How to start a hospice business: A founder's guide

Launching a hospice business is a deeply rewarding venture, blending compassion and caregiving expertise with sharp business savvy. The market itself is valued in the tens of billions, driven by a steady need for compassionate end-of-life care for patients and their families.

This guide will take you through the practical steps of validating your business concept, securing funding, obtaining the right licenses, and building your care team to help you launch a successful hospice business in the U.S.

Step 1: Validate your concept and plan your finances

Begin by analyzing local demand. You can review data from the Centers for Medicare & Medicaid Services (CMS) to understand hospice utilization rates in your target county. Also, connect with local hospital discharge planners for firsthand insights into patient needs and referral patterns.

Next, identify your direct competitors. Use the National Hospice and Palliative Care Organization (NHPCO) directory and the CMS Hospice Compare website. Many new owners only look at services offered. A deeper look at quality scores often reveals where established providers fall short, which is your opportunity.

Breaking down your startup costs

Your initial investment requires careful planning. A frequent misstep is to underestimate the cash needed to operate for six to nine months before Medicare reimbursements begin. You might want to secure enough capital to cover this operational gap from the start.

• Licensing and accreditation fees: $5,000 - $15,000
• Electronic Health Record (EHR) software: $2,000 - $10,000+ annually
• Liability and professional insurance: $5,000 - $20,000 annually
• Initial medical supplies: $10,000 - $25,000
• Six months of working capital: $100,000 - $250,000+

Here are 3 immediate steps to take:

• Download hospice utilization data for your target counties from the CMS website.
• Create a list of 3-5 local competitors and analyze their Hospice Compare scores.
• Draft a preliminary budget with line items for licensing, software, insurance, and at least six months of operating capital.

Step 2: Establish your legal entity and secure licenses

First, choose a business structure. Most new hospice owners form a Limited Liability Company (LLC) for its simplicity and liability protection. You might consider an S-Corporation for potential tax savings once profitable, but it requires more administrative work. A CPA can help you decide.

Navigating state and federal requirements

Your primary hurdle is the state hospice license, managed by your state's Department of Health. The application process can take 6-12 months and cost between $2,000 and $5,000. A frequent miscalculation is underestimating this timeline, so start the paperwork immediately.

To serve Medicare patients, you must pass a certification survey from an accrediting body like The Joint Commission or the Community Health Accreditation Partner (CHAP). This survey costs $5,000 to $10,000. After you pass, you will submit the CMS-855A enrollment application to become a certified provider.

Finally, secure a local business license from your city or county clerk. This is a straightforward step but necessary for legal operation. The entire journey from state application to receiving your Medicare provider number can easily take over a year, so plan your capital accordingly.

Here are 4 immediate steps to take:

• Consult a CPA to determine if an LLC or S-Corp is right for your financial situation.
• Contact your state's Department of Health to request the hospice license application packet.
• Review the survey standards on the websites for The Joint Commission and CHAP.
• File for a local business license with your city or county government.

Step 3: Secure your insurance and manage risk

Protecting your business from liability is non-negotiable. You will need a package of several policies to operate safely. Many new owners are surprised to find their general liability policy does not cover care-related incidents, so you must get the right coverage types from the start.

Key insurance policies for your hospice

Your core protection comes from professional liability insurance, also known as malpractice coverage. A typical policy provides $1 million per claim. In addition, you will need general liability, workers’ compensation for your staff, and commercial auto insurance for any vehicles used for patient visits.

A comprehensive insurance package with adequate limits often has annual premiums between $8,000 and $30,000. You might want to work with an agent who specializes in healthcare. Consider providers like Philadelphia Insurance Companies, The Hartford, or CNA, as they understand hospice-specific risks like medication errors or claims of emotional distress.

Here are 4 immediate steps to take:

• Contact an insurance agent who specializes in healthcare to discuss your needs.
• Request quotes for a package including professional liability, general liability, and workers' compensation.
• Confirm with potential insurers that volunteers are covered under your professional liability policy.
• Ask for a sample policy to review the specific exclusions and coverage limits.

Step 4: Secure your location and get equipment

You will need a physical office for administrative tasks and supply storage. Look for a space around 800-1,500 square feet zoned for commercial or medical use. This provides enough room for a small office, a secure records room, and a supply closet without excessive overhead.

When you review a lease, confirm it allows for after-hours access for your on-call staff. Also, ensure the space can accommodate secure, HIPAA-compliant storage for patient files. These details are often overlooked but are operationally significant.

