Home Care Agency Due Diligence Checklist for Buyers
By the time a buyer signs a letter of intent on a home care agency, they have usually met the owner, reviewed summary financials and heard about the agency’s clients and caregivers. Home care agency due diligence is where those impressions are tested against records, licenses, contracts and conversations. Because the business is responsible for vulnerable people and relies on a workforce that can be difficult to replace, diligence deserves particular care.
This checklist is written for buyers of established non-medical home care agencies, such as personal care, companion care and homemaker-service businesses, rather than skilled home health or clinical providers. Payer mix, caregiver retention and change of ownership are covered in more depth in separate articles. This is not legal, regulatory, privacy or employment advice; work with qualified professionals on the matters that apply to your transaction.
A Note on Sensitive Information
Client records and caregiver personnel records contain sensitive information subject to applicable privacy and employment requirements. Buyers should work with counsel on how such information can be shared and reviewed during diligence, which may involve summaries or de-identified data before closing.
1. Financial Records
- Business tax returns for several years
- Profit and loss statements and balance sheets, including year-to-date
- Bank statements
- Scheduling and billing reports showing hours of care and revenue over time
- Accounts receivable aging, where third-party payers are involved
- Payroll records and owner compensation
- Existing debt and liens
Compare tax returns, financial statements, billing reports and deposits. Consistent records support the price; our guide to home care agency valuation explains how verified cash flow drives value.
2. Payer Sources
- Revenue by payer type, such as private pay, long-term-care insurance, veterans’ programs or state-funded programs, where applicable
- Any payer agreements and their terms
- Payment timing and collection history
- Any audits, recoupments or disputes with payers
Not every agency works with third-party payers. Our article on home care payer mix explains what to review.
3. Clients and Referral Sources
- Active client counts and length of service, using appropriately protected information
- How much revenue depends on the largest clients
- Where new clients come from and how dependent the agency is on particular referral sources
- Client service agreements and their terms
- Complaint history and how concerns were resolved
4. Caregiver Workforce
- Caregiver counts, tenure and scheduling practices
- Pay structures and any agreements
- How caregivers are classified, which should be reviewed by qualified professionals
- Hiring, screening and training practices
- Office staff roles and key personnel
See our guide to home care caregiver retention.
5. Licensing and Regulatory History
- Licenses, registrations or certifications held, where required
- Inspection or survey reports, findings and corrective actions
- Complaints filed with regulators
- Whether licenses or program arrangements can be maintained after a sale
Requirements vary by state; see our guide to home care agency change of ownership.
6. Insurance and Incidents
- Liability, bonding and workers’ compensation coverage
- Claims history and incident reports
- Policies and procedures for client safety
7. Contracts, Systems and Office
- Office lease and its assignment provisions
- Scheduling, timekeeping and billing system agreements and data ownership
- Franchise agreement and transfer requirements, if franchised
- Vendor and service agreements
8. Items Your Lender Will Request
Lenders typically request many of the same records, along with the purchase agreement and your personal financial information. See our guide to home care agency loan requirements.
Using What You Find
Diligence findings may confirm the deal, change the price, add conditions to closing or lead you to walk away. Issues can be addressed through price adjustments, holdbacks, indemnities or other terms, subject to negotiation and lender requirements.
US Professional Funding works with buyers acquiring existing non-medical home care agencies. Learn more about our home care agency acquisition financing.
