How to Start a Medical Transportation Business
Getting to and from medical appointments can require a lot of driving and waiting, which is a challenge for people who cannot drive themselves. However, when family and friends are unavailable, medical transportation service is helpful.
Typical systems, such as bus routes or Uber rides, may be unavailable if the individual needs a specialty vehicle to accommodate wheelchairs or oxygen tanks. Fortunately, medical transportation is a popular service that provides a solution to customers needing frequent, non-emergency rides to medical appointments.
Business Description
A medical transportation company provides rides in vehicles that are typically ADA compliant. Medical transportation businesses can operate with a single vehicle or with a fleet of vehicles. Rides are usually on a scheduled route or a custom route for customers needing door-to-door rides.
Often, the customers who use this service are elderly or persons with disabilities who may have frequent appointments. In addition, customers who require a vehicle that can accommodate wheelchairs, mobility devices, stretchers, or medical equipment are also individuals who benefit from medical transportation services.
A medical transportation business can operate independently or have contracts with medical organizations like hospitals, senior living, dialysis centers, or assisted living facilities. The rates for a ride can be costly; however, some insurance policies will cover the customer’s non-emergency medical transportation costs, making the service more accessible to those who need it.
Industry Summary
In the U.S., there are approximately 166,000 special needs transportation businesses, generating $11 billion annually. Over the last five years, the industry has grown each year at a steady rate of 3.3%. The medical transportation industry is expected to see continual growth as the elderly population grows.
Related Industries
Industry Trends
In recent years, the U.S. has seen an increased number of individuals aged 65 and older. As elderly individuals make up many of the medical transportation industry’s customers, medical transportation will also presumably grow with the aging population. For instance, in the U.S., the population of adults aged 65 and older has grown by 13.8 million between 2010 and 2019. That number is expected to continue growing as the Baby Boomer generation ages.
Although growth is predictable, some challenges can hinder a new business’s growth:
- Fluctuating gas prices: Elevated gas prices increase operation costs, narrowing the profit margin.
- Rising employee wages: Higher employee wages also increase operating costs.
- Increased vehicle prices: Like the previous two challenges, the inflated cost of vehicles is a hurdle for new businesses that need to purchase one or several cars. Rising wages, gas prices, and vehicles could strain a new business’s initial profit.
- Liability: Although medical transportation is intended for non-emergency situations, there could be times when a customer has a medical emergency while headed to appointments, which could become a costly liability for a new business.
Target Market
Finding a healthy market helps ensure profitability. For instance, populated areas are great markets for medical transportation businesses since the demand for rides to local medical offices is higher. The customers will primarily be elderly persons and persons with disabilities who need vehicles equipped to accommodate mobility devices or medical equipment.
Other places to find customers include individuals needing door-to-door service, medical organizations (i.e., hospitals, doctor offices, and long-term care facilities), and medical insurance companies.
Checklist for Starting a Medical Transportation Business
Starting a medical transportation business can be a great way to help people in your community while also making a profit. However, there are some things you need to do before you can get your business off the ground. Use this checklist to make sure you have everything covered.
Step 1: Determine what type of medical transportation business you want to start
There are several kinds of businesses that offer medical transportation services, from non-emergency transport (NEMT) to more specialized ambulance services. Knowing what type of business you want to start will help you determine the kind of vehicle or vehicles you’ll need, the staff you’ll need to hire, and what kind of training and certification will be required.
Step 2: Write a Business Plan
A business plan is an essential tool for any business, and a medical transportation business is no exception. When writing a business plan for a medical transportation business, there are a few key points to keep in mind.
First, it is important to clearly define the services that the business will provide. Will the business offer non-emergency transportation or emergency transport? Will it provide transportation for patients with disabilities or those who are bedbound? Are there already competitors offering this service? If so, what is your business going to do better or different from them?
Once the services have been defined, it is important to develop a marketing plan that will attract customers. In addition, the business plan should include an operations plan that outlines how the business will function on a day-to-day basis.
Finally, it is important to create financial projections that show how the business will generate revenue and profit. With a well-crafted business plan, a medical transportation business can be up and running in no time.
Related: How to write a business plan
Step 3: Name the Business
When it comes to naming a medical transportation business, there are a few things to keep in mind. First and foremost, the business name should be easy to remember and pronounce. It should also be indicative of the services you provide. In other words, avoid names that are too general or vague. You want your potential customers to know exactly what your business does at a glance.
Not only does the name have to resonate with your customers, but it also has to be available to use.
Related: Tips for naming a business
Step 4: Form a Business Entity
There are many business entities (also called a legal structure) to choose from when starting a medical transportation business. Each has its own advantages and disadvantages, so it is important to consider which one is best for your specific company carefully. The most popular business entities for medical transportation businesses are sole proprietorships, limited liability companies (LLCs), and S corporations.
Sole proprietorships are the simplest and most common type of business entity. They are easy to set up and require very little paperwork. However, sole proprietorships offer no personal liability protection, meaning that the owner is personally responsible for all debts and liabilities of the business.
