Hospice care is a process where clients can find a caring environment and quality of life at the end of their days as they prepare themselves to pass on. These terminal patients are cared for in the best way possible and kept comfortable. They receive medical care round the clock from the hospice while their family members are also given support and updates about their loved ones.
Starting a Hospice business can be a tricky one because there are regulations that need to be fulfilled. It is more than just registering your hospice business with the government. Here are the essential steps that can ensure your new hospice business is well planned, registered properly, legally sound, and becomes successful.
Step 1: Planning the business correctly
An organized, clear plan is needed for a successful hospice business. It helps to map out the specifics of the business. Here are the important questions one needs to ask before opening a hospice business.
What are the major costs?
A hospice startup cost will be different depending on the type of hospice one is opening and which state it is located in. The main cost can range from $70,000 to $120,000 if it is a non-Medicare facility. If it is a Medicare-certified hospice agency the cost can range from $160,000 to $400,000. These costs include licensing for faculty and staff, computer hardware and software, physical space for the facility, accreditation, business branding, marketing materials, inventory, and insurance.
Since the regulations are strict, many entrepreneurs may choose to invest in consultation services which increase the costs while increasing confidence in compliance.
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What are the ongoing costs?
Apart from the standard operational expenses, there will be ongoing annual costs ranging between $400,000 to $450,000 (on the higher side). Exact numbers will differ depending on the size of the facility and the number of services being offered. Payroll will take up the greatest portion of the ongoing costs.
How will the hospice business make money?
For-profit and nonprofit hospices receive funds from different sources. Charitable donations and grants are the main sources of revenue for not for profit hospices which can also be reimbursed by private insurance, Medicaid, and Medicare for the patients being cared for. Many facilities are reimbursed on a daily basis and are offered payment for every day a patient is in the facility. Hospices can also be reimbursed on an hourly basis if the patient needs home nursing care 24/7.
How much profit can be made?
The average payment reimbursed to hospice facilities by Medicare ranges from $145/day or at an hourly rate of $40/hour if care is being given 24/7. Given this, successful hospice businesses have shown to make up to $120,000 to $200,000 in profits annually. Of course, the amount will vary depending on the number of patients, number of services offered, and ongoing expenses.
How can the business profits be optimized?
Successful hospice businesses use several strategies to ensure optimization of their profits. These include finding a gap in the market, taking up underserved segments of the market, and customizing services to their needs. Another strategy is to work with physicians, hospitals and other facilities in the community and highlight the benefits of using hospice facilities. This will develop a strong referral base.
Step 2: Forming a Legal Corporate Entity and Registering for Taxes
The three most common types of legal entities are sole proprietorship, partnership, Limited Liability Company, and C corporation. If the business owner wants to be protected from being personally liable, he can opt for an LLC or a corporation.
Once the business owner has decided on the legal entity, the business must be registered for each state in which services are provided as well as for federal taxes before officially opening the business. The business owner will need an EIN to do that. If the business structure is an LLC, it can benefit from being taxed as an S Corp. there may be specific state taxes applied to a hospice business. Here are the details on starting an LLC.
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Step 3: Getting a Bank Account, Credit Card, and Setting Up Business Accounting
If the business owner wants personal asset protection, then dedicated business banking and credit accounts are needed. It is important to keep personal accounts separate from business accounts. It makes taxing and filing easier too.
Once that is done, the hospice business owner needs to set up business accounting to record various expenses and sources of income in order to understand the financial performance of the hospice facility.
Step 4: Getting Permits and Licenses
If a hospice business does not have the essential permits and licenses, it can result in heavy fines and shutting down the business altogether. The federal business licensing requirements call for a hospice to complete and submit an enrollment application. Once done, the hospice will be checked out to see if it meets the federal requirements.
State and local business licensing requirements are different as each state has its regulations regarding hospice care licensing. This guide will help in determining if the hospice is operating according to the correct state law.
Hospice facilities that are working out of a physical location also need a certificate of occupancy (CO). The CO confirms that all working areas, building codes, zoning laws, and government regulations are being met.
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