Jump to a section
Key takeaways
- Keep service type, payer, time unit and effective date attached to each rate.
- Reconcile completed hours with billed hours and credits before calculating realized revenue.
- Subtracting base pay alone does not show profit.
How should the rate be documented?
Record the payer or customer agreement, service description, time unit, rate and effective date. Identify special terms for minimum visits, weekends, cancellations or other relevant circumstances. Do not assume an advertised price is what every client pays.
Then reconcile the rate schedule with invoices and recognized revenue. The IRS emphasizes records supporting business income and expenses; a buyer should use the underlying records to test the seller’s rate claims. (Source: IRS recordkeeping, retrieved 2026)
Why does the distinction matter in an acquisition?
A buyer can overstate revenue by multiplying all scheduled hours by the highest quoted rate. Scheduled work may be cancelled, some service may be priced differently and credits may reduce the amount earned. Separately reconcile completed, billable and billed hours.
Caregiver pay also needs its own supporting records. DOL’s recordkeeping guidance concerns actual hours and wages; the price charged to a client does not determine all compensation obligations. (Source: DOL Fact Sheet 21, 2008)
What does an illustrative example teach?
For a fictional non-medical agency, an invoice may use a quoted hourly rate but later receive a credit for a cancelled portion of service. The invoice’s original total would overstate realized revenue if the credit were ignored. This example supplies no market rate and should not be used to price a local service.
For covered Medicaid services, required EVV and state program workflows are another part of service and billing verification. EVV is not a universal private-pay rate-setting rule. (Source: Medicaid.gov EVV guidance)
What should the buyer compare next?
Compare realized revenue with fully identified direct labor costs, then evaluate overhead and collections. Use the home care margin calculator with your own verified assumptions, and discuss unexplained differences with Jason Taken and the accounting adviser before relying on earnings.
Frequently asked questions
Is the advertised bill rate the same as average revenue per hour?
Not necessarily. Actual service mix, negotiated rates, concessions and credits can change realized revenue. Use reconciled records and a defined denominator.
Can I subtract caregiver pay to calculate net profit?
No. Base pay omits other labor costs and operating expenses. Define direct costs and overhead before calculating margin or earnings.
Should different services share one rate assumption?
Only if justified by the actual agreements and service mix. Keep materially different rates and units separate in the model.
Does a billed hour prove payment was collected?
No. Trace the invoice to collections and adjustments. Billing, revenue recognition and receipt of cash are distinct steps.
Sources
Sources are dated to distinguish current guidance from earlier publications. They support the identified facts; the transaction questions and examples are educational analysis.
- IRS: business recordkeeping (2026). Retrieved September 5, 2026.
- DOL: Fact Sheet 21, FLSA recordkeeping (2008). Retrieved September 5, 2026.
- Medicaid.gov: Electronic Visit Verification (2026). Retrieved September 5, 2026.