Last year, at the Home Care Conference in Chicago, home care provider leaders candidly shared just how high billing rates had gotten for them.
Over the course of preceding two years, rates had risen by about 25%, it seemed. But 24 Hour Home Care President Ryan Iwamoto said they had risen by as much as 40% in certain markets.
Shortly thereafter, 24 Hour Home Care – a traditionally private-pay provider – acquired a Medicaid-based home care provider in New Mexico. It was a sign of the times.
Nearly a year later, the rise of billing costs has not abated. C-suite executives see that as an existential threat worth addressing.
Some providers have leaned further into government payer sources, such as Veteran Affairs (VA), Medicaid or Medicare Advantage (MA). But not many have figured out one solution just yet, though plenty have suggested new home care business models are in order.
“I’m sure everybody’s seen this through the pandemic,” Alex Bonetti, the founder and CEO of Family Tree Private Care, said last month at Home Health Care News’ FUTURE conference. “Particularly with the labor market squeeze, we’ve seen rates and wages rise, probably somewhere in the range of 30% to 35%.”
The question has become less about whether billing rates will eventually level, and more about what providers need to proactively do to keep their businesses sustainable. That could mean new service lines, new payer sources, or completely different business models.
That is the topic of this week’s exclusive, members-only HHCN+ Update.
Searching for sustainability
Rates rising as much as 30% to 35% may mean more profits for some home care providers in the interim. But that could be at the risk of losing market share.
The percentage of Americans that can afford private-pay home care is already low. As costs rise, that percentage is likely to become lower.
“We don’t see [rates] coming down,” Bonetti said. “I think that does mean that the number of people that can afford what we do [dwindles]. On the whole, this space is accelerating and growing, but it’s kind of decelerated growth, because fewer people that need these services can now afford what we do. It’s gotten expensive.”
Family Tree offers concierge-level caregiving, private nursing and care management services in Colorado and Texas.
For franchises – of which many of the top home care providers are – that issue creates a further problem. Any effort to diversify revenue or change course would have to include franchisee approval, which is tough, especially because many of those franchisees are seeing higher profit margins than ever.
That is, in part, why companies like BrightStar Care have built out larger company-owned footprints, where it can toy with new models, new payer sources and new technologies.
Bonetti was on a panel with HomeWell Franchising CEO Crystal Franz and Kevin Porter, the brand president at Executive Home Care, which is also a franchise. While each provider operates in different markets, all three agreed that billing rates had not tapered.
Anecdotally, the audience agreed. Both Bonetti and Franz acknowledged the heads in the crowd nodding in agreement as they discussed their rising rates.
Private pay still represents about 85% of Executive Home Care’s revenue, but it has had to make a concerted effort to expand into other payer sources of late.
A part of Evive Brands, Executive Home Care provides personal home care services across 12 states.
“We have infused more VA into our our daily operating referral sources, which has been fantastic,” Porter said. “We’re starting to see that, in some markets, the Medicaid rates are [at a point] where they’re beneficial to consider. It just really depends on the margins, right? From the franchise perspective, it’s a marginal business.”
Franz discussed implementing more technology, but not in the home necessarily. While in-home technology could help augment care, it’s not HomeWell’s focus just yet.
HomeWell Franchising Inc. provides personal care through 50 locations across more than 100 territories in the U.S.
For now, Franz is thinking about technology like many Medicare-certified home health providers are.
“We’re looking at creating efficiencies on the operation side,” Franz said. “I think that’s our focus when we talk about innovation – the operational efficiencies at the agency level.”
On Family Tree’s end, Bonetti is also considering what alternate business models could work in the future, adding that his primary goal is to make sure, for now, his company is focusing on executing their current business plan.
“I think there’s a lot of opportunity for innovation,” he said. “Some of the interesting ideas that I think about, for instance, are subscription model services for what we do. Building an ‘assisted living at home,’ and having payment models that support that.”
A subscription model could work in the home, but it would likely require an insurance-type approach.
In other words, a provider would need a large amount of subscribers, and also a large range of clients based on complexity. In order for the model to work, there would have to be low-utilizer clients to make up for the high utilizers.
Adult day models are another area some providers have teased getting into. They offer daytime care for seniors from families that can afford some care, but not bunches of hours of in-home private-pay services.
In the end, each new model offers opportunity, but also an array of additional challenges.
For the home care agencies that have the capital, though, it may be time to wade into uncomfortable areas and see what sticks, and what doesn’t.
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