How to Open a Residential Care Facility for the Elderly

With aging populations and declining birth rates, older people make one of the fastest-growing population groups in many developed countries. This demographic change is also causing a gradual rise in the demand for long-term senior care homes.

Let us dig deeper into the type of residential facilities for seniors you can open, what are regulatory requirements, how to create and execute a business plan, and the risks you may have to manage in your entrepreneurial journey in this space.

——————————-

These care homes are expected to provide several services to its residents. These services include but are not limited to serving meals and facilitating assisted daily living, laundry service, and entertainment service.

Started as a small-scale industry, assisted living has been picked up by many large organizations in today’s world. Like any real estate service, long-term senior care homes also work hard to beat the competition with agents and brokers’ help.

How to open a residential care facility for the elderly

Amidst growing competition, most large long-term care homes in North America are owned by large public companies, REITs (Real Estate Investment Trusts), or hedge funds. In other words, they’ve got deep pockets.

If you have ever thought of opening a senior living home, you may have seen that many large firms are reporting very high occupancy of more than 90%. You may also check that resident fees range from $2000 to 5000 per month. It may make you think it is a great business model with high demand, high customer stickiness, continuous cash flow, and excellent profitability.

You may not be wrong, either. However, besides all the positives, you must also understand the detailed process of opening a residential care facility. It may include what it takes to make a care facility successful and the business or operational risks associated with seniors’ residential care homes.

In this article, let’s cover a few of these critical topics.

Understand Various Types of Care Facility

Depending on the audience, care facilities may differ from each other. There are various types of assisted care facilities which provide a varying scope of services.

For example, few facilities may provide independent living premises such as individual apartments within a professionally managed complex – similar to other apartment complexes. Other organizations may give a care facility managed by a residential board, which offers a high degree of personal care services, including professional help with bathing, eating, dressing, and other personal activities.

Depending on their residents’ needs, senior care facilities are mainly of three types – Long-term care homes, Supportive housing, and Retirement homes.

Some seniors may need 24/7 nursing care in a trusted environment. For these people, long-term care homes work best. Also known as nursing homes, these facilities cater to the fragile seniors’ needs requiring continuous care throughout the day.

How to open a residential care facility for the elderly

Assisted living homes work for seniors who may need moderate support and care in their day-to-day personal activities. These facilities are also known as supportive homes. Residents in these facilities may be mobile but need help with daily activities like bathing, eating, etc.

These are also known by a few other names like adult family homes, care homes, or adult care homes. They can vary in size from having four bedrooms for few residents to large communities with a few hundred single or double-occupancy bedrooms.

On the other hand, retirement homes are care homes for financially independent seniors who can take care of themselves on their own. In these facilities, elderly clients need minimal assistance in their daily activities. These homes are part of independent living communities for reasonably healthy seniors. Many seniors, who may live alone otherwise, choose retirement homes over their home settings to live with people of their age and avail occasional care if they need it.

Different types of senior care facilities may require very different business models because of their residents’ needs and facility size. Therefore, as part of your research, you may have to analyze the ecosystem around the type of facility you intend to start to avoid making your business venture highly risky and a financial disaster.

 

You might also like Best Ways to Get Clients for a Home Care Agency

 

Regulations & Requirements for Residential Care Homes

Like starting any business, opening residential care facilities also requires an in-depth preparation before attracting residents and providing care service. In most jurisdictions, businesses, including residential care facilities, need to complete a minimum of three necessary steps:

  • Understand the regulatory requirements and licenses needed to start the care home
  • Determine the entity structure and apply for registration to incorporate the business
  • Understand the tax structure and taxation laws in the jurisdiction

Depending on the country’s regulation, you may have to deal with the central/federal government or the provincial/state governments. For example, in the United States, different states regulate the licensing and compliance for the residential care facilities in that state. Similarly, in Canada, various provinces may have different licensing needs.

Moreover, within states or provinces, different departments may oversee the compliance. For example, in a few countries in the USA, the state’s health department manages residential care facilities. While in other states within the USA, independent entities like the Office of Regulatory Services or the Department of Elder Affairs are responsible for overseeing these facilities’ approvals and compliance.

How to open a residential care facility for the elderly

For example, in Ontario, Canada’s most populated province, the licensing authority for seniors personal care homes is the Retirement Homes Regulatory Authority (RHRA). Once can contact RHRA at 1-855-275-7472 (ASK-RHRA), or visit their website at https://www.rhra.ca/en/licensing/general/

Besides, because these care homes provide nursing and healthcare services for its residents, they will need to comply with the federal statutes’ rules like the Patient Self-Determination Act and the Nursing Home Reform Act.

In many jurisdictions, long term care homes may also have to go through periodic health inspections to ensure compliance with senior services’ regulatory standards. In Canada’s Ontario province, Ontario’s Ministry of Health and Long-term Care governs compliance adherence through its Long-term care home Quality Inspection Program (LQIP).

