Growing Trend in Home Health Care... Private Pay
We're at the middle of another seven year cycle in home health care. For the past 30 years, home health care reimbursement has changed every seven years or so. We saw changes in 1982, 1989, 1997, 2000, 2008, and now we're looking for more changes over the next three years leading up to the full implementation of the Patient Protection and Affordable Care Act in 2014.
What does that mean for home health agency leaders? One of the things it means is a trend toward looking for other streams of revenue besides Medicare and Medicaid. That has led to the explosive growth of private pay, non-medical home care in Medicare Certified Home Health Agencies. While we've been seeing this trend for a number of years, 2011 is starting off to be a big year for home health agencies refocusing on private pay.
We see three elements of this trend:
1. Agencies with successful private pay businesses are looking for ways to grow the business and make it more profitable.
2. Agencies with struggling private pay businesses are looking for ways to turn around their troubled business.
3. Agencies that do not now have private pay, are exploring the potential for the future.
Where is your agency in this trend?
At our recent Academy for Private Duty Home Care in Louisiana, about 40% of the group was made up of certified agencies who want to grow their private pay business.
We saw agencies from all three categories above. They are looking for strategies and insights to help them grow and be more profitable.
Our private duty benchmarking research shows that there were 10,581 Medicare Certified Home Health Agencies at the end of FY 2009. We estimate that as many as half of them have, or, are exploring private pay.
Private Pay in Home Heath Benchmarks
Just released this past week was Leading Home Care's 2010 Private Pay in Home Health Benchmarking and State of the Industry report. This report is based on an industry survey of home health agency leaders who have private pay businesses. We learned some interesting facts that helped to clarify our understanding of the private pay sector and the various types of companies.
For example, we learned that the median sized private pay business had annual revenue of $2,118,048, as compared to private duty franchise businesses with median revenue of $637,796 and independent companies with median revenue of $802,434.
While the CHHA based companies are larger, their growth was slower in 2006 and 2007 when the franchises and independents were growing between 20% and 35%. Then when the franchises and independents slowed in 2008 and 2009, the CHHA based companies grew 34.4 and 28.2 % respectively.
We also learned that CHHA based agencies tend to be less profitable than franchises or independents. Franchises showed owners compensation and net profit of 11.93% of revenue while independents showed 16.6% of revenue. CHHA based agencies in our benchmark group earned a net profit of 2.72% and returned 5.39% to their parent organization in overhead allocation for a total of 8.11%.
2010 Private Pay in Home Health Benchmark Report now available.
The final version of the 2010 Private Pay in Home Health Benchmarking and State of the Industry Report has been sent to all of the agencies who participated in the survey, and to our co-sponsors at the Accreditation Commission for Home Care and VNAs of America.
Now you can get a copy of this report by logging onto www.privatedutytoday.com/benchmarks.
Here's what you'll find in the final report:
Chapter I: Home Care in America - An Industry Overview
Chapter II: Overview of the Study
Chapter III: Industry Data and Benchmarks
Summary of revenue data from 2004 - 2009
Growth data for three types of companies
Mean and Median Benchmarks for:
- Agency overall revenue
- Private pay revenue
- Clients served
- Hours of service
- Revenue per client
- Revenue per service hour
- Caregivers employed
- Revenue per caregiver
- Cost of care provided
- Gross margin
- Office wages
- Marketing expenditures
- Recruiting expenditures
- Other overhead and corporate allocation
- Net profits
- Net profit and corporate allocation
Data comparison between franchises, independents, and CHHA based companies
Chapter IV: Best Practices
- 27 Elements of a Successful Private Pay Business
- Four Big Barriers to Success
- Top Techniques for Sales and Marketing
- Top Techniques for Recruiting Caregivers
Chapter V: Industry Associations
Chapter VI: Accreditation
Appendix: Industry Resources