Home Health Agency License and Medicare Certification: The Full Sequence

A home health agency license and Medicare certification are two different approvals from two different governments, and they have to happen in a fixed order: state license first, Medicare enrollment and certification second, Medicaid and managed care last. Between the second and third steps sits a rule that surprises almost everyone — you must already be caring for at least ten patients before the survey that certifies you can happen.

That single fact reorganizes the whole plan. You are not building an agency and then turning on revenue. You are building an agency, operating it unpaid or on private-pay and Medicaid volume, and only then earning the certification that makes Medicare billable. Everything below is the order that works, with the citations, so you can check it.

The stack, in order

Skip a step and you do not fail — you wait. The stages have different queues at different agencies, and none of them will hold your place while an earlier one catches up.

Step 1: Know which of the three businesses you are starting

“Home health” describes three businesses with different licenses, different rules and different payers:

• Non-medical home care / personal assistance — help with bathing, dressing, meals, companionship. No skilled nursing. Usually private pay and Medicaid waiver programs. Medicare does not pay for it, and it needs no CMS-855A.
• Licensed home health — skilled nursing and therapy under a state license, billing Medicaid and commercial payers, but not certified for Medicare.
• Medicare-certified home health — the licensed agency plus federal certification against the Conditions of Participation at 42 CFR Part 484, which is what lets you bill the Medicare home health benefit.

Choosing the wrong one costs a full licensure cycle to correct. The distinction and its Texas mechanics are laid out on our home health agency enrollment page; this article is the sequence that applies wherever you are.

Step 2: The state license comes first

Every state licenses home health separately, and the details differ enough that national advice is worth exactly one sentence: find your state’s licensing agency, read its rules before you write a business plan, and assume the license is a multi-month project.

Texas is a useful worked example because its rules are unusually explicit, and because a lot of what it requires has close analogues elsewhere.

In Texas the license is a Home and Community Support Services Agency (HCSSA) license issued by HHSC under 26 TAC Chapter 558. What it involves:

Pre-survey training before you can even apply. Under 26 TAC §558.13(a), the administrator and alternate administrator must complete the Pre-survey Training before submitting an application — as must the supervising nurse and alternate supervising nurse for agencies providing licensed home health, licensed-and-certified home health, or hospice. This is not a formality you schedule later. It gates the application.

A category decision. §558.13(b) offers six: licensed and certified home health services; the same with home dialysis designation; licensed home health services; the same with home dialysis designation; hospice services; and personal assistance services.

Real money and a real term. §558.3 sets the initial license fee — including for a change of ownership — at $2,625, with the same amount for a three-year renewal and $1,750 for a two-year renewal. Branch offices carry their own fee per physical address. Under §558.15(b), an initial license is valid for three years.

A qualified administrator. §558.244 requires the administrator and alternate administrator of a licensed home health, licensed-and-certified, or hospice agency to be a licensed physician, RN, licensed social worker, licensed therapist or licensed nursing home administrator with at least one year of management or supervisory experience in a health-related setting — or to hold a high school diploma or GED with at least two years of that experience. Supervising nurses must be RNs with at least a year of RN experience in the last 36 months.

A background that survives review. §558.11 lets HHSC deny a license over an unsatisfied final judgment, delinquent child support, an unresolved federal or state tax lien, an unresolved final Medicare or Medicaid audit exception, or — within the preceding 12 months — a denied, suspended or revoked health facility license, a Medicare or Medicaid sanction, decertification, exclusion or involuntary contract cancellation. It applies to the applicant, controlling persons, persons with a disclosable interest, affiliates and the chief financial officer. Diligence on your own cap table before you file is cheaper than a denial.

Clocks you can plan against. §558.31 gives HHSC no more than 45 days to determine whether an application is complete and accurate, and no more than another 45 days from completeness to license issuance. But §558.12 puts the risk on you: if the application is incomplete, HHSC sends one electronic notice, and you have 30 days to supply what is missing. Miss it and the application can be denied — and the fee is not refunded.

