FAQs Section 3: Financial Projections and Business Plan

3.1 How much funding should I have to start a home health agency?

There is no amount that every applicant could use as a starting point. Effective July 1, 2008 each home health agency applicant must prepare a business plan. Each agency’s plan for the services offered and the amount of staff to be hired is different. Once you complete your plan and retain a CPA to prepare your financial schedules you will be in a better position to determine how much funding you will need. Please note that the minimum amount of funding cannot be less than three (3) month’s average operating expenses.

Please note: If you are applying for Medicaid and/or Medicare the revenue from these sources does not begin until the agency completes a certification process which includes passing an unannounced survey by an approved accrediting organization. See the website for the How to get Medicare overview for more information on the accreditation process. Certification can take five to six months, or longer, to complete after the agency has been licensed by the state. Projecting revenue from Medicaid and/or Medicare to start during the first month of operations as a licensed home health agency is not feasible due to the length of the certification process.

3.2 What is included in the business plan and financial projections?

  The business plan, signed by the applicant, is required to be sent with the financial schedules. The plan must describe the home health agency’s methods to obtain patients and its plan to recruit and maintain staff. At a minimum the plan should include:

  1. description of the business
  2. services to be provided
  3. the existing market
  4. the level of competition in the market
  5. the applicant’s strategy to enter the market and obtain patients
  6. a time-line of major events (expected date of licensure, deemed status, etc)
  7. the level of available personnel including RN’s, LPN’s, Physical Therapists, etc
  8. the applicants strategy to recruit and maintain personnel
  9. description of the applicants admission policy for patients

Financial projections for the first two years of the operation of the home health agency prepared in accordance with Generally Accepted Accounting Principles and signed by a Certified Public Accountant need to be completed. Applicants must show independent evidence of sufficient funds for start up, working expenses and contingencies. There are certain items that are required in order to start an agency that are common to all agencies including:

  1. cash assets in the company name; personal assets are not acceptable; or
  2. committed lines of credit from a reputable lending institution;
  3. evidence of contingency funding equal to three(3) month’s average operating expenses during the first year of operation;
  4. projected balance sheet, income and expense statement, statement of cash flows for the first 2 years of operation which that show evidence of sufficient assets, credit and projected revenues to cover liabilities and expenses by the end of the second year of operation;
  5. cannot project an operating margin of 15 percent or greater for any month in the first year of operation and
  6. required application items that need to be budgeted for in the financial schedules and need to be in place at the time the application is submitted to the Agency including:

3.3 What does the Home Care Unit look for in the financial schedules?

The financial schedules need to be completed and signed by a Certified Public Accountant. A Certified Public Accountant at the Agency reviews the schedules and determines if any corrections or additional information is needed to prove financial ability to operate the home health agency. The reviewers look for the following:

Make sure to read the instructions with each schedule and provide the information requested in the instructions.

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