What to verify before buying a licensed home health or non-medical senior care business — from Medicare certification and payer mix to caregiver retention and billing compliance.
Find Senior Care / Home Health Acquisition TargetsAcquiring a home health or senior care agency involves risks far beyond standard financial review. Buyers must validate licensing and CMS certification transferability, assess payer mix concentration, confirm caregiver workforce stability, and audit billing accuracy — all before committing capital. This guide walks through every critical checkpoint for lower middle market deals in the $1M–$5M revenue range.
Confirm all federal and state licenses, Medicare and Medicaid certifications, and compliance history are clean, current, and transferable to a new owner under an asset purchase structure.
Confirm all state home health or personal care licenses are active and determine whether they transfer automatically or require re-application under new ownership, which can delay operations.
Obtain CMS certification numbers, review most recent state survey results, and confirm no open deficiencies, Plans of Correction, or pending audits that could jeopardize reimbursement post-close.
Review any HIPAA breach history, wage-and-hour claims related to caregiver overtime, and independent contractor misclassification exposure — common and costly issues in home care operations.
Assess the sustainability, recurrence, and risk profile of all revenue streams by dissecting payer sources, client concentration, billing accuracy, and accounts receivable aging.
Quantify revenue split between private pay, Medicaid, and Medicare. Medicaid-heavy books carry rate-cut risk and thinner margins; private-pay revenue commands higher multiples and better cash flow.
Identify any single client exceeding 10% of revenue. Review average care plan duration and churn rates — long-tenured clients validate revenue durability and reduce post-acquisition revenue risk.
Audit accounts receivable aging for claims older than 90 days, denial rates, and any history of third-party payer clawbacks. Poor billing hygiene is a major red flag in government-pay agencies.
Validate caregiver headcount, turnover history, and operational infrastructure to confirm the agency can sustain and grow client census under new ownership without the departing owner.
Request 24-month caregiver turnover data. Rates above 50–60% signal systemic culture or compensation issues. Confirm W-2 vs. 1099 classification and review all active employee and contractor files.
Determine whether the owner personally handles scheduling, recruitment, or key client relationships. Absence of an office manager or Director of Nursing creates significant transition and continuity risk.
Confirm the agency uses scheduling software and has documented intake, care planning, and HR procedures. Operational infrastructure directly impacts your ability to scale and retain staff post-acquisition.
Yes. Home health agencies are SBA 7(a) eligible. Expect to inject 10–20% equity, and structure any seller note as a gap between the SBA loan and purchase price, subordinated to the SBA lender.
Not automatically. Under an asset purchase, CMS typically requires a change of ownership (CHOW) filing. Certification may continue during review if properly filed, but timelines vary by state and agency type.
Expect 3.5x–6x SDE or EBITDA depending on payer mix quality, caregiver stability, compliance history, and revenue recurrence. Private-pay and Medicare-certified agencies trade at the higher end of that range.
Interview key staff, review whether client relationships are documented in care plans, and assess whether an office manager or DON handles day-to-day operations independent of the owner.
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