Starting a NEMT Business: A Comprehensive Guide
The Non-Emergency Medical Transportation (NEMT) sector is a source of great opportunity and consistent growth.
Fueled by an aging population, increased healthcare accessibility, and demand for patient-centered care, the NEMT industry presents an exciting avenue for entrepreneurs.
A Lucrative Market
The NEMT sector, while built on the simple premise of providing crucial medical transportation, is a high-profit, high-demand market. Industry professionals who have unlocked the formula for success report healthy revenue, even amidst economic fluctuations.
With a potential profit margin of 20-30%, the NEMT industry offers robust financial rewards for those ready to navigate its unique challenges.
NEMT is a high-demand market because the need for the service is present, and it is unlikely to diminish.
While seniors form the largest customer base for most NEMT providers, the demand stretches beyond this demographic. NEMT is indispensable to individuals grappling with various medical conditions and healthcare needs, like dialysis patients, individuals with chronic conditions, and patients who need post-injury physical therapy.
In an economic downturn, many industries suffer as consumer spending contracts. However, the need for healthcare services — and by extension, NEMT — tends not to decrease and, in some cases, may even rise. Health is a primary need, and medical appointments cannot be postponed indefinitely without severe consequences.
A Note on Medicaid NEMT vs. Private Pay
As you launch your NEMT business, one crucial decision will be the balance between Medicaid NEMT and private pay clients.
As you start out, you might find it beneficial to opt for Medicaid NEMT business initially. Medicaid NEMT contracts need you to partner with a Medicaid broker who can then provide consistent revenue and a steady stream of clients.
Also, reliable, polite service to Medicaid beneficiaries can lead to positive word-of-mouth and referrals from healthcare providers, social workers, and the clients themselves.
However, Medicaid rates that brokers pay out are lower than what you might receive from private pay clients, i.e., clients that directly contract you for medical transport. As your business grows and establishes a solid reputation, you can gradually increase your proportion of private pay clients.
Setup Your Business
Once you’ve identified your business model, you need to know the specifics of setting up your NEMT business. This involves establishing your business entity, securing licenses, and getting a National Provider Identifier (NPI), which are the building blocks for your NEMT business.
Establish a Business Entity
Ensure your selected business name is available by searching the Secretary of State business database for your state. This is a resource that is available online and is different for each state.
Once you’ve identified your business name, apply for your Tax Identification Number or Employer Identification Number (EIN) through the IRS website. It’s a relatively quick process and you often get your EIN instantly.
With your EIN in hand, return to the Secretary of State’s portal to establish your LLC or Partnership, marking the formal inception of your NEMT business.
Get Licenses and NPI
Obtain a business license for operating a medical transport service, usually from your local Department of Health and Human Services.
If your business is home-based, you might need to procure a zoning permit from your town or city.
Also, apply for your National Provider Identifier (NPI) number, a unique 10-digit identification number essential for healthcare providers. You can process your application via the NPPES website.
Buy the Right NEMT Vehicles
Your fleet is the backbone of your NEMT business. Choosing the right vehicles for your fleet is paramount to the success of your NEMT business. You’ll need to choose a mix of liveries, wheelchair vans, and stretcher cars.
Identify the Right Vehicles
When considering the types of vehicles for your NEMT fleet, prioritize accessibility and passenger comfort.
Minivans are highly recommended as the first NEMT vehicles due to their ability to accommodate wheelchairs and larger passenger groups more comfortably. Toyota Siennas, in particular, stand out because of their durability and long-term value retention.
Make sure you buy vehicles that comply with the Americans with Disabilities Act (ADA). An increasing number of customers choosing NEMT services are seniors, and they usually have some form of mobility issues. Choosing ADA-compliant vehicles also ensures you meet the necessary legal requirements for operating an NEMT business.
Used Vehicles vs. New Vehicles
Buying used minivans can be a more practical and cost-effective choice for your NEMT business when starting.
The insurance costs associated with new vehicles are a significant overhead that can strain your business’s cashflow.
Aesthetics (like minor scratches or dents) should not be your primary concern when buying used vans. Instead, you should focus on the vehicle’s safety, reliability, and overall operating condition, as these factors will significantly impact your insurance premiums, service delivery, and customer satisfaction.
Online marketplaces have become valuable platforms for sourcing used minivans. Pre-COVID, used minivans with under 150,000 miles could often be sourced for approximately $7,000-$8,000. However, market dynamics have shifted, and the current prices for similar vehicles have risen to about $12,000, particularly in urban regions like New York.
Hire and Train Drivers
Building an efficient, reliable, and compassionate team of drivers is a key success factor for any NEMT business. There is a compliance standard to meet when hiring drivers for your NEMT business. Plus, to work as a NEMT driver, they need to go through mandatory training. You’ll also need to inform your NEMT insurance provider and get your drivers added to the commercial NEMT auto-insurance policy.
Hiring NEMT Drivers
Background Checks: Conduct thorough background checks on all potential hires. This step is a must and involves checking the applicant’s criminal history and any potential red flags that could impact their role as an NEMT driver.
Clean Driving History: Your drivers should have a clean driving history. Major violations or repeated incidents could be cause for concern. Check the driving history of potential hires for any instances of reckless driving, DUIs, or other serious infractions that might pose a risk to your business.
Regular Drug Screening: Having drug screens regularly is a compliance requirement for NEMT businesses. Inform any potential hires of this, and plan for subsequent regular screenings to maintain safety and compliance.
Driver Training and Certifications
PASS Training: The Passenger Assistance Safety and Sensitivity (PASS) training program is designed to provide NEMT drivers with the skills to assist passengers with special needs safely. This program focuses on sensitivity training, securing wheelchairs, awareness of passengers’ needs, and handling emergency situations.
