Home Care Agency Due Diligence: A Buyer’s Review

Define the business before requesting records

List the services, legal entities, trade names and areas served. Identify who employs caregivers and who sends each bill. A registry, placement firm and agency that employs workers can have different duties. Separate skilled home health or hospice from this review of non-medical care.

Request current licenses, service agreements and a chart of the related companies. Match their names to the payroll and billing records. If two service lines share staff or office costs, ask how those costs were split. The same expense must not be omitted from both businesses or charged to both in full.

Illinois maintains home services agency licensing and ownership-change resources. Use them for an Illinois operation, then find the relevant agency for each other state served. This is a state example, not a national license category. (Source: Illinois IDPH home services)

Reconcile a sample from service to cash

Agree on a sample with the accounting adviser. Include different payers, longer shifts, credits, late bills and overtime periods. Use the same service dates throughout. A monthly bank deposit can include old invoices, so it cannot by itself prove this month's revenue.

Keep an exception log instead of forcing the totals to match. Ask who resolved each item and which record supports the result. IRS guidance describes underlying income and expense records; the buyer still needs to connect those records to actual service activity. (Source: IRS recordkeeping)

Test the labor cost behind the margin

Define the bill rate as gross or net of the stated credits. Trace payroll taxes, benefits, workers' compensation, paid leave, overtime and other applicable costs to the accounts. Identify paid travel, training and other time that cannot be billed. Use a consistent cost boundary for home-care gross margin.

Inspect temporary staffing invoices and open-shift coverage. A cost does not disappear because the seller calls it unusual. The buyer needs evidence that the cause has ended, or a funded replacement plan. Keep recruiting and office costs visible even when the stated gross-margin measure excludes them.

DOL's recordkeeping guidance concerns employee hours and wages. Those records do not settle worker classification, exemptions or state-law compliance. Employment counsel should assess those questions from the actual duties and pay practices. (Source: DOL Fact Sheet 21)

Check who can cover the existing work

Request a coded caregiver schedule for authorized diligence. Define an active worker by recent work and availability, with a stated period. Keep that definition fixed across months. Separate people on leave, occasional workers and dormant roster entries before drawing conclusions about staffing capacity.

Compare hours delivered with shifts declined, missed or filled at extra cost. Look at travel areas, required skills, weekend cover and assignment preferences. A worker available on Tuesday morning does not necessarily solve a Friday-night vacancy. Ask the operating reviewer to test coverage against the current client schedule.

Check the recruiting process and the time between an accepted offer and a staffed shift. Record the key dependencies and backup person. Route any staff interviews through the seller's approved process; buyers should not independently contact caregivers to test whether they will remain.

Separate clients, payers and referral sources

Prepare three schedules, using consistent periods and definitions. Client concentration measures dependence on individual care relationships. Payer concentration measures who owes the money. Referral concentration measures the sources of new work. These can overlap without being the same risk.

Compare client counts with delivered hours and receipts tied to those service periods. One intensive assignment can support more revenue than several occasional clients. Record the limits of the data: a receipt total may include old balances, and a new inquiry may never become delivered care.

Use the payer-mix guide to review payment responsibility, not just labels in the software. Read the contract where insurance is involved. An insurer reimbursing a family does not always become the agency's debtor. Future referrals and future service demand remain assumptions to test.

Verify the buyer's service and billing pathway

Build a list of required notices, applications, consents and system changes. Match each to a legal entity, service and location. Request renewals, complaints, restrictions and relevant agency letters. A current seller license does not establish that the buyer may operate on the closing date.

The home care transfer exercise tests 24 fictional client files against a proposed employer model. It separates terms that match, conflicting roles and missing records. Those groups guide follow-up without treating every open file as a lost client.

For affected Medicaid services, compare authorized hours with delivered visits and billed units. Federal EVV concerns covered Medicaid personal care and home health services involving in-home visits. State and payer implementation needs its own review. Do not apply that federal scope to all private-pay care. (Source: Medicaid.gov EVV)

The EVV transition guide covers records, exceptions and access. Confirm the buyer's lawful credentials and billing route. A login that still works is not proof that the buyer may use the seller's account or provider identity.

