Buying an Adult Day Care in Texas: The Temporary License and 90 Day Clock
Texas licenses adult day care centers, now formally called Day Activity and Health Services facilities, through the Health and Human Services Commission, and a center's license cannot be transferred to a buyer. Anyone buying a center has to apply for a temporary change of ownership license and then earn an initial three-year license after the state reviews the facility, so the license timeline sets the closing date as much as the financing does. The license covers facilities serving four or more people who are not related to the owner on a daily and regular basis.
The buyer submits a license application, the fee and a Change of Ownership Transfer Affidavit, signed and notarized by both the buyer and the current license holder, through HHSC's online portal at least 30 days before the planned change of ownership. An incomplete application can be filed with a letter explaining what is missing, but the clock on the temporary license does not start until the agency has the filing, and the effective date cannot come before the date HHSC received it.
The temporary license expires 90 days after its effective date or on the day the three-year license is issued, whichever comes first, and HHSC can extend it in 90-day increments only for extenuating circumstances and at its sole discretion. That 90-day window is the period in which the buyer has to pass the agency's review, so a center with records or building problems needs them fixed before the clock starts rather than after.
Until the temporary license is issued, the seller remains responsible under its own license, and the buyer may run the center on the seller's behalf. For a small center where the owner is also the director and often the nurse, that arrangement means the seller's continued involvement through the transition may be essential, and the purchase agreement should say so.
After the temporary license is issued, HHSC generally conducts an on-site health inspection, and passing it is a condition for the three-year license. The agency can replace the inspection with a desk review when less than 50 percent of the ownership changes hands or when the new owners already held disclosable interests in the former license holder, and it can order a Life Safety Code inspection at its discretion.
Most centers depend on Medicaid, and Day Activity and Health Services are paid through contracts with HHSC and the state's STAR+PLUS managed care plans, which follow the provider rather than the building. A buyer needs its own contracts and credentialing before those payments resume in its name, and in a center where most participants are Medicaid members, a gap of even a few weeks can strain working capital in the first months.
Revenue in an adult day center depends on attendance rather than enrollment, because participants miss days for illness, appointments and family plans, and Medicaid pays only for days actually attended. A seller's enrollment count can look healthy while average daily attendance runs well below it, so the attendance records are the number that matters when you price the business.
Transportation is often part of what keeps attendance up, and many centers run their own vans to bring participants in each morning and home each afternoon. Vehicles, drivers, insurance and the routes themselves belong in your diligence, because a center that loses its transportation can lose its participants in the same week.
Before you sign, confirm the license and its capacity with HHSC, pull the center's inspection history, and ask for twelve months of attendance by day alongside the Medicaid contracts and payer mix. Set closing at least 30 days after your application will be complete, keep the seller involved until the temporary license issues, and plan enough working capital to carry the center while your Medicaid contracts move into your name.
How much working capital is enough depends on how long the Medicaid contracts take to move and how attendance holds up through the transition, and both belong in the model before you sign. I help adult day buyers build projections that carry the center through that period, review the seller's attendance and payer data and put together the business plan and SBA package for the purchase. If you are looking at a center here, send the attendance records and financials to amer@awadcapitaladvisors.com, and I can help you size the cash you will need.