assumption, a medical transportation business could conduct about eight daily trips during business hours. Calculating only the base rate, we can estimate that a round trip costs $65 ($50 base, plus a $15 waiting fee).

Multiply the $65 trip estimate by eight trips, and we can conclude that one vehicle makes $520 daily. So, if the business runs 5-days a week, it could earn $2,600 per week or $10,400 per month.

After fuel, employee, and maintenance costs, the business could expect to see a healthy profit, especially with a fleet of vehicles on the road. 

What is the NAICS code for a medical transportation business?

The NAICS code for a medical transportation business is 485991, which is categorized under special needs transportation.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code?

Sources

  1. U.S. Centers for Medicare & Medicaid Services ↩︎

How To Start A Medical Transportation Business

How To Start A Medical Transportation Business

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