LLCs are more complex than sole proprietorships and require more paperwork to set up. However, LLCs offer personal liability protection for the owners, meaning that they are not personally responsible for the debts and liabilities of the business. This can be a major advantage for medical transportation businesses, as they can be sued for negligence if something goes wrong during transport.
Corporations are similar to LLCs in that they offer personal liability protection for the owners. However, Corporations are more complex to set up and maintain than LLCs.
Related: Comparison of business entities
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
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Step 5: Select Your Location
When selecting a location for a medical transportation business, it is important to consider the specific needs of your target market. For example, if you are planning to transport elderly patients, you will need to be located near retirement communities and assisted living facilities. If you are catering to a pediatric clientele, you should be situated near hospitals and clinics that serve children.
Once you have narrowed down your options, it is also a good idea to consult with local zoning experts to ensure that your chosen location complies with all applicable regulations. By taking the time to carefully select a suitable location, you can set your medical transportation business up for success.
Step 6: Apply for Business Licenses and Permits
Licensing for non-emergency medical transportation businesses varies by state. In general, every business must certify that all drivers and attendants have completed a safety program, CPR certifications, clean driving record, passed a criminal background check, and have a negative drug test.
To reach the most customers, a business will want to apply to be a Medicaid provider in addition to obtaining a National Provider Identifier (NPI).
Also, some states, such as Illinois, have additional licensing requirements to operate as a medical carrier or a medical transportation service.
The above licenses are specific to medical transportation businesses. Every state and city will vary, however, there will also be general licensing to research, such as a local business license, Employer Identification Numer (EIN), sales tax permit, and more.
Related: Common business licenses, permits, and registrations by state
Step 7: Find Financing
Many entrepreneurs find the biggest challenge in starting a medical transportation business is finding the right funding.
There are a number of ways to fund a medical transportation business. One option is to take out a small business loan. Another possibility is to seek out venture capitalists or angel investors.
Before approaching possible lenders or investors, it’s important to have a solid business plan in place. This will give you a better chance of success when seeking out funding.
Step 8: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 9: Get your Marketing Plan in Place
A medical transportation business provides non-emergency transportation services for patients who need to get to and from medical appointments. While the demand for this type of service is growing, it can be challenging to market a medical transportation business effectively.
One way to reach potential customers is by partnering with local doctors, hospitals, and senior living facilities. You can also promote your business through online directories and by advertising in local publications. In addition, it’s important to create a strong social media presence to reach the families of potential customers who may be searching for this type of service online. By taking these steps, you can help ensure that your medical transportation business is successful.
Related: Low-cost ideas to market a new business
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Step 10: Purchase Equipment
When starting a medical transportation business, there are a few key pieces of equipment that you will need in order to provide quality care for your patients. perhaps the most important piece of equipment is a reliable vehicle.
If you are transporting patients who are unable to walk, you will need a van or SUV that is equipped with a wheelchair lift. You will also need to make sure that your vehicle is clean and comfortable, as this will help to put your patients at ease. In addition to a reliable vehicle, you will also need to invest in some basic medical supplies, such as Band-Aids and fire extinguishers, as well as any other state requirements.
Step 11: Get Business Insurance
When starting a medical transportation business, it is important to make sure that all of the necessary insurance coverage is in place. The type of insurance needed will vary depending on the specific business model, but there are some basic types of coverage that all businesses should consider.
Perhaps the most important is liability insurance, which can protect the business from financial damages if someone is injured while using the transportation services. Other important types of coverage include vehicle insurance, which covers the cost of repairing or replacing vehicles in the event of an accident, and workers’ compensation insurance, which provides benefits to employees who are injured while on the job.
By carefully selecting the right insurance policies, medical transportation businesses can reduce their risk of financial losses due to accidents or injuries.
Step 12: Hire Employees
A medical transportation business provides non-emergency transportation services for patients who need to travel to and from medical appointments.
The most important employees in a medical transportation business are the drivers. They must have a clean driving record, a valid driver’s license, and experience driving in different weather conditions. They must also be familiar with the area where they will be driving and know the best routes to take to get their passengers to their destination safely and on time.
As the business grows, you will likely need to add additional employees. In addition to drivers, a medical transportation business will also need dispatchers. Dispatchers work behind the scenes to coordinate pickups and drop-offs, and track the location of the company’s vehicles at all times. They must have excellent customer service skills, as they will be interacting with both passengers and drivers on a daily basis.
Finally, a medical transportation business will need office staff to handle billing, scheduling, and other administrative tasks. While not required, it is helpful if office staff have experience working in the medical field. This way, they can better understand the needs of the passengers they are dealing with on a daily basis.