Regulations and compliance requirements may also differ for different types of residential care facilities. For example, retirement homes may also not have many regulatory compliance needs. Still, you must ensure you know your rights and responsibilities as a landlord of these facilities. In Canada’s Ontario province, its ministry of municipal affairs and housing governs this regulatory compliance aspect.

Similarly, assisted living or supportive homes may not need to comply with many federal regulations. However, they will have to maintain paperwork and adhere to the state laws. For these types of facilities, it may be easier to get licenses and permits.

Nevertheless, most jurisdictions in the USA and Canada ensure certain rights to every senior living in a residential care facility. Facility owners and managers of these homes must ensure that these requirements comply with the regulations in letter and spirit.

  • Facility management must provide dignified care and respect for the privacy of every resident. Residents should also be given a lockable, secure space for their valuables.
  • Keep personal care and health records of all residents confidential. Do not disclose them without the concerned resident’s consent. Here, facilities will have to comply with regulations like HIPPA.
  • All new residents should be given, in written form, a statement of the services facility will provide them at the same cost.
  • All residents must be provided with adequate care and services promised to them as per their needs.
  • Facility management must ensure that they don’t tolerate any abuse, neglect, or exploitation of any resident.
  • Without a physician’s authorization, the management or staff should not administer any drug or physical restraints medicines to the residents.
  • Nobody from staff or management should restrict or eavesdrop on any resident making private phone calls or sending mail.
  • Management should ensure residents can file complaints or suggestions without fear from staff or a facility management team member.
  • Residents should neither be restricted from participating or forced to participate in any community activity.
  • Residents should be allowed to manage their finances or delegate it to somebody else. However, any delegation of rights should not be interpreted as ownership.
  • Before discharging a resident for nonpayment or medical reasons, they should be given a notice as required by law and should also be allowed to appeal against the management decision.

While the above-mentioned points constitute key principles, owners and managers of residential care homes must ensure that other requirements mandated by the applicable law are followed.

 

You might also like What Is the Profit Margin of Non-Medical Home Care Business?

 

Execute Your Plan

Once you have identified the type of residential care facility you want to open and understood the regulatory framework associated with that, the next step is to develop a business plan and execute it well.

How to open a residential care facility for the elderly

Below are the ten steps of this business plan to drive operational excellence are:

  1. Select a location and jurisdiction
  2. Do your market research
  3. Complete mandatory courses and training
  4. Create a business plan
  5. Arrange for Financing
  6. Understand Taxation laws and your obligations
  7. Rent or buy the property
  8. Apply for a License
  9. Recruit the right people and establish rules of caring
  10. Inaugurate the Facility

Let’s go through each step in little more detail.

Select a location and jurisdiction

Most older adults may not want to travel very far from the place they spent their whole lives. They are comfortable with the environment and would prefer to live there. So you may have to look at the demography of the location.

The demographic parameters you should analyze are – average household income and net worth, population age and growth, and consistency in regulations and laws.

Do your market research

Like any business, market research is the next step after deciding the location and market where you want to open your care facility.

There may be several potential residents capable of paying for the service in a viable market. This market shouldn’t be flooded with competition to make it attractive enough for you.

You may also want to benchmark the type and quality of service established homes in your target market offer. Based on that, you will have to find ways to differentiate yourself. This differentiation can be better food, personal service, highly qualified staff, caregiver to resident ratio, quality of activities for the residents, etc.

 

You might also like Should I Buy A Home Healthcare Business Or Start From Scratch

 

Complete mandatory courses and training

Depending on the regulatory jurisdiction, facility owners and management may have to complete a specific number of classroom training hours. As an outcome of this training, attendees may receive a certificate. Few jurisdictions may also require continuous training to maintain compliance.

How to open a residential care facility for the elderly

Besides the management, staff may also be required to undergo on-the-job training. There may be additional training for specific services your facility provides.

Create a business plan

Creating a business plan for any business is never easy. It requires a lot of thought process and may have to go through critical scrutiny. One thing you shouldn’t do is making a large investment without a concrete business plan.

As they say – as much time you spend in planning, as little time you will have to in execution. Obviously, here I don’t mean that you should do your analysis until paralysis.

 

You might also like How Can I Value And Sell My Home Healthcare Business

 

Arrange for Financing

As far as government funding is concerned, you may request federal and/or state funding depending on the country’s constitutional structure. In the USA, to be eligible for federal funding, residential care facilities must meet state regulations.

Your financial plan should include your operating income and financial aid that you may be eligible for. The operating income will consist of monthly fees from residents, which may vary from $2,000 to $5,000.

Few governments may provide grants, subsidies, and loan guarantees. For example, in Canada, entrepreneurs may seek out federal or provincial governments. They may surf Innovation Canada (https://innovation.canada.ca/) website to find about programs and services that may help start a new residential care facility.

