Home healthcare agencies are businesses that are completely insulated from negative changes in the economy. This is due to the fact that people that are elderly or have disabilities require ongoing and constant care on a day-to-day basis. Most importantly, and one of the key strengths for a home healthcare agency is that they are always able to remain profitable and cash flow positive. These businesses are able to generate revenue directly from patients, public as well as private insurance. While there have been some issues with the reimbursement rates that are associated with in-home care, the demand among families to have proper nurses and aides can disabled family member is substantial.
As such, these businesses are able to produce
very high gross margin income while not having to maintain a substantial
overhead cost. The gross margins generated 5% depending on whether or not bad
debt expense is factored into the cost of goods sold. These businesses do have
moderate barriers to entry given that licenses from the state as well as the
federal government are required in order to render the services to the general
public. It should be immediately noted that there are some companies operate in
a non-medical capacity, which allows them to operate with a limited amount of
licensure. A qualified attorney should hired to ensure that the home care
agency is operating within the letter of the lot all times. The startup costs
for this type of business typically ranges anywhere from $25,000 to $100,000
depending on the number of people that are going to be on staff at the onset of
As it relates to weaknesses, despite the fact that these businesses are highly immune from negative changes in the economy – there are a number of issues that arise from operating this type of business. Foremost, a substantial amount of compliance needs to be adhered to at all times given the nature of this work. Large-scale malpractice and liability policies need to be put in place in the event of an on-site accident. Additionally, depending on the nature of the home healthcare agency – personnel expenses can be very high. This is especially true if the agency is going to be providing skilled nursing services. within any given market there is usually a substantial amount of competition in this field.
As it relates opportunities, there are numerous ways in which a home healthcare agency can boost its revenues. Foremost, these businesses can hire additional nurses, certified medical assistants, and certified nursing assistants to render a larger degree of services within the target market. Some healthcare agencies also expand by simply acquiring similar businesses that are already in operation. Home healthcare agencies typically have substantial access to capital given that they are able to produce highly predictable streams of revenue on a month-to-month basis while concurrently being able to generate income from publicly funded healthcare sources from time to time. One of the common trends within this industry is to offer non-emergency medical transportation services, which can drastically boost the revenues of any home healthcare agency.
For threats, as this is a healthcare focused business there are a number of issues that can cause substantial damage to the business. As mentioned above, malpractice or injury can cause a significant number of lawsuits to accrue. Additionally, changes in political policy – especially as it relates to reimbursement rates – can have an impact on a company’s profit and loss statement. As such, an entrepreneur that enters this field needs to keep a very tight control on all underlying expenses in the event that certain reimbursement rates are reduced.
Home healthcare agencies are going to continue to remain in strong demand especially as the baby boomer population ages. Almost 44 million people within the United States are required to care for an elderly person or disabled person on a day-to-day basis. This number is expected to increase significantly over the next twenty years. As such, a home healthcare agency can be a highly lucrative small business opportunity that has substantial growth potential over the next two decades.