Residential Care Home Due Diligence Checklist

Establish the care model and transaction scope

List the legal provider, property owner, employer and parties to key agreements. List the assets, balances and duties included in the offer. Explain whether the proposed structure changes ownership, control, property rights or several of these. Use the residential care home overview to frame the care model.

Collect the current license and conditions, approved capacity, service description and relevant agency letters. Confirm that the records refer to the same entity and address. A seller may operate several homes through different arrangements. Do not rely on a license from another location or a group-level financial summary.

Washington's CHOW rule reaches specified provider and control changes, so the deal's label alone does not answer the licensing question. (Source: WAC 388-76-10105) Ask counsel and the agency to assess the actual structure. Preserve their findings and open conditions in the review record.

Confirm operating authority, capacity and contracts

Verify the buyer's required qualifications and the path to lawful operation. In Washington, review the separate applicant conditions for a seven- or eight-resident home's ownership change. (Source: WAC 388-76-10032) Do not budget the seller's full census before checking the buyer's capacity premise.

Obtain specialty contracts and current correspondence. DSHS identifies named specialty contracts that do not transfer; the incoming operator needs qualifications and an executed contract. (Source: DSHS buying an AFH) Track the service and payment dependency separately from the general license.

Use the Washington guide for those state-specific questions. For an RCFE, use the California guide and its separate conditions. California's current rules make the license nontransferable and require a new application for the specified changes. (Source: CDSS RCFE regulations)

Reconcile earnings with owner and family duties

Tie the earnings presentation to tax returns, accounts and records of each item. List each adjustment, its evidence and whether the expense continues. Check shared costs and related-party arrangements. A buyer needs a supported budget for this home alone, including replacements for services supplied by another seller-owned business.

Build a map of the working week for the owner and family. Include nights, weekends, management, meals, transport, billing and emergency cover where performed. Compare it with schedules, payroll and invoices. Check whether proposed replacements have the skills and time to do the work. Do not assume one hire can perform every role.

The owner replacement cost guide helps distinguish compensation from the cost of necessary work. Check that replacement wages, employment costs and relief are included once. If the starting measure already includes a replacement, do not deduct it again. Treat onsite housing and property rent as separate assumptions to reconcile.

Test resident revenue and the effect of a vacancy

Review actual charges, discounts, credits, collections and remaining balances for matching periods. Keep housing charges and covered services distinct under the relevant program. The HCBS waiver funding limit has specified exceptions and is not a rule for every Medicaid benefit. (Source: 42 CFR 441.310)

For the occupied rooms, the residential care fee exercise tests whether current agreements support the advertised-rate case. It keeps fee groups, credits and proposed effective dates visible before any increase enters recurring earnings.

Consider a fictional vacancy that removes $6,000 of earned fees for one full month. Assume $900 of that month's variable cost can responsibly be avoided, without reducing required services or coverage. All other costs remain unchanged in this example, and there are no other revenue adjustments.

The contribution decline is $6,000 − $900 = $5,100 for that month. It is not the home's total profit or a cash forecast. The example makes no staffing recommendation. Validate the actual avoidable costs and service duties before applying this approach to a real vacancy.

Compare occupancy with licensed and usable capacity over time. Explain rooms out of service, recent departures and proposed admissions. A hoped-for replacement resident belongs in a separate scenario with its own timing and evidence, not in historical earnings.

Trace resident funds and continuing commitments

Obtain a balance schedule for deposits, advance fees, refunds and money held for residents. Reconcile it with agreements, accounts and bank evidence through an authorized process. Determine who owns each amount and which obligations transfer. Do not assume every dollar in the operating account is free cash.

Review the required handoff with advisers. Washington's CHOW rule includes equivalent resident-account treatment and notice when the depository changes. It also assigns existing deficiencies to the new owner. (Source: WAC 388-76-10105) A private reimbursement agreement should not be mistaken for release from an external duty.

Compare resident agreements with actual services, fees and promised support. Identify refunds, disputed balances and commitments that extend beyond closing. Assign who answers questions and maintains the records. The buyer's budget should reflect lawful ongoing duties, with uncertainty carried into terms and funding decisions.

Review staff coverage and care limits

Ask qualified reviewers to compare resident needs, service plans, license limits and current staff coverage. Review credentials, training, background requirements and open staffing issues under the rules that apply. The buyer’s review should cost a suitable plan. Clinical judgments about each resident belong with qualified professionals.

