7 Questions to Ask Before Buying a New Home Health Agency

2026-08-21

Thinking of buying a home health agency? Ask these 7 critical questions about finances, licensing, and liabilities before you sign. Practical advice for new owners.

Buying an existing home health agency can be a faster path to ownership than starting from scratch, but it comes with hidden risks. Before you sign any purchase agreement, you need to dig into the agency’s financials, compliance history, and operational realities. Here are 7 questions to ask, with concrete steps you can take this week.

1. Why is the seller really selling?

The seller’s stated reason may be retirement, but you need to verify. Ask for the real story. A practice that is losing its largest referral source, facing a malpractice lawsuit, or about to lose its Medicare certification is a liability, not an opportunity.

Action step: Request a written timeline of the agency’s patient census and referral sources over the past 3 years. If the numbers are declining, ask for the reason in writing. Cross-check with local hospital discharge planners or referral coordinators if possible.

2. What is the agency’s current licensure and certification status?

Home health agencies must be licensed by the state and certified by Medicare/Medicaid to receive reimbursement. Losing certification is a death sentence for the business. Check the status directly with your state health department and CMS.

Action step: Obtain the agency’s CMS Certification Number (CCN) and look up its survey history on the CMS website. Look for any condition-level deficiencies, civil monetary penalties, or termination notices in the last 5 years.

3. What does the patient mix and payer breakdown look like?

Agency revenue depends heavily on payer mix. Medicare pays differently than Medicaid or private insurance. A heavy reliance on one payer can be risky if reimbursement rates change. Also, examine the acuity of patients: high-acuity patients require more skilled nursing, which can be more profitable but also more demanding.

Action step: Ask for a payer mix report for the last 12 months, including the percentage of revenue from Medicare, Medicaid, private insurance, and self-pay. Also request a breakdown of patient diagnoses and average visits per episode.

4. What are the agency’s true operating costs?

Beyond the purchase price, you need to know the monthly burn rate. This includes salaries, rent, supplies, insurance, and administrative costs. Many new owners underestimate the cost of compliance and staff turnover.

Action step: Obtain the last 3 years of profit and loss statements and a current balance sheet. Calculate the average monthly operating cost. Compare it to the average monthly revenue to see the true margin. Also, ask for a list of all leases and contracts, including the terms and renewal dates.

5. What is the state of the staff and their contracts?

Home health agencies are labor-intensive. If the nurses and aides leave after the sale, you have no business. Review employment contracts, non-compete clauses, and staff turnover rates. Also, check if any staff have been involved in fraud or abuse allegations.

Action step: Ask for a staff roster with titles, tenure, and compensation. Request copies of all employment agreements and non-compete clauses. Talk to a few key employees informally to gauge their commitment.

6. Are there any pending or potential legal liabilities?

This includes malpractice claims, billing fraud investigations, or disputes with vendors. A hidden liability can wipe out your investment. You need a thorough due diligence process, including a review of all litigation and regulatory actions.

Action step: Hire a healthcare attorney to conduct a legal audit. Ask for a list of all past and pending lawsuits, settlements, and regulatory actions. Also, check the Office of Inspector General (OIG) exclusion list for any employees or contractors.

7. What is the real value of the agency’s assets and contracts?

You are buying more than a name. The value lies in patient contracts, referral relationships, and physical assets like vehicles and equipment. But contracts may be non-transferable, and referral relationships may be personal to the seller.

Action step: Ask for a detailed asset list with depreciation schedules. Review all patient and referral contracts to see if they are assignable. Also, assess the condition of any vehicles and medical equipment, and get independent appraisals if needed.

FAQ

Can I buy a home health agency if I have no healthcare background?

Yes, but you will need to hire experienced clinical and administrative staff. Many owners come from business backgrounds. However, you must understand the regulatory environment and reimbursement rules, or you will quickly run into trouble.

How much does it cost to buy a home health agency?

Prices vary widely based on location, patient census, and profitability. Small agencies can sell for $100,000 to $500,000, while larger ones can exceed $1 million. You also need to budget for legal fees, due diligence, and working capital.

How long does the due diligence process take?

A thorough due diligence process typically takes 60 to 90 days. This includes financial audits, legal reviews, and regulatory checks. Do not rush this step; it is your best protection against hidden problems.

What is the biggest mistake new buyers make?

They skip due diligence or rely solely on the seller’s word. Always verify financials, check licensing, and talk to referral sources. Also, many buyers underestimate the cost of compliance, which can be $20,000 to $50,000 per year for smaller agencies.

The bottom line

Buying a home health agency is a major investment. The 7 questions above are your starting point. Do not rely on the seller’s promises. Verify everything with independent sources. Spend the money on a good attorney and accountant. If the answers raise red flags, walk away. A clean, well-run agency is worth the wait. Take action this week: request the financials and licensing documents, and start your due diligence checklist.

This article is for informational purposes only and does not constitute legal or financial advice. Consult with a qualified professional before making any purchase decisions.