How To Start an Assisted Living Facility in 8 Steps

If one aspires to open an assisted living facility, they first need to learn the prerequisites of the industry, the certifications they may need, and other steps on how to start an assisted living facility. Their research process will include conducting market research to determine the barriers to entry and the viability of opening a facility in their location.  

The good news is that there are definitely great opportunities out there. While the American Health Care Association (AHCA) reports that there are already approximately 28,900 registered assisted living communities across the U.S, the need for elderly care is still in high demand, primarily due to the aging Baby Boomer generation that is approaching retirement. 

Furthermore, 2021 statistics published by the U.S. Census Bureau show that approximately 54 million seniors living in America are 65 or older, accounting for 16.5% of the nation’s population. And the AHCA’s 2019 figures indicated that there were approximately 918,000 residents living in an assisted living facility with only 453,000 caregivers working in assisted living. 

Though these statistics may be encouraging for potential investors, they also suggest that the demand for assisted living care far outweighs the number of available caregivers. That is one of the reasons the nation faces a staffing crisis. And as the need for care continues to increase, the ratio of residents to nurses will only continue to increase.

Barriers to Entry

Buying or founding a nursing home is a big decision. It is, thus, worthwhile looking at the potential costs and barriers to entry, which include:

• Comprehensive knowledge of compliance rules and regulations: Before an aspiring owner opens an assisted living facility, it is essential to research what federal and state regulations are in place. Assisted living facilities mainly operate on a state level, meaning permits and regulations will differ by state. 
• Associated labor costs: Labor costs are one of the most significant overheads for assisted living facilities, as most assisted living residents are aged 85 years and older and need help with Activities of Daily Living (ADLs). Therefore, an aspiring owner will need to factor in and budget for overnight caregivers and adequately trained staff, like registered nurses and CNAs.
• Limited prospective customers: Medicaid funding for assisted living varies depending on the state. Therefore, some residents may have to pay for most of or the entirety of their stay out of their own pockets. According to Genworth Financial, the average monthly payment for an assisted living facility is $4,500. Therefore, the pool of customers is limited due to the lack of affordability of an assisted living facility.
• Saturated market: The assisted living market is considerably saturated because there is a small pool of prospects. Typically, prospective residents and their families will visit several facilities before making a final decision. Therefore, a newly-opened facility will face fierce competition from well-established facilities already known within the local community. 
• Technology costs that fail to factor in your census numbers: For facilities to stay competitive, they must invest in modern technology to ensure workflow efficiency. However, long term care software is costly, and you will usually have to pay the same amount even if your facility is not at full capacity. Therefore, it is advisable to find a reasonable software vendor with value-based pricing that adjusts the per patient day (PPD) calculations according to the number of residents currently in your facility. 
• Staff training: Long term care software systems require training so the facility’s staff can maximize the software’s features and capabilities. Facilities can identify their tech-savvy “super users” so they can first learn the software’s programs and processes, becoming an authority in the facility. They can then help and train other staff members. Facilities can also pursue vendors that offer free online EHR training programs, as they are proven to improve compliance significantly. 

How To Open An Assisted Living Facility in 8 Steps

Now that we have addressed potential barriers to entry, we will now discuss how to open an assisted living facility. The following steps offer sufficient guidance to aspiring facility owners asking how to start an assisted living facility.

1. Create a Business Plan

Address and map out the potential problems by asking the following questions:

• What startup costs are there? 
• How will I brand my assisted living facility? 
• When can a return be expected once the facility is launched?
• Who is the target market?
• How much will residents be charged?

2. Form a Legal Entity for Your Assisted Living Facility

Structuring the organization as a Limited Liability Company (LLC) will protect the facility owner from being personally liable should the facility be sued. Some of the most common lawsuits facilities face relate to:

• Abuse
• Financial exploitation
• Government-provided insurance policies
• Compliance
• Acquisitions and affiliations
• Bank transactions.

Therefore, it is worthwhile to either have in-house legal counsels or hire qualified agents who can advise and ensure both the facility and the owner are fully protected on privacy and compliance matters. 

3. Register For Taxes

Before opening an assisted living facility, it is vital to register for federal and state taxes. This means applying for an EIN (Employer Identification Number) via the IRS website.

4. Open a Business Bank Account and Credit Card

Aspiring owners wanting to open an assisted living facility must protect their personal assets. This means it is essential to open a business bank account, where all business transactions occur. Opening a business account also makes it easier to track all accounting processes, expenses, and tax payments more organized. These details can be synced with the long term care software to ensure maximum efficiency and accuracy. 

