January 23, 2023
Adam Hoeksema
The non-emergency medical transportation industry is expected to reach $15 billion in annual revenue by 2027. This is due to the growing aging population in the United States that is poised to reach 70 million by 2030 according to U.S. Census data. With the growing elderly population, there is a growing demand for transportation services to bring folks that can’t drive to medical appointments and procedures.
This growing industry made me curious about how the business works and whether the NEMT business is profitable for business owners or not. So as is our custom here at ProjectionHub I am going to do a deep dive into the NEMT industry and learn all that I can. While I learn I will write down what I have learned and how my learnings will impact the potential financial performance of an NEMT startup.
I am also created a non-emergency medical transportation business financial projection template that I will use to demonstrate my learnings and help us uncover whether the business opportunity can be profitable.
I plan to hit on the following key areas:
- What is Non-Emergency Medical Transportation?
- Non-Emergency Medical Transportation Business Startup Costs
- How Much Revenue can a NEMT Business Generate?
- How Much Does it Cost to Operate an NEMT Business?
- How Much Profit can a NEMT Business Generate?
With that as a plan, let’s dive in.
What is Non-Emergency Medical Transportation?
Non-Emergency medical transportation is a Medicaid benefit that provides transportation to non-emergency medical appointments, procedures, dental care, prescriptions, mental health care and surgeries. The benefit is made available to individuals who have a significant barrier getting to medical appointments. Barriers that might make an individual eligible for NEMT might include:
- No working vehicle
- No driver’s license
- Physical, mental, or development limitations
Next, let’s look at what it would cost to start a NEMT business. We are going to assume that this business starts with just a single vehicle and owner operator. Of course you could eventually grow to build a fleet of NEMT vehicles, but for my research I am going to start with just one.
Non-Emergency Medical Transportation Business Startup Costs
We estimate that it costs between $40,000 and $80,000 to start a non-emergency medical transportation business.
Let’s dig into how I came up with that range of startup costs. We need to answer a few questions:
- What kind of vehicle to use for an NEMT business?
- How much does a new NEMT vehicle cost?
- How much does a used NEMT vehicle cost?
- How much working capital should I have for an NEMT business?
What kind of vehicle to use for an NEMT business?
The typical NEMT vehicle will be either a minivan, full size van or a small bus or ambulance.
Your choice of vehicle really depends on what types of customers you want to be able to serve. You might want to be able to accommodate both wheelchairs and gurneys along with at least one passenger that might accompany the patient to an appointment.
Since the most common need will be wheelchair access, I am going to focus this example on a NEMT vehicle with wheelchair access only.
How much does a new NEMT vehicle with wheelchair access cost?
A new wheelchair minivan can cost between $43,000 and $71,000 for a base model according to Consumer Affairs.
How much does a used NEMT vehicle with wheelchair access cost?
A used wheelchair minivan can cost between $16,000 and $83,000 based on the wheelchair minivan inventory available at MobilityWorks.
You can see a range in vehicle prices that could work for an NEMT business. In my example I am going to assume that we buy a new minivan with wheelchair access for $55,000 and that we get a loan to finance 90% of the vehicle price. You can see how I entered this vehicle and loan into our financial model below:
You can also see that I assumed that we would purchase a bus for $75,000 in month 13 (year 2) of the business.
How much working capital should I have for an NEMT business?
You should have at least $10,000 in working capital available for startup expenses for an NEMT business.
We are basing this on the assumption that you have 1 vehicle operating and are working for Medicaid. You will likely have to cover fuel, maintenance, driver wages and other expenses for at least a month before you start to get paid by Medicaid.
How Much Revenue can a NEMT Business Generate?
A non-emergency medical transportation business can generate roughly $50,000 to $60,000 in annual revenue per vehicle according to iSi Technology.
In order to estimate how much revenue your NEMT business will generate you need to make a number of assumptions. I tried to research reasonable assumptions for the following:
How many miles is the average NEMT trip?
