How to Start a Rehab Center in 11 Steps

It’s no secret that starting a rehab center is fulfilling work. In fact, many behavioral healthcare providers are eager to learn how to start a rehab center that will grow into a successful treatment facility down the line. 

Here’s the truth: You cannot go into this industry unprepared! There are A LOT of moving parts that go into planning and opening a successful rehab center. Unfortunately, it’s easy to miss some of these steps if you don’t know what to look out for. This can lead to big challenges down the line. 

Luckily, this guide is here to highlight these steps for you, so you can make the best decisions possible when opening a behavioral health treatment facility. Keep reading to discover the 11 basic steps you must take to build a rehab facility.

By the end of this guide, not only will you know HOW to start a rehab center, but you’ll also have enough tools to develop the foundation of your organization. Let’s begin!

1. Identify Your ‘Why’

First and foremost, you need to decide what type of rehabilitation facility you’re going to open and WHY you want to open it

  • What is your mission? 
  • How do you envision this organization operating? 
  • And most importantly, what are your core values?

The “why” should be the foundation of your facility. It will help you establish your main objectives and allow you to focus on your target audience (a.k.a. Your ideal patients) down the line.

Ask Yourself These Questions

Here are some questions you should ask yourself:

  • Are you going to focus on drug-related treatments? 
  • What about alcohol addiction? 
  • Who will be in need of your services?
  • Why should they come to you for help?
  • What types of programs are you going to offer? 
  • Are you going to have a detox program? 
  • What about a residential treatment plan? 
  • Will you host therapy sessions?
  • What will your inpatient and outpatient services look like?

The answers to these questions will help you define your “why” and will be a great asset when it comes time to build your business strategy. 

2. Take a Feasibility Study

Once you have established your “why,” it’s time to see how viable your business idea is. This is where a feasibility study comes into play.

In essence, a feasibility study is an assessment of how practical a proposed business plan is. The study aims to highlight how rational of a decision it would be to start this venture and uncover the strengths and weaknesses of the plan.

For a startup rehabilitation center, a feasibility study will seek to answer the following questions as rationally as possible:

  • Should you actually go into this industry?
  • What does it take to successfully enter this market?
  • Is now the right time to proceed? 
  • Who should you work with? 
  • What do you need to continue operations in the long run? 
  • How are you going to achieve this?

At the end of the day, you should ALWAYS enact the help of a feasibility study before you continue with business development. It is absolutely essential if you want to proceed with as few roadblocks as possible.

3. Build a Business Plan

One of the most important steps to starting a rehab center is to set up your business strategy. Think of your strategy as your master plan. Not only does it need to look at your present-day goals, but it also needs to define milestones that reach far into the future.

A strong business strategy is the key to success for your organization. Your strategy should include the following:

  • Financial oversight
  • Program development
  • Marketing strategy and budget
  • Marketing implementation
  • Staff hiring, onboarding, and training protocol
  • Billing and collection plan
  • Residential treatment protocol
  • Family and patient management plan

Another section you might want to add is a patient feedback and data strategy. Once you open your organization, you will want to perform the best quality care and medical practices possible. You can learn how to improve your center through patient feedback and data. Definitely include this into your overall business plan for long-term success.

4. Adopt a Pro Forma & Financial Budget

In the business world, budgeting is everything! And the same goes for the behavioral health industry – you will need a well-advised budget and financial management goals to get started. 

You should make sure your budget and financial goals are feasible to take on the size of an investment that goes into starting a rehab facility. You can accomplish this by laying out a detailed pro forma document that focuses on your business’s financial structure and long-term goals. 

Upfront Budget Expectations

In the beginning, you can expect the majority of your starting finances to go towards your property and staff. You’ll also have to invest in all of the proper equipment for your facility. 

We highly recommend talking to a financial consultant that is experienced with the behavioral healthcare industry to assist you in your financial plan. After all, a sound financial plan will lead to the long-term success of your facility. 

5. Look Into Legal Entity Formation

Now that you know the first few steps on how to start a rehab center, let’s talk about location. This is where you’ll have to get smart. 

First, the entity needs to be legal. For instance, you must carry all of the proper licensing and fill out the correct paperwork before you open your doors to the public. You also need to consider local municipality registrations and zoning requirements. Since this step is so important, we’ll explain it in fuller detail later on.

Important Considerations for Your Location

Next, you’ll want to consider WHERE you’re going to start your business. 

For starters, you don’t want to open a center that is in close proximity to other behavioral health treatment facilities… especially ones that offer the same specialty services as you. This will help you avoid the challenges of direct competition.

Furthermore, you’ll need to do some research on the type of center that is needed in your area. Is there a demand for drug and alcohol rehabilitation where you live? If not, you might want to consider a location that does have a need for your services. 

6. Raise Capital

For the next key step, you’ll need to translate your pro forma document (a.k.a. Your financial model) into investor materials. Yes, you’re now in the phase where you need to begin raising funds for your business.