The Texas licensed-and-certified loop

Texas handles the federal dependency in a way worth understanding, because it is a sensible model for how the two governments interlock. Under §558.13(d), an applicant that requests the licensed-and-certified home health category must also apply to CMS for Medicare certification. While CMS is deciding, HHSC issues an initial license reflecting licensed home health services — and the applicant must comply with the Medicare Conditions of Participation at 42 CFR Part 484 as if it were already dually certified.

If CMS certifies you during the initial license period, HHSC adds the licensed-and-certified category to your license. If CMS denies certification or you withdraw, you keep the licensed home health category and the business you built under it.

Read that as an instruction: build to the federal Conditions of Participation from day one. An agency that operates to a lower standard while waiting fails its first survey, and the survey is the expensive part.

Step 3: Capitalization, and why nobody can quote you the number

Under 42 CFR 489.28, a home health agency entering Medicare — including a new HHA resulting from a change of ownership that produces a new provider number — must have “initial reserve operating funds” sufficient to operate the agency for the three months after Medicare billing privileges are conveyed, excluding actual or projected accounts receivable from Medicare. The funds must be available at the time of application submission and at all times during the enrollment process, up to the expiration of that three-month post-conveyance period.

The amount is not a published figure. Per §489.28(b)–(c), CMS determines it from submitted cost report data for at least three comparable agencies in their first full year — factoring geography, urban or rural status, visit volume, provider-based versus freestanding — and takes the greater of your projected first-three-months visit volume or 22.5% of the average number of visits reported by the comparison agencies, multiplied by their average cost per visit.

Two practical consequences. First, anyone quoting you a flat capitalization number for your state is guessing. Second, the requirement is a sustained one — you cannot borrow the balance for a screenshot. The evidence has to hold through enrollment.

Step 4: The CMS-855A

Medicare enrollment for a home health agency runs on the CMS-855A, filed through PECOS or on paper to your Medicare Administrative Contractor. It requires a Type 2 organizational NPI, and per Section 125 of the Consolidated Appropriations Act of 2021, an action plan accompanies the application.

The CY 2026 institutional application fee is $750, paid through PECOS before the application is submitted, and owed again on revalidation and on adding a practice location.

The single highest-frequency cause of a returned 855A has nothing to do with the substance of your agency: it is a mismatch between the licensed entity name, the EIN, and the legal business name attached to the NPI. Those three strings must be identical. If you are not sure which 855 applies to a related line of business, our CMS-855 form guide walks the whole family.

Step 5: The survey — and the ten-patient rule

CMS’s State Operations Manual is blunt about what “ready for survey” means. New providers “must be in full operation and providing services to patients when surveyed” — doors open to admissions, all services necessary to meet the provider definition being furnished, and enough patients that compliance with every requirement can actually be assessed.

For home health specifically, SOM §2008B states that CMS requires each HHA applicant to have provided skilled home health services to a minimum of 10 patients before a survey is conducted, and at least 7 of the 10 should be receiving care from the HHA at the time of the initial Medicare survey.

Sit with the cash-flow implication. Those first ten patients are cared for by a licensed, staffed, insured agency that cannot yet bill Medicare for home health services. They come from Medicaid, from private pay, from commercial arrangements, or from the founders’ patience. Agencies that budget for a licensing fee and a payroll but not for this period are the ones that run out of runway two weeks before the surveyor arrives.

Accreditation or the state queue

You may satisfy the survey requirement through the state survey agency, or through a CMS-approved accrediting organization with deeming authority. For home health the deemed options are ACHC, CHAP and The Joint Commission — a successful deemed-status survey from any of them substitutes for the state survey and produces a recommendation for CMS approval.

The decision is a trade between a fee you control and a queue you do not. It is also genuinely yours: accreditation is not a service we sell, and we will say so rather than sell you an introduction. What we do is tell you when it has to happen relative to the 855A and the license, because getting that order wrong is what costs agencies a quarter.

Step 6: Certification, the provider agreement, and your effective date

CMS’s own description of the certification path, as printed on the CMS-855A, runs five steps: you file; the MAC reviews and recommends to the State survey agency with a copy to CMS; the State agency or approved AO surveys and makes a certification recommendation; the MAC conducts a second review to confirm you still meet enrollment requirements; CMS makes the final decision and, if approved, you sign a provider agreement.

