By Beth Carpenter
President
Beth Carpenter and Associates
Are you new to the home health and hospice marketplace? With the aging demographics of the American population, there is increased interest in home health and hospice agencies as viable business opportunities. If you have made the decision to enter the home health or hospice marketplace, the next, most important decision to make is whether to start up your agency or purchase one already in business. There are advantages and disadvantages to either choice. Today, I provide some guidelines to help you make a decision that is right for you.
PURCHASING AN AGENCY
Advantages:
• Purchasing an agency already in business provides immediate cash flow.
• An operating agency has recruited and trained staff to meet current patient needs.
• Critical elements such as leases and business equipment are immediately available.
• Contracts for services, such as therapists, will need to renegotiate for your company; however, these resources are familiar with the agency staff and documentation requirements.
Disadvantages:
• An available agency may not serve your desired geographical area.
• An available agency may not have the same philosophy of service.
• An available agency’s reputation may create future financial and regulatory liabilities.
• An available agency may not have the management and clinical leadership depth needed post-acquisition.
DECISION-MAKING TIPS
• Clearly identify the size, geographic location and service lines you want in your agency.
• Use a transaction firm that specializes in providing acquisition services to potential buyers of home health or hospice agencies as well as assisting those buyers to locate potential agency purchases.
• Engage not only accountant resources to audit the agency books, but also a firm to perform a due diligence audit of the clinical, operational and personnel aspects of the agency.
• Create a business plan that identifies the cash needs for funding an acquisition.
• Explore funding options.
STARTING UP AN AGENCY
Anytime you can establish a new agency instead of buying an existing agency, you face a longer start-up period with no cash flow, but a smaller long-term risk with many rewards. The key is to make sure you have a committed, experienced staff and advisors to show you the correct way to complete all the necessary steps and expedite the journey.
Advantages:
• You can design new workflows for the highest efficiency in areas such as Intake, Physician Communication, Billing and Caregiver Scheduling.
• There are no potential compliance issues from an agency’s past performance.
• A hands-on approach creates an opportunity for deeper knowledge of regulations for everyone involved.
Disadvantages:
• It may take many months from concept to completion before the agency can bill for services provided.
• Expenses precede revenue, especially in the area of salaries.
• Low patient volume initially may make it difficult to negotiate favorable rates with vendors.
TIPS FOR A SUCCESSFUL START-UP:
• Select a Project Leader who has start-up experience with positive outcomes.
• Establish a Plan of Action with a clear timeline for completing all pertinent tasks.
• Select a Medicare “deeming authority” to provide guidelines and requirements for your initial Medicare survey.
• Select policy and procedure manuals, standardized forms and job descriptions. Customize as necessary.
• Hire key positions.
• Select scheduling, clinical and billing software and determine hardware needsDevelop marketing materials.
Perhaps, after looking at the home health or hospice agencies available in your community, you have decided to start your agency from scratch. We encourage you to read our second article, which will explore the anatomy of an agency start-up, and the key steps involved in the start-up process.
©Copyright 2011 Beth Carpenter and Associates. All rights reserved. No portion of these materials may be reproduced by any means without the advance written permission of the author.
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