5. Obtain the Necessary License and Insurance

Without the proper permits and licenses, an owner will be subject to hefty fines or even face jail time. There is also the risk of the facility getting shut down. Therefore, aspiring owners must visit the U.S. Small Business Association (SBA) reference to state licenses and permits to find the necessary information before making any financial investment. 

Furthermore, the facility will need business insurance coverage to operate safely and lawfully. That is why it is advisable to purchase a General Liability Insurance, which ensures coverage for the most common issues that small businesses need, and  Workers’ Compensation Insurance, which covers employees’ medical expenses and other work-related injuries.

6. Define Your Brand

A facility’s brand is what the company stands for and how local communities will perceive the facility. Therefore, having a solid brand will help a facility stay competitive. 

7. Go Digital With Your Marketing

For new facilities, it is essential to promote and market the facility to attract residents.  In today’s modern world, digital marketing is becoming more popular. Some of the most effective digital marketing strategies include building a solid website, using social media to build rapport with the local community, and blogging to provide relevant and quality information to prospective customers. 

After the first residents have been enrolled, they can help as brand ambassadors, spreading the word about the facility. 

8. Investing in Long Term Care Software

Another way a new assisted living facility can stay competitive is to adopt an efficient care plan software tailored to the specific needs of an assisted living facility. An example of a software module specifically designed for assisted living facilities is the Service Tracker, intuitive software that allows facilities to document services at the point of care, creating more accurate billing invoices.

Contact us here if you would like to test drive our user-friendly long term care software.

Assisted Living vs Nursing Home CNA Roles 

If we look at assisted living vs nursing home CNAs, the differences are mainly in the different levels of care and services offered. This brings us to the topic of state staffing requirements. When considering how to start an assisted living facility, it is essential to research and understand state mandates, such as staff requirements. 

Some states require pre-employment checks, such as previous employment history, criminal background checks, and credit checks for aspiring owners and CNAs who will be working in the facility. Therefore, aspiring owners need to understand all the requirements on how to start an assisted living business before embarking on the business venture. 

Below, we will highlight the differences between assisted living vs. nursing home CNA roles. 

Assisted Living Facility

Assisted living facilities are catered to seniors who need assistance with ADLs, like bathing, feeding, and taking medication. Here, residents do not need constant supervision as is required in a nursing home. Because the level of care in assisted living facilities is less specialized, CNAs do not need the same level of medical training as registered nurses. 

Some of the top responsibilities of CNAs in an assisted living facility include:

• Feeding, bathing, and dressing residents
• Taking residents’ vital signs
• Serving meals, cleaning rooms, and making beds
• Setting up medical equipment and assisting with medical procedures
• Answering calls for assistance, especially when residents’ condition or behavior changes

Skilled Nursing Home

As mentioned earlier, it is essential to differentiate between assisted living and nursing homes and the difference in CNA job description before an aspiring owner can fully understand how to open an assisted living facility and what are the requirements for an assisted living facility and nursing home.  

A nursing home is catered to seniors who need round-the-clock care. Residents often suffer from more complex health conditions, such as chronic illnesses, severe pain, or permanent disabilities. This means that nursing home CNAs may have to assist with other services, such as physical or speech therapy sessions.

Depending on state regulations and facility requirements, some CNAs in nursing homes may have additional training and can assist with advanced duties, such as:

• Assisting in minor medical procedures
• Measuring vital signs, oxygen levels, blood pressure, and temperature
• Documenting food and liquid consumption
• Changing dressings and bandages
• Explaining medical procedures to residents and their families

How To Start an Assisted Living Facility 

When an aspiring owner is considering how to start an assisted living facility, they must not forget to weigh the pros and cons of the long term care industry. Even though this business is noble and satisfying, it is also fraught with challenges like oversaturation, the death of residents, and having to deal with difficult family members and residents. 

The reality is that owning and operating an assisted living facility can be profitable, but it is equally stressful and time-consuming. Facility owners often have little time for their personal lives, with some even living in the facility. 

However, owning a facility also gives owners a sense of pride, work satisfaction, and fulfillment that other industries and professions cannot offer.  

Therefore, before embarking on owning an assisted living facility, aspiring owners must understand what is required and what expectations they must live up to. 

For more on recent trends in long term care, read our blog and subscribe to the LTC Heroes podcast.