Compare the buyer's franchise terms

For a franchise resale, obtain the existing agreement, amendments and current documents proposed for the buyer. List royalties, advertising charges, software costs, training, territory and remaining term. Check transfer approval and any required work. Model the buyer's terms alongside the seller's recorded costs.

The FTC's franchise guide explains how disclosures and contract review can help a prospective buyer. It does not determine this agency's resale terms or prove its future earnings. Use current applicable documents and franchise counsel for that assessment. (Source: FTC franchise buyer guide)

Compare the local unit's records with any brand-level earnings material. Keep their periods and cost definitions separate. The franchise resale guide expands the transfer questions; the independent agency needs its own review of brand, systems and support costs.

Build an opening cash forecast

Reconcile AR aging by payer with later receipts, credits and disputes. Ask why old balances remain open and who is pursuing them. An aging report is a request for evidence, not a promise that every balance will be collected.

Map payroll, rent, insurance and other cash dates against expected receipts. State who owns pre-closing invoices and who handles mixed-period payments. If the seller keeps old receivables, the buyer may fund new shifts before collecting new invoices. Use the working-capital guide to document those assumptions.

Review deposits and advance payments with their future-service or refund duties. Cash received before closing may support an obligation after closing. Have the accountant and counsel connect each balance to the purchase agreement and closing statement so the same obligation is not lost between schedules.

Replace the owner's duties in the plan

Ask the seller to map a normal week and a difficult week. Include intake, scheduling, hiring, payroll, complaints and billing disputes. Record hours, skills, system access and a backup person. Check the description against actual work records rather than relying only on a job title.

In a fictional agency, a manager covers weekday schedules while the owner handles all weekend gaps and disputed bills. Calling the agency manager-run leaves those duties unresolved. The buyer must assign them, price any added labor and arrange training before treating the owner's pay as removable.

Separate temporary handoff support from permanent staffing. State what the seller will teach, to whom and by when. The offer should not depend on unlimited unpaid availability or on the buyer having skills and hours that have never been established.

Control access and keep care running

Pre-NDA outreach should exclude financials, identity, exact location and identifying client, worker, vendor or referral details. Later authorized financial review can use grouped or coded records. Small groups and distinctive patterns may still reveal identities. Removing names alone does not establish de-identification. (Source: HHS de-identification)

An NDA does not independently authorize disclosure of protected health information. Use the records-custody guide with the privacy adviser to establish lawful access and safeguards. Keep the document-request log focused so staff do not repeatedly assemble the same records.

Coordinate visits and interviews around care duties. Set a clear escalation route for a service issue found during review. Commercial confidentiality must also accommodate required notices and the seller's continuing responsibilities to clients and workers.

Request the counting method behind reported caregiver turnover. Compare the defined staff group, dates and departure events before using the percentage in a cost or continuity assessment.

Turn findings into decisions and closing conditions

For each open item, record the evidence, commercial effect, next action, responsible adviser and deadline. Distinguish a missing document from an unresolved operating problem. A better spreadsheet cannot cure work that the agency cannot staff or a licensing path that has not been established.

The home-care seller example follows a fictional service request accepted after the buyer package’s cutoff. Staffing is still unresolved at the later update. Use the dates to distinguish a changed service commitment from a missing document. Then assign the operating response and revise the affected buyer statements.

Some findings change price or the cash reserve. Others need a specific closing condition or justify stopping the deal. Use the LOI guide to connect the proposed terms with the review still required. Avoid treating every issue as a routine post-closing task.

Jason Taken can coordinate the commercial process. The buyer's accountant, counsel and operating specialists should reach conclusions in their own fields. The home-care overview provides the broader business context; this checklist should leave the buyer with evidence, assigned decisions and a realistic handoff plan.

Use the W-2 versus 1099 record comparison before accepting a staffing label as a cost assumption. Review any claimed companionship exemption separately, including the distinction between regulatory text and the agency’s enforcement policy.