CPR and First Aid: It’s crucial that all your drivers are certified in CPR and first aid. These skills can be lifesaving in the event of a medical emergency during transit.
Defensive Driving: Defensive driving courses teach your drivers how to operate vehicles safely by recognizing and effectively responding to potential hazards. These skills can significantly reduce the risk of accidents.
Wheelchair Securement Certification: With many NEMT clients using wheelchairs, it’s crucial that drivers are certified in wheelchair securement. The PASS training covers the basics, but you might consider specialized wheelchair safety training to ensure the safety of your customer – like the National Rural Transit Assistance Program’s (RTAP) Wheelchair Securement training.
Insurance Approval for Drivers
Commercial NEMT auto insurance is expensive, complicated, and it has a lot of compliance requirements. Registering new NEMT drivers is one of these regulations.
Each time you hire a new driver, you must get insurance approval to ensure that the driver is qualified and does not pose a liability risk.
Before the driver even fills out an application, you’ll have to send their license to your insurance company for approval. This step confirms the driver’s record meets your insurance provider’s standards, ensuring your policy stays valid and your premiums do not rise unexpectedly.
Get the Right NEMT Insurance
Understanding the insurance requirements for an NEMT business and getting appropriate coverage is a vital step in setting up your operation.
Insurance will usually be the biggest overhead for your NEMT business, so you can’t afford to neglect doing due diligence when choosing your insurer. Also, having the right coverage can mean the difference between success and insolvency for your NEMT business.
NEMT Auto Insurance
Businesses are mandated to have commercial NEMT auto insurance. In many states, the typical liability limit for NEMT auto insurance is around $1.5 million. However, this limit can vary based on the state you operate in, so it’s crucial to familiarize yourself with your local regulatory requirements.
Insurance premiums for new providers in the NEMT industry tend to be higher due to a lack of track record and experience, known as a zero rating.
Contrary to what one might expect, these rates are usually not directly related to the age or mileage of your vehicles. Instead, premiums are based on incidents, accidents, and your overall performance as a provider.
NEMT auto insurance does not typically cover damage to the vehicles in your fleet. So, when you’re buying your NEMT vehicles, prioritize safety, reliability, and overall operational condition over minor considerations such as scratches or dents.
Statues mandate that NEMT businesses must have auto insurance. However, to better manage risk, you might consider getting some business insurance as well.
General Liability Insurance: General liability insurance focuses on specific risks, covering third-party lawsuits over bodily injury and property damage, which isn’t covered by auto insurance policies.
Worker’s Compensation Insurance: Worker’s compensation insurance benefits your drivers, covering their medical expenses, rehabilitation costs, and lost wages if they become ill or injured on the job.
Umbrella Insurance: Umbrella insurance acts as a supplementary protective layer, stepping in when the high costs of lawsuits or claims surpass the limits of primary insurance policies.
How to Find an Insurance Provider
Identifying a suitable insurance provider requires careful consideration. While big insurers like State Farm, Progressive, and Nationwide are worth obtaining quotes from, don’t overlook the benefits of working with local insurance brokers.
Insurance brokers understand your local market, can guide you through the insurance maze, and often advocate on your behalf. Ensure you shop around to find a broker who understands your specific needs. Take the time to compare the coverage options between different insurers to get the best value.
Acquiring Your First Clients
The first clients for your NEMT service can be the most challenging to acquire but are fundamental to kickstarting your business. To become a successful NEMT service provider you will need aggressive marketing, networking, and relationship building.
Generate New Business
Explore Broker Relationships: Starting your NEMT business can be made easier by signing up with brokers. They can help provide initial market exposure, aiding in getting your first set of clients.
Tapping into Local Opportunities: Don’t limit your business to only what the brokers bring to the table. Take the initiative and register with local, county, and city procurement offices within your state. This effort can open up a lot of local opportunities in state institutions and care homes administered by the local government.
Broaden Your Client Base: NEMT service is not exclusively for medical appointments. Your client base can be more extensive than just Medicaid-mandated transport services. Many people who use NEMT services have mobility issues, and they may need transportation services that you can naturally fulfill.
Approach Hospitals/MCOs: Hospitals and Managed Care Organizations (MCOs) are obvious targets for your services, but successful partnerships will require extensive groundwork. They usually have their own NEMT services or follow stringent vendor onboarding standards that you must meet.
Networking and Relationship Building
Success in NEMT significantly hinges on strong relationships. Forge these bonds through interactions with peer support workers, social case workers, or administrators.
Senior care homes also present potential opportunities. Develop a marketing plan that goes beyond brochure distribution and focus on genuine conversations and trust-building.
Use Digital and Social Media
Having an online presence is vital. Create a Google My Business page so that people near you can find you online easily. It’s a step towards improving your online visibility, enabling people to locate your services through Google maps when they search for the keyword “NEMT service near me.”
Beyond your Google My Business page, social media channels like Facebook can be instrumental in expanding your reach. Participation in local groups can help you connect with your community. Facebook Ads is another popular platform that can help you generate leads and new business.
NEMT Is a Rewarding Business
Starting a NEMT business requires more than acquiring vehicles and offering rides. Understanding the unique dynamics of Medicaid and private pay business, compliance, and safety are the essential milestones you need to pass.
NEMT software is also a vital tool that you will need when your business starts to grow. It can make managing your day-to-day operations easier, letting you handle more business without hiring a lot of new dispatchers.
Owning an NEMT business is as rewarding as it is challenging. Success in NEMT lies not just in navigating this industry, but also in building and maintaining relationships.