Guides
Home care agency startup: price the service menu first
Home care agency startup pricing: build the service menu, set visit minimums, match rates to wage bands and work out break-even client hours.
What to take away
- Price the menu before anything else. Companion, personal care and home health aide visits do not share a wage band.
- A visit minimum is a pricing decision, and a dense city and a rural county need different ones.
- The billed rate must cover on-costs, paid travel and supervision, not just the caregiver wage.
- Break-even client hours equal committed monthly cost divided by contribution per visit hour.
- Check local demand and caregiver pay in your own service area before you commit to it.
Build the menu around visit minimums
A home care agency sells visits, so the menu comes before the budget. Write the menu as services, visit lengths, minimums, service area and hours, then attach a wage band to each line.
The table is a worked example, not a market rate. It shows why one hourly price cannot cover three service lines.
Visit minimum
- Companion and homemaking
- 2 hours
- Personal care
- 1 hour
- Home health aide, delegated tasks
- 1 hour
Caregiver wage band
- Companion and homemaking
- $13 to $16
- Personal care
- $15 to $19
- Home health aide, delegated tasks
- $18 to $23
Example rate
- Companion and homemaking
- $26 to $30
- Personal care
- $30 to $36
- Home health aide, delegated tasks
- $36 to $45
Service Lines Compared
Personal Care Aide
- Tasks
- Bathing, dressing, transfers
- Wage band
- Different
- Insurance exposure
- Different
- Supervisor ratio
- Different
Home Health Aide
- Tasks
- Delegated clinical tasks
- Wage band
- Different
- Insurance exposure
- Different
- Supervisor ratio
- Different
Companion/Homemaking
- Tasks
- Housekeeping, errands, respite
- Wage band
- Different
- Insurance exposure
- Different
- Supervisor ratio
- Different
A one-hour minimum in a dense city and a four-hour minimum in a rural county are different businesses. Set the minimum from your drive times, because a short visit that needs a long drive earns little.
Match the rate to what it must cover
The gap between the caregiver wage and the billed rate pays employer FICA at 7.65 percent, unemployment insurance, workers' compensation, paid travel, mileage, paid time off, supervision, scheduling and billing. Leave one out and the rate is too low.
Travel between two client homes inside the workday is generally compensable in the US. Commuting from home to the first client is not. The Labor Department's fact sheet on hours worked in domestic service says that travel between several clients during the workday is compensable, and that the third-party employer is responsible for paying it.
Overtime after 40 hours in a week applies to most agency-employed caregivers. Price the busiest caregiver's week, not the average one.
Work out contribution per visit hour
Contribution per visit hour is the billed rate minus wages, on-costs and travel. The steps are short:
- Take the billed rate for one service line.
- Subtract the caregiver wage for that line.
- Subtract on-costs and paid travel per hour.
- What remains is contribution toward fixed cost and profit.
A $32 rate against $19 in wages, $4 in on-costs and $2 in travel leaves $7. The pricing and profit guide works the same arithmetic through other visit lengths. Recompute it for each line on the menu, because the wage bands differ.
Canada runs the same arithmetic with CPP, EI and provincial workers' compensation in place of the US payroll taxes.
Find break-even client hours
Break-even client hours equal committed monthly cost divided by contribution per visit hour. At $14,000 in committed monthly cost, a $7 contribution means 2,000 client hours before the owner earns anything.
That figure shows why the menu matters more than the logo. Raise contribution and the break-even falls, while a wage increase with no rate change pushes it the other way. Wages go out weekly, and payer money arrives in weeks or months, so the float is part of the same plan.
The startup budget, state licensing and the seven sections of a written plan sit in the business plan guide. Price first, then test the budget against the break-even figure.
Let the payer shape the rate
Who pays decides which rate you can charge. Medicaid personal care programs add provider enrollment, a fee schedule and their own visit documentation rules, so a Medicaid line may not follow the private-pay example rate.
Medicare covers skilled home health, not long-term personal care. Long-term care at home is paid privately, through Medicaid waivers or through long-term care insurance. Put the payer beside each line on the menu before you fix its price.
Canadian rules are provincial. British Columbia requires registry registration for publicly funded care, Ontario agencies hold Ontario Health atHome contracts, and Quebec agencies must meet Bill 96 French-language duties. Each of those shapes who can buy the visit and at what price.
Check demand and pay in your own area
The BLS Occupational Outlook Handbook entry for home health and personal care aides is a source of national occupation information. Use it as context, then assess demand in the service area rather than assuming a national outlook predicts local bookings.
Count the licensed agencies in your service area before you commit to it; state licensee lists are public in most states. Wage tables by state and metro, such as those in the market comparison, inform caregiver pay.
Caregivers are employees in nearly every agency model. The IRS test for contractor status looks at the entire relationship and the right to direct and control the worker. Misclassification brings back taxes, penalties and unpaid overtime.
