Buying an Existing Home Health Agency: Due Diligence Before You Sign

With CMS currently holding a moratorium on new Medicare home health enrollments in most states, acquisition has become the realistic way into this business. Buying a home health agency — rather than starting one from scratch — gets you a Medicare provider number, a book of referrals, and staff already in the field. It also gets you every skeleton in that agency's closet unless you go looking for them first.

We've sat on the other side of the table as state surveyors, accreditation reviewers, and a Medicare hearing officer. We've seen what happens when a buyer skips the hard questions: six-figure repayment demands surface eighteen months after closing, or a plan of correction the seller never mentioned turns into a full recertification survey under the new owner's name. This is general guidance, not legal advice — pair it with your healthcare attorney and CPA — but here's what our team inspects before any letter of intent becomes a signature.

What does a change of ownership (CHOW) actually transfer?

A CHOW under Medicare rules transfers the provider agreement, but it does not wipe the slate clean. The new owner typically inherits:

• The existing survey history and any open plans of correction
• Outstanding overpayment liabilities and active ADRs (Additional Documentation Requests)
• Pending complaint investigations
• The agency's compliance track record with the Medicare Administrative Contractor (MAC)

Key takeaway: a CHOW is a legal continuation of the provider, not a fresh start — so due diligence has to look backward, not just at current census and revenue.

How far back should the survey history go?

Request the last three full survey cycles, not just the most recent one. Look for:

• Repeat deficiencies across cycles (a pattern surveyors flag immediately)
• Immediate Jeopardy findings, even if resolved
• Complaint surveys separate from the standard recertification survey
• Current, unexpired plans of correction and whether CMS or the state accepted them

Ask the seller directly for the CMS Form 2567 (Statement of Deficiencies) and the accepted Plan of Correction for each cycle. If they hesitate, that hesitation is itself a data point. You can also request the agency's current standing through the state licensing agency (AHCA in Florida) and check public deficiency history where available.

What billing and ADR exposure should you look for?

Billing risk rarely shows up on a balance sheet until it's already a demand letter. Before closing, our team walks through:

• Open or recent ADRs and the outcomes (paid, denied, appealed)
• Any Targeted Probe and Educate (TPE) rounds and where the agency landed
• Recoupment or repayment plans currently active with the MAC
• Credit balance reports and any unresolved Medicare overpayments
• OASIS submission timeliness and accuracy trends, since these tie directly to case-mix and payment accuracy

Key takeaway: billing exposure inherited through a CHOW does not disappear because ownership changed hands — the new owner typically steps into the same liability.

Are the staffing files and personnel records in order?

Personnel files are one of the fastest things a surveyor pulls after a change of ownership, because new owners often haven't yet touched them. Pull a sample — not just the administrator's file — and check for:

• Current licenses, background screenings, and required health clearances
• Competency evaluations and in-service training records under 42 CFR Part 484
• Signed job descriptions matching actual roles performed
• Supervisory visit documentation for home health aides
• Whether the agency has a qualified Administrator and clinical manager on record, and whether they're staying post-sale

If key clinical leadership is walking out the door at closing, that's not a footnote — that's a staffing plan you need before day one.

What should a pre-purchase compliance review actually cover?

A proper pre-purchase compliance review is broader than a financial audit. It typically includes:

1. Policy and procedure review — Are policies current with the latest Conditions of Participation, or are they a decade-old template?
2. Clinical record sample — Pull 10-15 active charts across payer types and diagnoses. Check for physician orders, plans of care, and timely recertifications.
3. QAPI program evaluation — Is there an actual functioning Quality Assurance Performance Improvement program with data, or a binder that exists for survey day only?
4. Emergency preparedness plan — Required, tested, and updated, or outdated and untested?
5. Infection control and emergency preparedness compliance — Frequently cited areas in recent survey cycles nationally.
6. Contract and MOU review — Especially for any contracted or per diem staff, therapy arrangements, or DME suppliers.

Agencies preparing for a sale sometimes tighten up documentation right before a buyer's review. That's not necessarily deception — but it means you want to see records from six to twelve months before diligence began, not just the freshly cleaned-up file.

How does licensure transfer in Florida versus other states?

Florida requires a separate change of ownership application through AHCA under Chapter 400, F.S., independent of the Medicare CHOW process. The timelines rarely align, and operating outside your approved licensure window — even briefly — creates its own exposure.

Other states vary widely: some require full relicensure, others a simple notification. Confirm your state's specific CHOW licensure process before you set a closing date, because a Medicare-approved CHOW does not automatically mean you're licensed to operate under state law on day one.

What should be in the purchase agreement itself?

Due diligence findings should shape the deal terms, not just your decision to proceed. Common protections include:

• Escrow holdbacks tied to known survey or billing exposure
• Seller indemnification for pre-closing deficiencies and overpayments
• Representations and warranties on compliance status
• A defined transition period with the outgoing administrator or DON

None of this replaces legal counsel, but knowing what to ask your attorney to include starts with knowing what your compliance review actually found.

Getting ready before you even make an offer

Whether you're evaluating your first acquisition target or your third, the agencies that come out ahead treat due diligence as a compliance exercise first and a financial one second. A clean P&L can sit on top of a fragile survey history — and that history follows the provider number, not the prior owner.

If you're exploring home health agency acquisition and want a second set of eyes that has actually sat on the surveyor's side of the table, our team can run a pre-purchase compliance review alongside your financial and legal due diligence. We also support agencies exploring non-Medicare, private-duty, and state-licensure-only paths while enrollment remains paused — see our startup support resources for that route.

Buying an existing agency is still the most realistic way into this industry right now, but only if you know exactly what you're inheriting. Talk to the Solutions for Care team before you sign.