Buy Home Health Care Business
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Due to the aging of baby boomers and increased life expectancy, the number of senior citizens over the age of 65 is increasing every year. With that comes the increasing need for medical and personal care as well. This offers great business opportunities for entrepreneurs in the healthcare industry.
Home care that is provided by caregivers is based around the need for basic day-to-day assistance. For example, home care aides will prepare meals, clean the house, help change or dress an individual or drive them to or from doctors appointments.
This is the first step in starting any type of business. You need to make a business plan for your home health care agency because it is the base of your company and will be needed for each step to follow. A business plan includes the following:
You will also need to incorporate your business, get your tax identification and register for your NPI (National Provider Identification) number. These requirements for starting a home health care agency depend on a state-to-state basis.
Be aware that this process of becoming accredited can take longer than you think, sometimes even up to a year. To apply and go through the survey process, visit cms.gov. In addition to getting these certifications, some states require business owners of home health care agencies to complete a jurisprudence exam.
Once you start billing Medicare, Medicaid or third-party insurers, the slow payment periods can cause some stress on you as the business owner. Accounts receivable factoring is used by home healthcare agencies and businesses to bridge the gap between payment periods.
Invoice factoring allows you to be advanced an amount to pay employees and continue growing your healthcare business. You company will have more money for expenses and take the stress of cash off your mind so you can focus on your business operations.
The only constant for home healthcare agencies is change. For many owners of agencies, change is both demanding and fatiguing. At some point, owners start thinking about exiting their company. Some owners elect to pass ownership down to their adult children. Some stop taking on new clients/patients and simply close their doors. Others seek to sell their company in the marketplace. This column is written for those owners considering selling in the marketplace.
The merger and acquisition (M&A) market for home healthcare agencies is currently very robust, with buyers eagerly gobbling up well-performing agencies. As such, this may be the best time to sell if you're looking to get the highest price, best terms, and well-suited buyers.
Why are buyers eager to buy? Home healthcare agencies are one of the fastest-growing industries in the healthcare sector. Thanks to an aging population, an increase in chronic diseases, the growth of physician acceptance of home healthcare, medical advancements, increased demand for home-based care (especially for the elderly or in times of a pandemic), and a movement toward cost-efficient treatment options from public and private payors, the industry has flourished. Moreover, the industry is anticipated to grow over the coming years, which will allow providers to compete effectively with institutional care agencies, such as hospitals.
According to the Medicare Payment Advisory Commission's ("MedPac") March 2019 report to Congress, between 2004 and 2016, the number of home health agencies increased by over 60%. Currently, there are approximately 12,000 active home health agencies in the market, and as of 2017, approximately 98% of Medicare beneficiaries lived in a zip code with a home health agency.
Total Medicare spending on home health services increased by 108.2% from 2000 to 2017. MedPac estimated operating margins for freestanding home health agencies to be approximately 4.5% for the blended all-payor margin.
Market multiples refer to the estimated purchase price, or enterprise value, related to adjusted EBITDA. The typical range of market multiples for home hea