Then the part that governs your revenue. Certified providers are not on the 30-day retrospective billing window that physicians, therapists, labs and several other supplier types get under 42 CFR 424.521. Their effective date is set by 42 CFR 489.13 and, per SOM §2008D, may not be earlier than the date on which the provider met all federal requirements — enrollment under 42 CFR Part 424, the provider agreement requirements at 42 CFR 489.10 and 489.12, and compliance with the Conditions of Participation.

There is no backdating. There is only starting earlier.

The two rules that catch buyers and new agencies

The 36-month rule (42 CFR 424.550(b)). If majority ownership of an HHA changes by sale — asset sale, stock transfer, merger or consolidation — within 36 months of the agency’s initial Medicare enrollment or its most recent change in majority ownership, the provider agreement and billing privileges do not convey. The buyer must enroll as a new agency and obtain a new state survey or accreditation. Exceptions are narrow; one is where the agency has submitted two consecutive years of full cost reports since enrollment or the last ownership change, and low- or no-utilization cost reports do not count.

This is why “buy a certified agency and skip the wait” so often does not work. Diligence has to establish when the seller enrolled and when majority ownership last moved, before price.

The provisional period of enhanced oversight (42 CFR 424.527). New providers — including newly enrolling agencies, those required to enroll as new under the 36-month rule, certified providers undergoing a change of ownership, agencies going through a 100% ownership change by change-of-information, and providers reactivating billing privileges — are subject to a provisional period of enhanced oversight. Its effective date is the date the new provider submits its first claim. Meaning your first claims can be the ones under the most scrutiny, which is an argument for clean documentation from visit one rather than from the first audit letter.

Steps 7 and 8: Medicaid, MCOs and Medicare Advantage

Medicare certification buys you traditional Medicare. It buys you nothing else.

Medicaid is a separate application in every state. In Texas that means enrolling with TMHP through the PEMS portal — a process with its own screening levels, its own revalidation clock and its own failure modes, walked through in our TMHP PEMS guide.

Medicaid managed care organizations are separate again. State enrollment is a precondition, not a substitute; filing MCO applications before state enrollment closes does not start a second clock in parallel.

Medicare Advantage matters more for home health than most founders assume. A large share of the Medicare-eligible population is enrolled in MA plans, and an MA plan is a contract negotiation, not a certification. An agency that finishes certification and stops has credentialed itself into a fraction of its own referral base. Sequencing those negotiations is the work in group enrollment and contracting.

What we do, and what we don’t

Honesty about scope saves everyone a month:

• We do: the Type 2 NPI, the CMS-855A and its ownership disclosures, documenting your initial reserve operating funds inside the enrollment file, state Medicaid enrollment, and MCO, Medicare Advantage and commercial contracting. That is Medicare & Medicaid enrollment plus contracting.
• We don’t: state facility licensure applications, accreditation surveys, or raising the capital. Those belong to you or to specialists in them. What we contribute is the sequence — telling you what has to be true, and by when, so the queues you cannot control overlap instead of stacking.

Start from the open date, not the incorporation date

Pick the month you intend to admit your first Medicare patient. Work backward through certification, survey, the ten patients, the 855A, the capitalization evidence, and the state license — with its pre-survey training, its 45-day clocks and its one 30-day chance to fix an incomplete file. The date you need to begin is almost always earlier than it feels.

If you want that backward plan built against your actual state and target date, a 20-minute consult produces it, with a written scope before anything is committed.

Sources: 42 CFR 424.520, 424.521, 424.527, 424.550 and 489.28 (eCFR); CMS State Operations Manual Chapter 2, §§2008A, 2008B and 2008D; CMS-855A enrollment application; 26 TAC §§558.3, 558.11, 558.12, 558.13, 558.15, 558.31 and 558.244; Provider Enrollment Application Fee Amount for Calendar Year 2026, 90 FR (Dec. 3, 2025). Verified 2026-08-12.