How to buy a home health agency: what to check

Published October 25, 2026 · Facts checked as of October 2026

Short answer

First distinguish Medicare-certified home health agencies (skilled nursing and therapy, billed to Medicare and other payers) from non-medical home care (personal care, companionship, mostly private pay and some Medicaid programs). For Medicare-certified agencies, the CMS '36-month rule' generally means that if majority ownership changes within 36 months of initial enrollment or the last majority ownership change, the provider agreement and billing privileges don't convey to the buyer, subject to exceptions. Then verify payer mix, census, visits, caregiver turnover and state licensing.

Home health agencies are regulated healthcare businesses where the license and the Medicare enrollment can matter as much as the client list. Get specialist healthcare counsel early. Not legal advice.

Two different businesses

Medicare-certified home health

Skilled nursing and therapy under physician orders. Medicare enrollment, surveys or accreditation, the 36-month rule, billing compliance and audits.

Non-medical home care

Personal care, companionship, respite. Private pay and some Medicaid waiver programs. State licensing in many states; caregiver recruiting is the business.

The 36-month rule

Based on 42 CFR 424.550(b). Check the dates before anything else.

Worked example: the 36-month check, in dates

Illustrative example, not legal advice

An agency's initial Medicare enrollment was effective March 1, 2024, and its majority ownership has never changed. Thirty-six months from that date runs to March 1, 2027. If you buy a majority stake and close in December 2026, the sale falls inside the window, and under 42 CFR 424.550(b) the provider agreement and billing privileges generally don't convey: you'd have to enroll as a new agency and get a new state survey or accreditation, unless an exception applies (the rule lists exceptions, such as an agency that has filed two consecutive years of full cost reports). Close after the window, and the rule doesn't bite. Healthcare counsel should confirm the dates from the enrollment record and the exceptions before you sign an LOI; getting this wrong can turn a going concern into a start-up.

Illustration based on 42 CFR 424.550(b). Exceptions exist; counsel confirms.

What to verify

Enrollment, licensure and accreditation status and dates.
Payer mix and census by month; visits or hours.
Billing compliance: documentation audits, any payer audits, recoupments or repayments owed.
Caregiver and clinician roster, turnover, classification and pay.
Referral sources and concentration (hospitals, physicians, case managers).
EVV (electronic visit verification) data where required, matched to billing.

Because billing liabilities can follow an entity, structure matters; see asset vs stock purchase and reps and warranties.

Quality, surveys and compliance

Medicare-certified agencies must meet the conditions of participation in 42 CFR Part 484 and are surveyed by the state or an accrediting organization. Ask for the last several survey reports and any plans of correction. Quality ratings on Medicare's Care Compare are public; check the agency's trend. Then the billing side: ask for every audit, additional documentation request, recoupment and repayment in the last three years, and how documentation is reviewed before claims go out. Check every clinician and aide against the HHS OIG exclusion list. In non-medical home care, the core compliance risks are caregiver classification and overtime (many agencies pay caregivers as contractors or underpay overtime for live-in shifts), state licensing, and electronic visit verification for Medicaid-funded hours.

Red flags specific to home health

An enrollment or last ownership change inside the 36-month window.
Survey deficiencies that recur, or an open plan of correction.
Referrals concentrated in one hospital system or physician group, or referral arrangements that pay referral sources.
Census that dropped after a payment change, suggesting the old mix depended on billing patterns.
Caregivers paid as contractors, or no overtime on long shifts.
EVV records that don't match hours billed to Medicaid programs.

Worked example: caregiver turnover in non-medical home care

Illustrative example, not industry data

A home care agency bills 2,400 hours a week at $34 an hour: about $4.2 million a year (2,400 × $34 × 52 = $4,243,200). It employs 85 caregivers and replaced 60 of them last year, a 71% turnover rate (60 ÷ 85). Recruiting, screening and training each new caregiver costs the agency about $1,200 in this example, so turnover costs $72,000 a year. Worse, each departure can mean a client shift unfilled or a client unhappy with a new face. If hours fall 10% because shifts can't be staffed, revenue drops by about $424,000. In home care, the recruiting engine is the business; ask how many applicants a month the agency attracts and how many shifts went unfilled.

