Home Care Licensing, Change of Ownership and Deal Structure
When a home care agency is sold, the buyer is not just acquiring a client list and a team of caregivers. Depending on where the agency operates, the business may hold licenses, registrations or certifications, and it may participate in payer programs that have their own requirements. How those arrangements are handled in a sale, often called a home care agency change of ownership, is closely tied to how the transaction is structured. Planning the two together helps buyers avoid surprises that could delay closing or disrupt care.
This article is limited to established non-medical home care agencies, including personal care, companion care and homemaker services. Skilled home health, Medicare-certified agencies and hospice are subject to different rules and are outside its scope. This is not legal, regulatory or tax advice. Requirements vary by state, by program participation and by transaction structure, so buyers should work with qualified legal and healthcare-regulatory professionals.
Licensing Varies by State
States take different approaches to non-medical home care. Some require a license for certain services, some use registration, and some regulate certain services lightly or not at all. Licensing categories may also differ depending on whether services include hands-on personal care or only companionship and homemaking. Buyers should not assume that the requirements in one state apply in another.
What Happens to Licenses in a Sale
Licenses are not necessarily transferable. Depending on the state and the structure of the deal, a sale may:
- Require notice to the licensing agency
- Require a change-of-ownership application and approval
- Require the buyer to obtain a new license
- Involve review of the new owners and administrators, such as background checks
Where approval is required, it depends on the facts and the applicable rules and is not guaranteed. The time involved varies, so purchase agreements and financing should account for that uncertainty rather than assume a specific date.
Payer and Program Arrangements
If the agency participates in third-party programs, such as state-funded programs, veterans’ programs or arrangements with long-term-care insurers, those relationships may have their own change-of-ownership requirements. Participation does not necessarily transfer automatically, and requirements depend on the program and the transaction structure. This article does not provide enrollment instructions; buyers should confirm requirements with the relevant program and qualified professionals. Our article on home care payer mix explains how payer sources affect a transaction.
Asset Purchase vs. Entity Purchase
Asset purchase
The buyer acquires specific assets, such as client relationships, the agency name, systems and goodwill, typically through a new company. This can limit exposure to the seller’s past liabilities, subject to applicable law and the agreement, but licenses, program arrangements and contracts may need to be newly obtained or transferred.
Entity purchase
The buyer acquires the company that operates the agency. Licenses and contracts may remain with the company, depending on their terms and applicable rules, but the buyer generally inherits the company’s history and liabilities. Some licensing authorities and programs also treat a change in ownership of the entity as requiring notice or approval.
Neither structure should be assumed to avoid regulatory review. The right choice depends on the agency’s licensing, payer arrangements, liabilities, tax consequences and lender requirements, and should be made with legal and tax advisors.
Liabilities to Consider
- Regulatory findings or open corrective actions
- Payer audits, recoupments or disputes, where applicable
- Employment-related claims, including worker classification questions
- Unpaid taxes and outstanding obligations
Purchase agreements commonly address these through representations, indemnities and holdbacks. Our home care agency due diligence checklist covers what to review.
Building Approvals Into the Deal
- Learn the applicable requirements before signing a letter of intent
- Make required approvals conditions to closing
- Agree on seller cooperation with applications and transition
- Plan who will serve as administrator or manager where required
- Coordinate timing with financing and the office lease
How Lenders View Licensing and Structure
Lenders want confidence that the agency can keep operating after closing. They may coordinate funding with licensing requirements and review the deal structure. See our guide to home care agency loan requirements.
Internal Transitions Too
These considerations also apply when ownership passes to a partner, family member or manager. See our guide to home care agency succession planning, and for the full acquisition process, our guide on how to buy a home care agency.
US Professional Funding helps buyers finance the acquisition of existing non-medical home care agencies and can help plan financing around a transaction’s licensing conditions. Learn more about our home care agency acquisition financing.