Roughly 90% of all NEMT trips are less than 20 miles while 75% of all NEMT trips are less than 10 miles according to a report by Burns & Associates. Based on this we are going to assume our average trip is 15 miles. You can see the breakdown of from the report below:
How many trips per day can one NEMT vehicle complete?
We estimate that one NEMT vehicle can complete roughly 8 trips per day. If a vehicle has to wait for a client at an appointment and can not take on another ride, the client will typically be charged an hourly rate for the time spent waiting.
How much does the average NEMT vehicle earn per hour?
The average NEMT vehicle can earn between $25 and $60 per hour according to RouteGenie.
How much does the average NEMT vehicle earn per mile?
We estimate that the average NEMT vehicle will earn between $2 and $4 per mile.
We came up with this estimate based on the assumption that the average NEMT trip is roughly 15 miles and can be completed in 1 hour which means we can just divide the hourly rate range of $25 to $60 per hour by 15 miles to come up with our estimate for an NEMT vehicle revenue per mile.
Based on these assumptions you can estimate the daily revenue potential for an NEMT business, then you just need to multiply by the average number of days you expect the vehicle to operate to come up with a monthly revenue forecast. You can see how we entered in these assumptions into our NEMT financial forecast below:
How Much Does it Cost to Operate an NEMT Business?
We estimate that it costs roughly $40,000 to operate a single vehicle NEMT business.
The primary operating costs for an NEMT business are:
- NEMT Driver Salary
- Fuel
- Vehicle Repairs and Maintenance
- Insurance
- Licenses and Permits
- NEMT Software
Here was our research on each operating expense:
What is the Average Salary of an NEMT Driver?
The average NEMT Driver Salary in the US is roughly $28,500 according to Ziprecruiter.
What is the Average Fuel Cost per Mile for an NEMT Vehicle?
We estimate that the average fuel cost per mile for an NEMT vehicle is roughly .20 cents per mile for a wheelchair van. This is a highly volatile expense though based on the price of gas and the fuel efficiency of your specific vehicle, so please do your own calculations for this estimate.
What is the Average Vehicle Repair and Maintenance Cost per Mile for an NEMT Vehicle?
We estimate that the average repair and maintenance cost per mile for a new NEMT vehicle is .12 cents per mile.
AAA estimates this cost is .09 cents per mile for a new car, but since an NEMT vehicle is a specialty vehicle, we are estimating .12 cents per mile.
You can see how we entered these per mile costs and revenue per mile into our financial spreadsheet below:
You will also notice that we did not enter in the driver pay on a per mile basis, instead we added the drivers as salaried positions as seen here:
There are a few more expenses that are likely to be fixed expenses or on a per vehicle basis. Let’s look at those expenses next.
What is the Average Insurance Cost for an NEMT Vehicle?
The average insurance cost per year for a NEMT vehicle is roughly $1,500 per year according to TripMaster.
How much do Licenses and Permits Cost for an NEMT Business?
This will vary depending on your specific location. We estimated $150 per month per NEMT vehicle.
How much does NEMT Software Cost?
NEMT routing software costs $50 per vehicle according to RouteGenie.
We also assumed $25 per month per vehicle for Workers Compensation and $300 per month in Miscellaneous costs which we entered into our model below:
With all of our revenue and expense assumptions entered in now, we can estimate profits.
How Much Profit can a NEMT Business Generate?
We estimate that an NEMT business with one vehicle can generate roughly $16,000 in annual profit when operating at full capacity.
In our example, we had 1 wheelchair van operating in the first year and a NEMT bus operating in the second year. Based on these assumptions you can see what our projected 5 year forecast looks like for the business:
We hope this has been helpful to you as you think about starting your own NEMT business. If you have any questions please feel free to reach out, and if you want to purchase the NEMT projection template we used to create your own projections, please do!