Depending on the amount of initial investment you need, you might have to take several preparatory steps before you reach out to investors. This includes:

  • Pitch decks
  • Cap raise strategy
  • Investor relations frameworks

Additionally, prepare and organize all of your financial research and documentation as soon as possible if you plan to lend capital from banks and other financial institutions. The earlier you can complete your documents, the faster you can get approval.

7. Get Licensed: Policy and Procedure Manuals

As promised, let’s go into further detail about rehab center licensure. If you are eager to know how to start a rehab facility, then this is by far the most crucial step! 

First, it’s important to know that a rehab center is considered a medical institution in the United States. Because of this, behavioral health treatment facilities require a lot of paperwork and regulation to ensure each center is legal to operate. 

Zoning Requirements

Similar to opening a private medical practice, you’ll need to look into zoning. For example, a residential rehab center could require commercial medical zoning

Zoning and licensing requirements vary from state to state. Contact your local officials and zoning authorities to learn what you need to legally open your center.

Strengthen Your Policy & Procedure Manual 

Next, a big part of your license lies in your Policy & Procedures Manual, also known as P&P. This manual will contain all of the steps you plan to take to implement specific policies in your treatment facility. It may also outline your program structure.

Here’s why this is important: To obtain licensure, your P&P will be reviewed by a licensing board. If your manual has any faulty documentation or missing steps, then the board will reject it. 

Don’t worry, you can reapply for licensing! But, you will have to get back in line and wait for approval before you can start a rehab center. That’s why you want to get it right the first time around.

8. Recruit Your C-Suite

After that, you will need to find the right staff for your rehab center. Keep in mind that your staff are the most important asset of your business! You’ll want to form a strong team right from the get-go to really maximize your long-term success.

Your C-Suite and initial staff that make up your leadership team will most likely consist of a doctor, such as a psychiatrist, a psychologist, and a head nurse. Underneath the leadership, you will probably also have several line staff nurses and case managers to consult with the families and patients. 

Finally, you will also need to consider an administrative team that handles communications, marketing, and your overall business strategy. 

9. Get Accreditation & Payor Contracting

Similar to rehab licensing, you’ll want to look into healthcare insurance accreditation. Although it might not be required in your state, it’s a great asset to have. Here’s why.

In simple terms, accreditation allows your rehab center to receive payment from federally funded Medicare and Medicaid programs. Furthermore, accreditation offers many benefits to behavioral health treatment facilities, including:

  • Improved risk management practices 
  • Bolstered position in the local community
  • Decreased insurance costs
  • Notable quality care standards

To get accreditation, look into The Joint Commission, which is the leading organization that accredits more than 20,000 health care programs in the US. 

Payor Contracting Management

It’s no secret that the proper management of payor contracts is absolutely essential if you want to successfully run your business. Payor contracts can be a challenge to manage if you don’t have the right tools in place to oversee them from the very start. 

Instead of diving into payor contract management blindly, we highly suggest you do your research on the ins-and-outs of how payor contracting works. 

For instance, look into the varying reimbursement schedules, contract clauses, network participation, and contract language that your industry will have to face in the coming years. Then, adopt a management system that evaluates every aspect of your payor contracts so you don’t have to spend so much time working on each contract yourself.

The sooner you implement a strong management system, the faster your organization will be able to grow without hitting contracting roadblocks. 

10. Kick Your Operations into Gear

At this stage in the game, you’ll start to see your business plan really come to life! But, there’s still some work you need to do to get the ball rolling.

In this phase, you’ll want to really hone in on your operational, clinical, financial, and medical integrations. In other words, it’s time to pull all of the moving pieces to one place and organize them to work together. 

Put all of your processes, systems, and management tools into action to see how they work as a collective. Ask your core leadership team to monitor the quality of work each system produces and keep records of all your operations. 

This leads us to our final step…

11. Milieu Management

Last but not least, if there are any kinks in the system, NOW is the time to fix them! You don’t want to wait until your business operations are in full swing to start fixing issues – because small problems can quickly snowball into massive challenges if you don’t address them right away!

Once you learn how all of your operations work together, you can create a management strategy that seeks to maximize profit, enhance the customer journey, and drive exceptional outcomes.

It’s always a great idea to continually check your operations to make sure everything is running smoothly! 

Need More Advice? Hire a Consultant

As you can see, there are a lot of moving parts that go into starting a rehab center. If you want to get all of your ducks in a row so you don’t miss any important steps along the way, consider talking to a behavioral healthcare business consultant
At C4 Consulting, we understand that you have BIG dreams to open your own rehab center. We’re here to support your goals and help you see success. Our expert consultants have years of experience in the behavioral health industry and know how to navigate all of the challenges that go with it. Contact us to schedule a consultation.

Contact us to schedule a consultation today.

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