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How Much Does It Cost to Start a Rehab Center? (Sales Forecast and Breakeven Analysis Included)

Drug Rehab Business

You should make plans to spend anything from $250,000 if indeed you want to open a rehab center in the United States of America.

Opening a rehab center is a capital-intensive venture, but the total cost of opening such a venture will be based on certain factors that we will discuss in this article.

Some factors may just be unique to your country, city, or state hence you must make sure you first carry out your due diligence and conduct your feasibility studies before drawing up a budget for a rehab center.

A rehab center is a facility that provides medical and therapeutic treatment to individuals recovering from addiction, substance abuse, or mental health disorders.

Estimated Cost Breakdown for Opening a Rehab Center

  1. Lease or Purchase of Facility: $30,000 – $70,000
  2. Renovations and Facility Setup and that included modifying the space for patient rooms, therapy areas, offices, and accessibility requirements: $40,000 – $80,000
  3. Medical Equipment and Supplies: $20,000 – $40,000
  4. Licensing and Accreditation: $5,000 – $15,000
  5. Software and Administrative Setup and Software such as Patient management software, electronic health records (EHR) system, office software, and initial IT setup: $10,000 – $20,000
  6. Initial Staff Salaries: $50,000 – $100,000
  7. Marketing and Advertising: $10,000 – $25,000
  8. Insurance: $10,000 – $20,000
  9. Miscellaneous and Emergency Fund: $15,000 – $30,000

This breakdown suggests a total potential expenditure ranging from $190,000 to $400,000. Given these figures, starting a rehab center with a $250,000 budget is feasible, especially if costs are carefully managed and the lower end of estimates are targeted where possible.

However, securing additional funding or loans might be necessary to cover the higher end of the estimates or to ensure the center has sufficient operating capital after the initial setup phase.

3-Year Sales Forecast

Assuming an average charge is $500 per day for inpatient care with an average stay of 30 days, the revenue per patient would be $15,000 per month. If your rehab center has a capacity of 10 patients at a time, with an initial 50% occupancy rate, growing 10% annually.

Then your variable costs (medical supplies, food, etc.) would be estimated at $100 per day per patient, or $3,000 per patient for 30 days. Now if your rehab center is able to achieve a 10% increase in the number of patients treated each year, considering increased awareness and referrals.

Year 1:

  • Patients Treated: 5.5 (approximated due to initial 50% occupancy)
  • Revenue: $82,500
  • Total Costs: $136,500
  • Net Profit: -$54,000

Year 2:

  • Patients Treated: Approximately 6
  • Revenue: $90,750
  • Total Costs: $138,150
  • Net Profit: -$47,400

Year 3:

  • Patients Treated: Approximately 7
  • Revenue: $99,825
  • Total Costs: $139,965
  • Net Profit: -$40,140

Breakeven Point = Approximately 10 patients

This means that to cover the fixed costs and variable costs without making a loss, your rehab center would need to treat at least 10 patients at an assumed occupancy rate based on the initial capacity of 10 patients.

Under the provided assumptions, the rehabilitation center does not reach the breakeven point within the first three years, as the number of patients treated does not meet or exceed the breakeven requirement of 10 patients.

The rehab center experiences a net loss in each of the first three years, though the loss decreases annually due to the growth in the number of patients treated.

This forecast emphasizes the importance of strategies aimed at increasing the occupancy rate and possibly reducing costs or increasing revenue per patient to achieve profitability more quickly.

Factors That Influence the Cost of Opening a Rehab Center

  1. Purchasing, Rent, or Lease of Property

When it comes to opening a rehab center, one of the major areas you will spend a large percentage of your budget on is acquiring leasing, or renting a property.

Note that if you opt for rent or lease, you are going to spend far less when compared to someone who settles for an outright purchase or mortgage.

Of course, the size, location, and available facility in the property will determine the amount you will spend in this regard.

You should budget about $55,000 or more if you want to rent a decent facility for your rehab center in the United States of America.

  1. The Required Renovations and Modifications

If you are fortunate enough to get a property that requires little renovations and modifications, then you will only spend less, but if you are not too lucky, then you must be ready to create a robust budget for renovations and modifications.

The truth is that no matter the type of property you acquire, you will have to spend money to make sure that the facility meets the specific requirements of a rehab center, such as office spaces, rooms, common areas, counseling rooms, security features et al.

Compliance with local building codes and licensing requirements may necessitate renovations or upgrades to the property.

  1. The Cost of Securing the Needed Licenses and Permits

The cost of securing the needed licenses and permits can vary depending on the location and the specific regulations in your area.

However, if you are looking to open a rehab center, then you must be prepared to get a general business license that allows you to operate a rehab center in your area. This license is typically obtained from the local city or county government.

Aside from a general business license, you should also make plans to get a healthcare facility license, accreditation from relevant regulatory bodies,

Drug Enforcement Administration (DEA), registration (if prescribing controlled substances), fire department permit, health department permit, and zoning permit.

  1. The Cost of Staffing

If you want to open your rehab center, then you must create a budget for employees who will occupy various positions in your organization.

You should consider the cost of hiring qualified staff members, such as Medical Director, Psychiatrist, Psychologist, Licensed Clinical Social Worker (LCSW),

Registered Nurse (RN), Licensed Vocational Nurse (LVN), Certified Substance Abuse Counselor, administrative personnel, and support staff.

Note that the number of employees you are expected to hire for your rehab center will depend on the size of the facility and the additional services you intend to provide.

  1. The Cost of Equipment and Supplies

Equipping a rehab center requires a lot of finance hence you must create a robust budget for this aspect of the business. In essence, if you are planning to open a rehab center, then you should make plans to furnish the rehab center with essential items such as:

Examination tables, medical equipment, therapy equipment, office furniture, computers and software, therapy materials, medical supplies,

Diagnostic tools, safety equipment, and waiting room furniture (chairs, tables, magazines), are ongoing operational expenses. These are just the basics, and you may want to go the extra mile to add additional furnishing.

  1. The Cost of Insurance

In the United States of America, it is considered illegal to operate a business without having some of the basic insurance policy coverage in place.

You should make plans to purchase general liability insurance, professional liability insurance, property insurance, workers’ compensation insurance, and abuse and molestation insurance.

Note that the cost of insurance for a rehab center will depend on various factors, including the size of the business and the type of services you are offering.

  1. Program Costs

If you plan to provide additional services like therapeutic programs, counseling, sports events, vocational training, or educational programs, you will need to budget for the necessary resources and materials needed to carry out such programs.

Note that providing ongoing support services for residents, such as transportation, job assistance, or educational programs, can also contribute to the overall cost of opening your rehab center.