However, there may not be much government support in other countries and jurisdictions to cover operational costs. So, you must perform the breakeven analysis with reality in mind.

Understand Taxation laws and your obligations

Your preferred location for the care facility, the type of facility, and the services you intend to offer will decide what federal, provincial, and municipal taxes will apply to your business. Accordingly, you may have to apply for tax registration in one or more tax jurisdictions.

For example, in Canada’s Ontario, you may have to get a business number. It will allow you to collect and remit the HST (Harmonized Sales Tax).

How to open a residential care facility for the elderly

Having said that, if your annual business income is less than $30,000, you may be exempt from charging HST. However, you can still claim the input tax credits. You should speak with the IRS (Internal Revenue Services) if your business in the US, or Canada Revenue Agency (CRA) if your business is in Canada for more information.

 

You might also like How to Start a Daycare Centre for the Elderly

 

Rent or buy the property

There may also be regulatory requirements that will play a role in your choice of property. For example, the facility may be restricted to host up to fifteen residents in shared rooms or at most two people in a single bedroom.

After deciding on the location and identifying the property, you may opt to rent or buy it. You must ensure though that it has enough space for the services you intend to offer.

After taking the property’s possession, you may have to renovate and furnish the facility to make it a care home.

The facility will have to fire safety inspection for you to get the license and permission.

There may also be other modifications you may have to make it safer for older adults.   These provisions may include installing grab-bars in toilets, getting flame-retardant beddings, and installing appropriate light at all places.

Apply for a License

To obtain a license for your care home, you must apply for a permit in the right category. Your licensing application may have to include but is not limited to a surety bond, budget information, staff information, and a fire inspection report.

Recruit the right people and establish rules of caring

While the regulations may or may not specify the number of people required, you must ensure that there is help available to all individual residents 24 hours a day. You should check if your jurisdiction requires you to commit to a minimum staff-to-resident ratio at all times.

You may rely on family members, volunteers, or professional staff to serve the residents. Find the best combination to reduce your operational cost and resident needs.

Besides passing the criminal checks, staff should also be patient and passionate about caring for the seniors. The team will include caregivers, geriatric physicians, cooks and servers, laundry persons, housekeepers, drivers, and 24-hour reception.

Also, all staff should complete all mandatory training. Administrators may have to complete an additional certification program and pass a qualifying exam conducted by governing bodies.

 

You might also like How to Start a Transportation Business for the Elderly

 

Inaugurate the Facility

After acquiring all the necessary things like property, furniture, license, operating budget, and the staff, you are ready to inaugurate the facility.

You may hire external sales and marketing agencies to attract new residents.

After you inaugurate the facility and admit residents, ensure your staff and administration are ready for periodic inspections from the authorities. The inspection frequency may vary from 1 year to 3 years. Facilities inspection track record and residents’ feedback may play a role in this inspection frequency.

Management and administration must keep all the paperwork updated all the time. It should also ensure that the complaints from residents and their family members’ are resolved in a timely fashion. Besides getting a bed name, you may face severe penalties for frequent complaints and non-compliance to regulations.

Identify Risks and Manage Them Actively

Like any business, opening a residential care facility also comes with many business and operational risks. Any of these, if materialized, can punch a deep hole in the business plan. A few of the critical risks are:

Staff and Associated Costs

Your staff may constitute the highest cost as you will have to pay for caretakers – day and night. So any uncontrolled expenses may increase the profitability risk of your business.

How to open a residential care facility for the elderly

You may reduce your cost if your family is there to assist in a few non-medical activities, at least. If anybody in your family has caregiver qualifications, it will be even better.

Depending on your location, you may also attract volunteers for other activities like entertainment, etc. It will reduce the workload of full-time staff.

 

You might also like Best Home Healthcare Business Consultants

 

Competitive Pressure

Typically, a family of a resident inquires into multiple care facilities before deciding on one. If you could find staff members who are professional nurses or nursing assistants, it will play a critical role in positioning your facility against the competition. You may also engage external agencies to get referrals on commission.

Considering unpredictably high residential turnover because of low satisfaction, death, or illness, you may have to keep looking for new residents.

Operational and Legal Risk

There can be instances of a resident’s injury and potential lawsuits. These injuries may include slipping and falling, negligent care, staff abuse such as sexual abuse, assault, and violation of resident’s rights.

While it is impossible to avoid all of these risks from occurring in residential facilities for seniors, management must formulate procedures to reduce potential liability and legal costs associated with these unwanted incidents. These steps will include

  • Up to date training of staff and administration
  • Regular medical checkup of all staff and residents
  • Proper maintenance and regular housekeeping of all places and equipment
  • Procedures to deal with residents’ complaints.

Management should also ensure that it keeps all the necessary documentation to put forward their view if required in the court of law.