Home Care Gets the Attention of Corporate America as Costs Go Up

Stephen Tweed | August 18, 2016 | Newsroom
By Stephen Tweed In two of my keynotes speeches for association conferences and corporate meetings, I talk about the "Six Seismic Shifts Shaping the Future."  These are six major trends that are affecting the future of health care in America.  The first Seismic Shift is the explosive growth in the cost of health care. The increasing…

By Stephen Tweed

In two of my keynotes speeches for association conferences and corporate meetings, I talk about the “Six Seismic Shifts Shaping the Future.”  These are six major trends that are affecting the future of health care in America.  The first Seismic Shift is the explosive growth in the cost of health care.

The increasing cost of in-home personal care has caught the attention of Corporate America with a recent article in Forbes Magazine.  Forbes logoThe leading business publication published the article “Do Higher Minimum Wages Work in All Industries?”  The article quotes Dylan Hull, CEO of Select Home Care as he talked about how the increasing wages of caregivers, the growth of the minimum wage, the elimination of the overtime exemption, and the requirement to pay sleep time during live-in care in California are making the cost of in-home care too expensive for many Californians.

Hull states what many home care owners believe.  “I want to be able to pay people more. I really do. But realistically, it’s driving costs up to the point that many senior citizens just cannot afford to have a private caregiver at home anymore.”

It’s a Matter of Economics

Many owners and CEOs of home care companies have expressed to us that they would love to pay more, provide better benefits, and improve working conditions for caregivers.  It’s a matter of economics.  How much can you charge before clients and families say, “Enough.  I can’t pay more for home care. I’ll have to move to a facility.”

“Three years ago,” Hull says, “a private full-time caregiver would have cost $6,000 a month. Now, it’s in excess of $15,000 a month, making it an elusive reality for most seniors.”

The elimination of the Federal Companionship Exemption, combined with rules in California requiring overtime after 9 hours in a day, and the requirement to pay sleep time, have virtually eliminated live-in care in the state.  That means that consumers who choose to stay at home and have round-the-clock care will have to pay for services on an hourly shift basis, and agree to pay overtime if they want the same caregiver for more than 9 hours in a day.  Hull says that average length of stay has gone down significantly.

Well Meaning Legislators Don’t Understand

As we have watched the overtime and minimum wage rules being enacted, we have read the comments of well meaning legislators and regulators who have positive intentions of helping low wage caregivers.  However, the practical reality has been that few caregivers actually receive overtime pay since companies are not usually able to pass that cost on to the client.  Instead, the agency must put in systems and procedures to limit workers to 40 hours per week (and less than 9 hours per day in California).

One of the first areas of the country to implement a move to a $15 per hour minimum wage is Seattle, Washington.  When the hourly rate reached $13.00 per hour earlier this year, we heard from home care agency owners who had caregivers request fewer hours because the increased pay was pushing them over income limits that caused them to lost benefits such as Medicaid and SNAP. Meanwhile prices are going up for seniors who wish to age in place in their own homes.

Add in the Caregiver Recruiting and Retention Crisis

On top of wages, overtime, and sleep time rules, agencies are facing the most serious shortage of caregivers in a decade, and this time there is no short term solution.  We saw a significant shortage of caregivers in 2006 and 2007 when there were half as many home care companies.  The economic crash in 2008 mitigates some of the caregiver shortages as workers stopped jumping jobs and turnover decreased significantly.  However, over the past seven years caregiver turnover has increased consistently to 61.9% in 2014 and the declined slightly to 59.2% in 2015.  At the same time, the number of home care agencies competing for clients and caregivers has created what we have labeled The Caregiver Recruiting and Retention Crisis. And this crisis is not limited to non-medical caregivers.  There is an equally challenging crisis finding and keeping nurses, therapists, and home health aides on the Medicare Certified Home Health Agency side of the business.

At Leading Home Care, we’ve been monitoring these trends closely, and conducting industry research to more clearly understand the significance of the crisis and to find solutions. Two of the Mastermind Groups sponsored by the Home Care CEO Forum are doing a “Best Caregiver Study” to learn more about their top caregivers.  Each of the companies in the group has identified the top 10% of their caregivers and have invited them to complete a short survey. The results will help company owners learn how to attract and retain other “best caregivers.”

If you are serious about growing your home care business to the next level in spite of all of the challenges, you may want to consider becoming a member of a Home Care Mastermind Group.  There are still a few spaces available.

Stephen Tweed
Stephen Tweed, CSP, began his journey as a business strategist in home health care in 1982. Today, Stephen is among the top thought leaders in Home Care strategy and management. He has worked with top 5% companies from across the US. He is a sought after speaker at from national and state association events.

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