Weeding Through The Cost Of A Homecare/ Home Health Start-Up.

Kenyon HomeCare Consulting • February 28, 2021

Kenyon Home Care Consulting

Kenyon Home Care Consulting has assisted with a number of start-up home health agencies across the country over the years. There are many questions that are asked, but we have noticed that only about 10% or less of those individuals calling have projected out the assumed cost of starting up or ask if the assumption is correct. The remaining individuals or about 90% have no idea what the cost of starting up a Home Health agency are and if they have thought about it, tend to grossly underestimate what it will take in the first year of operations. Costs of a start up home care agency vary by state as well as by the type of Home Care agency that an individual may wish to start. The least expensive is the non-skilled Home Care agency followed by the licensed skilled home care non-Medicare and finally the most expensive Medicare/Medicaid Home Health and Hospice.

We understand that one of the major reasons new businesses fail is because of lack of working capital for the start up phase of the business. The estimated cost to start up a non-skilled Private Pay Home Care agency runs about $40,000 to $80,000, Licensed Home Health non-Medicare $60,000 to $100,000 and Medicare Certified agencies $150,000 to $350,000, all depending on the state the home health agency start up is in. Much of the cost is incurred around licensing issues and regulations requiring licensed personnel, computer software and hardware, patient care non-recoverable costs paid out of the owners pocket, commercial office space. and length of time the state is out until initial review or survey. Additionally many states now require that all Medicare start up agencies go through an Accreditation organization which also adds cost and time to the start up phase.

It is recommended that anyone thinking about starting up a home care/health agency first develop a working budget for the first year. There are some basic costs that all home care start-ups share; name and logo development, policy and procedure development if in a licensed state or going for Medicare, computer software and hardware, marketing and sales, recruitment and retention, office furniture and equipment, in some states office space rental, plus telephones, office supplies and personnel costs depending on the type of agency and the state and federal rules. For the Medicare agency, the requirement of paid clinical staff to care for a minimum of ten patients has to be added in the budget as start up cost. Those monies are not recoverable from Medicare and are considered part of the startup costs. Additionally Medicare and the states will require a specified amount of money be in a bank account to prove the financial viability of the new organization. All of these elements must be in the startup budget.

There is one last budget element that must be added. The most common missed budget line is payment to the new owner. The time and energy put into starting up an agency is considerable and requires a line item for reimbursement. Starting a business is a full time job! Some of the estimated start-up costs stated above is the reimbursement that the owner will need to survive financially while the agency is getting started. Failure to include this expenditure leads many aspiring home care agency owners to work outside the start-up to generate income while they simultaneously try to start the business. This is a sure recipe for failure.

If you are considering starting up a home care/health agency and need some assistance in developing the budget, contact Kenyon Home Care Consulting for a sample budget. Or call 206-721-5091 for consulting assistance.

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