Home care agency due diligence

By the time you are under an LOI on a home care agency, diligence shifts from judging the opportunity to verifying it — confirming, document by document, that the client hours, the funding mix and the caregiver roster the seller described actually hold up. Three findings in this sub-sector are serious enough to change the deal materially or end it outright, and a diligence process built to surface them early is the whole value of this stage.

Get the funder’s confirmation in writing, not the seller’s word for it

Request direct, written confirmation from the government home-and-community-care funder — through the seller with appropriate consent — of what the contract actually requires on a change of ownership, whether consent to assign has been sought, and whether any re-tendering process is scheduled. A seller’s assurance that the contract always just carries over is not a substitute for the funder’s own confirmation, and a contract that turns out to require re-tendering at the point of sale can remove a large share of expected revenue with no recourse.

Pull real caregiver turnover and fill-rate data

Ask for actual turnover figures and shift fill-rate data over at least the past two years, not a summary characterization of the workforce as stable. A rising trend in caregiver departures, or a growing number of shifts going unfilled or filled late, is often the earliest sign of a service quality problem that has not yet shown up in client complaints or lost contracts, and it is exactly the kind of thing a seller under pressure to close a sale has little incentive to volunteer unprompted.

Review caregiver classification against how work is actually supervised

Have counsel review caregiver employment or contractor agreements against how those workers are actually scheduled, supervised and paid day to day, because a contractor label does not survive an employment-standards review if the underlying relationship functions like employment. Worker misclassification exposure carries real retroactive liability — back pay, overtime, statutory entitlements — and a finding here should be quantified and addressed in the purchase agreement, not treated as a minor administrative issue.

Confirm franchise standing where it applies

Where the agency operates under a franchise brand, confirm the franchisor has actually approved or is actively processing the transfer, review the franchise agreement’s remaining term and any renewal conditions, and get clarity on transfer fees or right-of-first-refusal provisions before you finalize pricing. A transfer that stalls at the franchisor stage after you have committed to a purchase agreement is a timing risk worth pricing into your closing conditions.

Reconcile billed rates against actual caregiver cost

Build a reconciliation of billed rates against fully loaded caregiver cost — wages, statutory benefits, overtime, travel time and any premium pay — across the funding mix, rather than relying on a blended margin figure. This is often where a due diligence process finds that reported profitability has been quietly eroding as caregiver wage pressure outpaces billed-rate increases, a trend that does not always show up clearly in a single year’s financial statements.

Test the scheduling and technology systems, not just the org chart

Have someone actually walk through how a new client hour gets scheduled, how an open shift gets filled, and how caregiver hours get reconciled to billing, rather than accepting a description of the process secondhand. Gaps between how the business is described and how it actually operates day to day are common in this sub-sector, and they are far cheaper to find during diligence than after you own the agency.

Search for related litigation and regulatory complaints

Run a litigation and regulatory-complaint search covering the agency, and confirm whether any employment-standards complaints, workplace-safety incidents or funder audits are open or recently resolved. A pattern of complaints, even individually minor ones, can point to a systemic issue in how caregivers are scheduled, supervised or paid that a single findings review might otherwise miss.

Confirm insurance coverage matches the actual risk profile

Request the agency’s current general liability and professional liability insurance policies, confirm coverage limits are adequate for a caregiving business operating inside clients’ homes, and check whether any claims history exists that has not been disclosed. A gap in coverage, or a pattern of claims tied to a specific service line or location, is the kind of finding that changes both the price you are willing to pay and the insurance you will need to arrange for yourself after closing.

Talk to actual clients and referral sources where the seller allows it

Where the seller permits it, and subject to appropriate confidentiality, a short conversation with a handful of long-tenured clients or referral sources can surface information no document search will show — genuine satisfaction, concerns about caregiver consistency, or awareness that the agency is up for sale. This step is used less often than it should be in small-business diligence generally, and it is particularly valuable in a relationship-driven sub-sector like home care.

What the underlying documents should actually show

• Client service agreements and care plans, and confirmation of client and, where applicable, funder consent to their transfer
• Government-funded service-provider contracts, with the assignment or consent clause specifically reviewed
• Caregiver employment or contractor agreements and the scheduling system, cross-checked against actual working patterns
• Franchise territory rights and the franchisor’s transfer approval, where the agency operates under a franchise brand