The growing demand for in-home care presents an opportunity for entrepreneurs. Launching a business to meet this need requires navigating legal and regulatory requirements. Understanding these obligations is the first step toward building a compliant and successful agency. This guide provides a path through the licensing and certification steps required to establish a home-based care business.
Differentiating Home Health and Home Care
Before pursuing any licenses, you must decide on the services your business will offer. The regulatory path depends on the distinction between medical “home health” services and non-medical “home care.” This choice dictates all subsequent licensing, staffing, and operational requirements for your agency.
Home health care involves providing skilled medical services prescribed by a doctor. These services must be delivered by licensed healthcare professionals, such as registered nurses (RNs), physical therapists (PTs), or occupational therapists (OTs). Examples of home health services include wound care, medication administration, and physical therapy. These agencies function as an extension of the clinical healthcare system.
In contrast, home care—also called personal or companion care—focuses on non-medical assistance with Activities of Daily Living (ADLs). This can include help with bathing, dressing, meal preparation, and transportation. Home care aides are not required to be licensed healthcare professionals, and their primary role is providing support and companionship. Because these services are non-medical, the licensing and oversight are less stringent than for home health agencies.
State-Level Operating Licenses
The primary authorization to operate any type of home care business comes from a state-issued license. These licenses ensure that agencies meet minimum standards for safety, quality, and operational integrity before they are permitted to serve clients. The specific regulations, processes, and costs vary significantly from one state to another.
The process begins by identifying the government body in your state that oversees home care agency licensing, which is a division within the state’s Department of Health. The official website for this agency is the most direct way to find application forms, fee schedules, and detailed requirements. The timeline for approval can range from a few months to over a year.
States require a comprehensive application package that details your agency’s operational plan. This includes submitting a business plan, providing proof of financial viability, and presenting detailed policies and procedures manuals. These manuals must cover topics such as patient rights, emergency preparedness, and staff conduct.
Federal Medicare and Medicaid Certification
Beyond a state license, agencies providing skilled medical services may need to pursue federal certification. This step is not required to operate, but it is mandatory for any home health agency that intends to bill Medicare or Medicaid for its services. This certification process is overseen by the federal Centers for Medicare & Medicaid Services (CMS).
To become certified, a home health agency must comply with a set of federal standards known as the Conditions of Participation (CoPs). These regulations govern patient care, clinical record-keeping, staff qualifications, and quality improvement. The process involves submitting a formal application, such as the CMS Form 855A, and undergoing a thorough on-site survey to verify that all federal standards are being met.
This survey can be conducted by state surveyors on behalf of CMS or by an approved accrediting organization. Agencies must be operational and serving a minimum number of patients before the survey can take place. For instance, some states require an agency to be actively providing skilled care to at least seven to ten patients at the time of the survey.
General Business Registrations
A home health care business must complete the same foundational legal registrations as any other new company. These steps establish the business as a legitimate legal and tax-paying entity, separate from its owners. This layer of registration is concerned with corporate structure and tax administration, not healthcare compliance.
The primary steps include:
- Choosing a legal structure for the business, such as a sole proprietorship, a Limited Liability Company (LLC), or a corporation, which impacts liability and taxes.
- Registering the business name, which may involve filing a “Doing Business As” (DBA) name if operating under a name different from the legal one.
- Obtaining a federal Employer Identification Number (EIN) from the Internal Revenue Service (IRS), which is required for any business that hires employees.
- Checking for any required local business permits from your city or county needed to operate legally within a specific municipality.
Required Insurance Policies
Carrying the right insurance is a prerequisite for obtaining a state license and legally operating a home health or home care business. Insurance protects the agency, its employees, and its clients from the risks of providing in-home care. State licensing boards require proof of specific coverage before issuing or renewing a license.
Commonly required policies include:
- General liability insurance, which covers third-party claims of bodily injury or property damage.
- Professional liability insurance, also called malpractice insurance, which protects the agency against claims of negligence or errors in professional services.
- Workers’ compensation insurance, which provides benefits to employees who suffer a work-related injury or illness and is mandatory in most states.
- Non-owned auto insurance, which may be needed if staff will be using their personal vehicles to transport clients.
Staff Licensing and Background Checks
An agency’s license to operate is contingent upon the proper credentialing and vetting of its entire staff. The business owner must verify and maintain records for every person they hire to ensure they meet all legal and professional standards.
For home health agencies, this means meticulously verifying the state licenses or certifications of all clinical staff, including RNs, Licensed Practical Nurses (LPNs), and Certified Nursing Assistants (CNAs). It is illegal for an individual to provide services for which they are not currently licensed. These credentials must be checked upon hiring and periodically thereafter.
A universal requirement for both home health and non-medical home care agencies is conducting thorough criminal background checks on all prospective employees. This step is mandated by nearly every state to protect vulnerable clients. These checks must be completed before an employee has any direct contact with clients.