The incoming people and evidence guide separates document presence, validity and suitability. Its fictional eight-person roster needs eleven check records, showing why a file count cannot establish that every required role has been reviewed.

Check the schedule against actual paid work, agency invoices and owner cover. Identify overtime, vacancies and absences that the annual average may hide. Discuss any proposed staffing change with the professionals in charge. A desired earnings level cannot establish the amount or type of coverage that is appropriate.

Read surveys, complaints, correction plans and follow-up records. Distinguish submission of a plan from confirmation that an issue was resolved. Assign open matters to a reviewer and track the evidence still required. Update the review for new notices before closing rather than treating an earlier report as final.

Inspect property rights and capital needs

Verify title or lease rights, permitted use, condition and restrictions affecting the proposed operation. Obtain qualified property review and list any approvals required for repairs or changes. A deed transfer does not establish the care license, and an existing license does not settle every property question.

The care-home valuation guide examines a fictional floor-area estimate. The assumed care-space share is applied to the whole property's stated value. That calculation does not establish the value of a separate interest. Check the rights and permitted use before relying on this shortcut to support an offer price.

Build a dated capital schedule for repairs, equipment and improvements. Include the cost of disruption or temporarily unusable rooms. Identify responsibility under the lease or sale agreement. Check whether recurring maintenance was excluded from earnings even though the buyer must continue to fund it.

Review related-party rent and onsite housing. The OpCo/PropCo guide helps reconcile business and property results. Use consistent rent assumptions when comparing earnings or financing. Do not count the same property income twice or present free use of the seller's building as a permanent buyer benefit.

The residential-care seller example tests a fictional promise that everything stays and the owner will remain nearby. The list shows an included appliance, excluded desk and resident recliner. The seller’s room use also needs review. Use those entries to distinguish the household assets from property access and seller work.

Plan lawful disclosure, records and notices

Pre-NDA outreach excludes financials and identifying owner, home, location, resident, staff, vendor and referral details. Later authorized financial review is a separate stage. Even coded records and small aggregates can identify a person or home; assess what the recipient could infer from the combined information.

Sensitive-record access needs a lawful basis and safeguards. An NDA does not create disclosure authority or establish de-identification. (Sources: HHS minimum necessary, HHS de-identification) Use the records custody guide to assign permitted access and ongoing retrieval duties.

Plan Washington's required ownership notice separately from license approval and any relocation process. (Source: WAC 388-76-10106) Record recipients, contents, delivery evidence and timing. Other states require their own review. Confidentiality should not delay a required communication to residents or the agency.

Translate findings into offer and funding decisions

Record what the evidence establishes and what remains uncertain. Assign each issue to the adviser or operator who can resolve it. Separate ongoing expense, one-time cash need, disputed liability and a barrier to lawful operation. These findings should not be collapsed into a single unsupported price discount.

Two fictional exercises test the records behind these findings. The leased-premises FAQ checks tenant identity and unsupported years at the site. The resident-deposit FAQ finds wrong individual entries behind matching totals. Use both to describe the specific evidence gaps before assigning the next review.

Review the letter-of-intent guide before relying on proposed terms. Build a separate cash forecast across licensing, closing and early operations. Price protections or seller promises do not provide missing staff, legal authority or the cash to meet a near-term obligation.

Rehearse the first operating week

Confirm who handles payroll, schedules, meals, supplies, billing, resident funds and emergency contacts. List required account access and backup, with the proper permissions. Test responsibilities using fictional information. A rehearsal can reveal a missing task without circulating private records or claiming to assess clinical readiness.

Refresh licenses, contract status, staffing, occupancy and key findings before closing. Carry unresolved items into an action plan reviewed by the relevant advisers or reconsider the deal when a required condition is unmet. The first 90 days guide helps turn accepted responsibilities into a dated work calendar.

Keep the final review useful to the incoming team. Each conclusion should point to evidence and a named next step where needed. The purpose is to support a sound purchase decision and dependable continuity, not to describe every requested document as proof that the home is ready.

The RCFE record map and adult family home capacity example answer different questions. First identify the state's actual category, then check the named operator and approved capacity for the specific home.

Use the background-registry record comparison to track current status and missing evidence. Its Illinois example does not establish a universal clearance process; confirm the actual role, jurisdiction and required system for the home being reviewed.