Related: Hiring your first employee
Step 13: Set up Non-Emergency Medical Transportation Software (NEMT)
There are many software programs available to help manage a medical transportation business. Dispatch software can help to schedule and track transportation services, while GPS tracking can help to ensure that drivers stay on route and arrive on time. fleet management software can also be used to maintain vehicles and ensure that they are properly maintained. In addition, billing and invoicing software can help to streamline the process of billing insurance companies and patients for transportation services. By using these tools, medical transportation businesses can operate more efficiently and provide better service to their clients.
How much does it cost to start a medical transportation business?
A medical transportation business has some upfront costs—arguably high start-up costs because specialty vehicles with wheelchair accommodations are expensive assets. So, let’s discuss some of the main expenses when starting a medical transportation business.
Business Formation. Permits, licenses, and insurance costs are some of the initial costs for opening a business. States often charge a filing fee to license your business, and sometimes permits apply. Generally, business licenses cost anywhere from $50 to several hundred dollars. The cost varies by state, so check with your local state’s government website for their cost breakdown.
Insurance is another essential business need. In case of accidents, losses, or liabilities, insurance can protect you from bearing the entirety of the loss costs. But, again, insurance varies based on risk exposure and coverage amounts. The best way to get an estimate is to contact an insurance company for a quote.
Vehicles. Vans, personal autos, and buses will make up a large portion of your initial expenses. For example, vans with a wheelchair lift or ramp can cost between $15,000 – $100,000, depending on size and modifications.
Initial Employee Wages.
It’s important to have cash on hand to pay your employees as many customers will be billing through insurance and Medicare and it’s not uncommon to have to wait as long as 90 days to receive payment.
According to Indeed, the average hourly wage for medical transportation drivers in the U.S. is about $15 per hour.
Marketing. Advertising is a marketing cost that, if done well, will return its investment in the form of paying customers. The amount spent on advertising varies but is an essential expense.
As a general guideline, small businesses should budget about 2 – 5% of their revenue for business-to-business advertising and about 5 – 10% of revenue for business-to-customer advertising.
Route Planning Software. Medical transportation software systems (aka NEMT software, which stands for non-emergency medical transportation software) help to plan routes and coordinate driver schedules.
There are various software systems on the market, with many offering monthly subscriptions or per-trip pricing. Plan pricing varies based on the software and the payment option you choose. A quick online search for NEMT software will show you some available options.
How profitable is a medical transportation business?
Given the industry’s predictable growth, a medical transportation business can expect to turn a profit. Additionally, with multiple vehicles on the road, the profits can scale quickly.
Medical transportation businesses commonly charge a base price for rides, plus mileage and additional costs like waiting time fees. For example, although prices vary greatly depending on location, demand, and insurance coverage, some medical transportation businesses charge a base rate for wheelchair rides between $25 – $35 for a one-way trip, plus mileage at approximately $3 – $5 per mile. Round-trip rides often double the base rate and mileage. Additionally, the waiting fee generally ranges from $15 – $30.
Let’s assume that one solo-rider round-trip ride takes one hour to complete. Under this assumption, a medical transportation business could conduct about eight daily trips during business hours. Calculating only the base rate, we can estimate that a round trip costs $65 ($50 base, plus a $15 waiting fee).
Multiply the $65 trip estimate by eight trips, and we can conclude that one vehicle makes $520 daily. So, if the business runs 5-days a week, it could earn $2,600 per week or $10,400 per month.
After fuel, employee, and maintenance costs, the business could expect to see a profit, especially with a fleet of vehicles on the road.
What skills are needed to run a medical transportation business?
Certainly, starting a business is no easy venture. A new business takes time, energy, and money. However, knowing which skills may come in handy can help alleviate some of the chaos of a budding business.
Planning and Organization. Setting up a medical transportation business requires planning routes and organizing schedules so that customers are picked up on time and employees are sufficiently staffed. In addition, an organized plan minimizes waste. For example, setting up routes that pick up multiple individuals from the same area can minimize deadheads and increase profits.
One solution to help plan routes is to purchase route planning software. These systems often also help with customer billing and dispatching drivers.
Similarly, employee scheduling is another crucial task to improve business flow. Ensuring enough employees are available and scheduled for specific routes keeps the system running smoothly.
Marketing. Getting the word out about your business involves consistency and networking. However, it is time well spent because building up contracts and routes ensures that your business continues generating income.
Marketing can be accomplished through advertising or in-person networking. Fortunately, you can hire out these two aspects of marketing—but at a cost. So, if initial funds are tight, having some confidence in this area can help you jump-start your business.
Medical Knowledge. You may benefit from medical knowledge, especially if you drive one of the vehicles. Although being a medical professional is not required, nor will you provide medical services to your customers, it may help to have some basic first aid and life-saving CPR knowledge in case an incident arises during transit.
What is the NAICS code for a medical transportation business?
The NAICS code for a medical transportation business is 485991, which is categorized under special needs transportation.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Related: What is a NAICS code?
Final thoughts
Although the start-up costs are high, you will likely earn a profit, considering that the 65 and older population is growing. Of course, no business is without its hard work and effort, but taking steps to set up your business for success can help return your investment and grow your business into a lucrative endeavor.