What moves the value of a home health agency

We don't value deals or publish multiples we can't verify. Appraisers and lenders weigh these factors:

Factor	Supports a higher value	Pulls it lower
Enrollment status	Outside the 36-month window, clean survey history	Inside the window, open deficiencies
Referrals	Many sources, steady admissions	One hospital or physician group
Payer mix	Balanced, with low denial rates	Dependent on one program or plan
Staff	Stable clinicians and aides, compliant pay	High turnover, classification issues
Quality	Good public quality ratings	Low or falling ratings
Compliance	No recoupments or open reviews	Audits, repayments, corrective plans

Documents to request

Medicare enrollment records showing initial enrollment and ownership change dates; state licence; accreditation.
Survey reports and plans of correction for several years.
Census, admissions and revenue by payer by month; denials and recoupments.
Referral source reports.
Staff roster, licences, pay records, OIG exclusion checks, EVV data where required.
Tax returns, financial statements, bank statements; Medicare cost reports.

Electronic visit verification: an independent record of visits

Federal law requires state Medicaid programs to use electronic visit verification (EVV) for personal care services and home health care services, or face reduced federal funding. EVV systems record the type of service, the person served, the caregiver, and the date, time and location of each visit. For a buyer, that is a record the seller doesn't control. Ask for EVV reports for the same months as the billing records and compare visits billed with visits verified. Gaps can mean billing errors, missed visits or system problems, and each one is a question for the seller before closing.

Payer mix and program rules

Agencies are often paid by several programs at once: Medicare, Medicaid fee-for-service, Medicaid managed care plans, waiver programs, the VA and private pay. Each has its own rates, authorizations and audit rules. Ask for revenue and visits by payer for three years, and for any audit, recoupment or corrective action plan. A business heavily dependent on one program is exposed to that program's rate changes.

Questions to ask the seller

What is the initial enrollment date and the date of the last change in majority ownership?
What are census, admissions and revenue by payer by month for three years?
Any audits, recoupments or repayments owed, and any open reviews?
Who are the top referral sources, and what share of admissions does each send?
What is clinician and caregiver turnover, and how are they paid?
When were the last survey and accreditation visits, and what did they find?

Before closing, review a sample of patient files with a clinical compliance reviewer: assessments, plans of care, visit notes and physician orders. Missing documentation can lead to payer recoupments after you own the agency.

Ask, too, about staffing ratios and hiring: how long open positions take to fill, and whether referrals are being turned away for lack of staff.

Frequently asked questions

What is the 36-month rule?

Under 42 CFR 424.550(b), if majority ownership of a home health agency or hospice changes by sale within 36 months of its initial Medicare enrollment or its most recent change in majority ownership, the provider agreement and billing privileges generally don't convey; the new owner must enroll as a new agency and obtain a survey or accreditation, unless an exception applies.

Is non-medical home care easier to buy?

It avoids Medicare enrollment issues but is still licensed in many states, and depends heavily on caregiver recruitment and retention.

How do I verify revenue?

Billing system reports, payer remittances, visit or hours logs (EVV data where used) and bank deposits should agree.

What's the biggest operating risk?

Caregiver and clinician turnover, and compliance: documentation that supports what was billed.

How are Medicare home health agencies paid?

Under CMS's home health prospective payment system, which pays per period of care based on patient characteristics and other factors rather than per visit. That means revenue depends on admissions, case mix and documentation, not just visit counts. Ask for revenue per period of care and how coding and documentation are reviewed.

Do non-medical home care agencies need a licence?

Many states license non-medical home care or personal care agencies, and Medicaid-funded services come with their own provider enrollment and electronic visit verification requirements. Check your state's health department rules and each program's change-of-ownership process before you sign.

Sources

Related guides

General information, not legal, tax, financial or investment advice. Rules and lender practices change; check the linked sources and talk to your attorney, CPA and lender about your deal. Examples with named numbers are illustrations, not real businesses. OKtoBuy's Deal Check does not value businesses or give price opinions.