Stocking your supply closet

Some owners purchase all their durable medical equipment (DME) at once. You might find it more capital-efficient to first lease items from a local DME supplier. This approach conserves cash while you build your patient census. You can later buy your own inventory.

• Hospital beds: $1,000 - $5,000 to purchase; $150 - $300 per month to rent
• Oxygen concentrators: $500 - $1,500 to purchase; $100 - $250 per month to rent
• Wound care supplies: Initial stock may cost $2,000 - $5,000

For disposable supplies, you can set up accounts with medical suppliers like Medline or McKesson. They typically have minimum order values between $150 and $250, so plan your purchasing schedule to meet these thresholds efficiently.

Here are 4 immediate steps to take:

• Research commercial properties zoned for medical use in your target area.
• Request rental quotes from two local DME companies for hospital beds and oxygen concentrators.
• Create an account with a major medical supplier like Medline to review their product catalog.
• Ask potential landlords about lease clauses for 24/7 staff access and secure storage areas.

Step 5: Set up your payment systems

Handling patient payments

While most revenue is from insurance, you will need a way to collect co-pays, deductibles, or private pay fees. This often applies to non-covered services like respite care or room and board in a facility.

Many new owners get complex systems they do not need. At the start, you might want a solution with low transaction fees and no monthly charges, especially when your patient volume is low.

For hospice businesses that need to accept payments on-site or on-the-go, JIM offers a streamlined solution. With JIM, you can accept debit, credit, and digital wallets directly through your smartphone. Just tap and done.

At just 1.99% per transaction with no hidden costs or extra hardware, it is useful for collecting payments during home visits. This rate is competitive, as many other payment solutions charge between 2.5% and 3.5% per transaction.

Using it is straightforward:

• Get Started: Download the JIM app for iOS.
• Make a Sale: Type the sales amount, hit sell, and ask your customer to tap their card or device on your phone.
• Access Funds: Your money is available on your JIM card as soon as the sale is done, with no waiting for bank transfers.

Here are 3 immediate steps to take:

• Identify all services you will offer that require direct patient payment, like private pay room and board.
• Compare JIM's 1.99% transaction fee against one other payment processor to see the potential savings.
• Download the JIM app to explore its interface before you process your first payment.

Step 6: Secure your funding and manage finances

Finding the right funding sources

You might want to start with Small Business Administration (SBA) loans. The SBA 7(a) loan program is a popular choice, offering up to $500,000 for working capital and equipment. Lenders typically look for a strong business plan and a credit score above 680.

In addition to SBA loans, consider a business line of credit from a local bank. This gives you flexible access to cash. While specific grants for for-profit hospices are rare, you can search for local economic development grants that may apply to new healthcare businesses in your area.

Planning for the reimbursement gap

Many new owners misjudge the time it takes for Medicare payments to begin after certification. You should secure enough working capital to cover all expenses for six to nine months. This buffer prevents cash flow problems while you build your patient census and await reimbursement.

Your budget should account for a minimum of $100,000 to $250,000 in operating funds. This capital covers payroll, rent, insurance, and supplies before revenue stabilizes. Having this money set aside provides a significant operational advantage and peace of mind during the launch phase.

Here are 4 immediate steps to take:

• Review the SBA 7(a) loan requirements on the official SBA website.
• Contact a loan officer at your local bank to discuss a business line of credit.
• Finalize your budget to ensure you have secured six to nine months of working capital.
• Search for local economic development grants available to new healthcare businesses.

Step 7: Hire your care team and set up operations

Your care team is the heart of your hospice. Medicare requires an Interdisciplinary Group (IDG) for patient care, which includes a physician, a registered nurse, a social worker, and a spiritual counselor. Many new owners hire a full team too soon, which can strain cash flow.

Building your core team

You might want to start with a few key hires and expand as your patient census grows. Your initial team will likely include a part-time Medical Director, a full-time Clinical Director (RN), and at least one RN Case Manager. All clinical staff must hold active state licenses.

• Medical Director: A physician who oversees care plans. Often a contract role at $150-$250 per hour.
• Clinical Director (RN): Manages all clinical operations and staff. Annual salary is typically $90,000-$120,000.
• RN Case Manager: Manages a caseload of 12-15 patients. Expect a salary of $75,000-$95,000.
• Social Worker (MSW): Provides psychosocial support. Salary ranges from $60,000-$75,000.

Once you have your team, you will need software to manage patient records, scheduling, and billing. You can look at hospice-specific EHR systems like WellSky, MatrixCare, or Kantime to handle these operational needs and ensure compliance.

