Essential Steps for Starting a Home Health Agency

Topping the agenda for a new home health agency are licensure, financing and insurance. With home health service needs growing rapidly, these efforts should pay off.

As the large baby boomer population ages and poses a greater demand for home healthcare, job availability in this employment sector continues to rise. According to 2012 U.S. Bureau of Labor Statistics, job growth in home health is projected to grow 48% between 2012 and 2022, prompting the need for more professionals to take the necessary steps toward managing a home healthcare agency.

While attaining a home healthcare management position can lead to a rewarding business enterprise, stringent government home health efficiency standards mandate numerous prerequisite steps be taken prior to an agency’s approval. These prerequisite actions are required to help ensure the highest quality of healthcare throughout the home health industry.

Obtain Licensing

Foremost, a valid license to practice is required by most states. To determine what each state’s specific licensing regulations entail, visit the corresponding Department of Business and Professional Regulation website. Additionally, all aspiring home health agencies should contact the county where the agency will operate, to inquire about other obligatory license or permit constraints. “If a home health agency does not obtain a license in a state that requires a license, the agency may be shut down and fined by the state,” warned Glenn P. Prives, an associate at McElroy, Deutsch, Mulvaney & Carpenter, LLP in Morristown, N.J. “Additionally, payers, both government and private, will seek recoupment of all amounts paid to the agency, plus additional penalties for knowingly taking the money without obtaining a license.”

During the license acquisition process, each agency must submit a standard state application and prepare for a follow-up state license inspection. A business plan outlining the services offered by a healthcare facility may also be requested to fulfill inspection requests.

In addition, states typically request proof of agency authorization, an administrative criminal check and proof of staff member qualifications. The amount of proof requested and the number of required forms can vary greatly from state to state, causing some applications to be as short as five pages while others are as long as 55 pages, according to (

Prepare Finances

Managing, owning or operating a home healthcare agency can require a lot of financial preplanning. To successfully open such an agency, many providers must first seek out a professional office space, hire qualified home healthcare providers and then take out the necessary business loans to cover costs.

Typically, a suitable office space will be between 600 square feet and 700 square feet, with prices dependent upon location. What an agency is required to pay healthcare caregivers also varies with location, but acquiring the more competent, kind and resourceful staff members is to a brand’s advantage. Most home healthcare services look to employ registered nurses, licensed practical nurses, physical therapists, occupational therapists, speech language pathologists and respiratory therapists.

When a budget including business space and hire costs is developed, agency operators should visit the Small Business Administration’s website for a list of approved business loan providers in their given region.

For operating costs less than $50,000, startups may consider taking out a microloan, an advance sum payable over 6 years with an interest rate fluctuating between 8% and 13%. However, these loans require borrower collateral and a personal guarantee, according to John Fall, a certified public accountant.

Procure Insurance

All home healthcare businesses should purchase insurance prior to their launch, enabling them to legally operate while protecting themselves against legal claims. Included within an insurance plan should be medical malpractice insurance and other products designed to protect a business’s assets.

“Home care businesses should obtain at minimum the insurance requirements in their state to provide adequate coverage for professional liability ($1,000,000), non-owned auto ($50,000), bonding ($25,000) and employment practices liability ($250,000),” suggested Jeff Bevis, President and CEO of FirstLight HomeCare, which operates in 29 states.

Home healthcare agencies should also determine which insurance plans they are willing to accept for service payment. It is largely beneficial for a home healthcare business to accept private insurance, and to contact the largest private insurance providers locally to gain an awareness of their participation policies.

Requests must also be submitted to Medicare and Medicaid for participation approval, for they will likely be a home healthcare business’s primary source of income. These health insurance programs have many rules and stipulations about how a home healthcare agency operates, thus they require an agreement of compliance be signed prior to admittance into their programs. Demonstrating this participatory compliance, agencies must abide by patient acceptance regulations and documentation, medical record and billing processes.

Each state’s Department of Health needs to know about an agency’s planned operations before they will allow it to operate and interact with patients. By completing the appropriate steps and application requirements, a home healthcare facility is securing its long-term success and government compliance.

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