Here are 4 immediate steps to take:

• Draft job descriptions for your initial hires, focusing on the Clinical Director and RN Case Manager roles.
• Research local salary data for healthcare roles to create a competitive compensation package.
• Schedule demos with two hospice EHR software providers to compare features and pricing.
• Network with local physicians to identify a candidate for your part-time Medical Director position.

Step 8: Market your hospice and find patients

Your marketing should target referral sources directly. Focus on hospital discharge planners, physicians' offices, and skilled nursing facilities. These professionals are the gatekeepers for patient referrals, so building trust with them is your primary goal.

Build relationships with referral sources

You might want to hire a marketing liaison to visit these key contacts. A single strong relationship with a hospital case manager can generate two to five referrals per month. Many new owners waste money on public ads, but your budget is better spent on direct outreach.

A proven strategy is to host "lunch and learn" sessions for case managers. Bring lunch and present a 15-minute overview of your services and quality scores. Also, create a one-page sell sheet that clearly shows your unique value, like specialized dementia care or high family satisfaction ratings.

Here are 4 immediate steps to take:

• Identify the top five hospitals and skilled nursing facilities in your service area.
• Draft a one-page sell sheet highlighting your quality scores and unique services.
• Budget for a part-time marketing liaison to visit referral sources weekly.
• Plan your first "lunch and learn" event for a local hospital's case management team.

Step 9: Set your pricing and manage billing

Your revenue will primarily come from Medicare’s per diem payments. This system pays a set daily rate based on one of four levels of care. Most of your patients will fall under Routine Home Care (RHC), which has a national average rate of around $200 per day.

Understanding Medicare reimbursement

The other levels are Continuous Home Care (CHC) for crisis management, General Inpatient Care (GIC) for complex symptoms, and Inpatient Respite Care (IRC). Each has a distinct rate. You must document patient needs precisely to justify the level of care you bill for.

A frequent miscalculation is ignoring the Medicare aggregate cap. This is an annual limit on the total Medicare payments your hospice can receive per patient. Exceeding this cap requires you to repay the difference, so you might want to track your revenue per patient closely from day one.

Billing and private pay services

You will submit claims through your EHR software to your regional Medicare Administrative Contractor (MAC). Incorrect documentation is a common reason for claim denials, which can severely disrupt your cash flow. Ensure your clinical notes always support the patient’s terminal diagnosis and care plan.

For services not covered by Medicare, such as room and board in a facility, you will bill patients directly. You can research what local competitors charge for these private pay services to set your rates competitively. This ensures you are aligned with the local market.

Here are 4 immediate steps to take:

• Review the current Medicare per diem rates for all four levels of care on the CMS website.
• Identify your region's Medicare Administrative Contractor (MAC) for claims submission.
• Create a price list for non-covered services based on what local competitors charge.
• Set up a process to track your revenue per patient against the annual Medicare aggregate cap.

Step 10: Maintain quality and scale your operations

Monitor your quality of care

To maintain high standards, you should track your performance using the Consumer Assessment of Healthcare Providers and Systems (CAHPS) Hospice Survey. This survey measures family satisfaction in areas like communication and emotional support. Your scores are publicly reported on Hospice Compare.

Many new owners focus only on clinical compliance. However, low family satisfaction scores can damage your reputation and hurt referrals. You might want to create a quality improvement plan that targets one or two low-scoring CAHPS domains each quarter.

Know when to grow

Scaling requires careful timing. A good benchmark to hire another RN Case Manager is when your current nurse's caseload exceeds 15 patients. Once you reach a census of 25-30 patients, you might consider hiring a full-time office administrator to manage scheduling and billing.

As you expand, your initial EHR software may not be enough. Systems like WellSky or MatrixCare offer advanced features for managing larger teams and more complex financial reporting. You can re-evaluate your software needs once you consistently maintain a census of 50 or more patients.

Here are 4 immediate steps to take:

• Download the latest CAHPS Hospice Survey questions from the official website.
• Set a target patient-to-staff ratio for your RN Case Managers, such as 12:1.
• Draft a simple quality improvement plan based on one CAHPS survey domain.
• Review your EHR software's features to confirm it can support a higher patient census.

Starting a hospice is a journey of compassion and business sense. Remember that your reputation for quality care will be your greatest asset, driving referrals more than anything else. You have a clear path forward to build a service that makes a real difference in your community.

And as you handle finances, remember that simple solutions often work best. JIM lets you accept payments directly on your phone for a flat 1.99% fee, without extra hardware. Download JIM to get started with your payments.