The Future of Private Pay Home Care: Ten Trends That Are Leading The Way

Stephen Tweed | January 15, 2019 | Research & Trends
By Stephen Tweed     What will the future of private pay home care be like?  What are the factors that will shape your future? One of our roles at Leading Home Care is to help our clients and members get ready for the future, and one way we do that is by tracking the trends…

By Stephen Tweed    

What will the future of private pay home care be like?  What are the factors that will shape your future?

One of our roles at Leading Home Care is to help our clients and members get ready for the future, and one way we do that is by tracking the trends that are shaping our industry.   Here are the Top Ten Trends that are leading the way into 2019.

  1. Home Care in Medicare Advantage – The Centers for Medicare and Medicaid Services have created a huge buzz in the private pay home care sector with their April 2018 announcement that Medicare Advantage Plans may add In-Home Support Service as a supplemental benefit beginning in January 2019.  A just-released report shows that 52 Medicare Advantage Plans from 10 companies will be offering In-Home Support Service as a benefit in 15 states in 2019.
  2. Demise of the Digital Disruptors – Private equity capital poured into technology companies who planned to disrupt home care by the “Uberization” of our industry in 2016.  The growth of these “Digital Disruptors” caused a stir among home care leaders.  This past year, we watched as three of the big players in this Uberization attempt either closed up shop or significantly changed their business model.  We continue to see new companies with new investment capital looking for opportunities to apply technology to disrupt home care.
  3. The Interoperability Barrier – One of the biggest frustrations of leaders of large private pay home care companies is the lack of automation software systems that talk with each other. While we’ve seen huge investment in home care scheduling software companies, none of these systems have effective Customer Relationship Management Modules or Applicant Tracking Systems.  Home Care companies are subscribing to stand-alone CRM and ATS systems that don’t talk to their scheduling software.  At some point, a leading company will offer a way to have effective scheduling, CRM, and ATS inter-connected and that will totally disrupt the software arena.
  4. Corporate Consolidation – 2018 was a big year for company consolidation in the home care industry.  There are a number of very large private pay companies in the $40 to $70 million annual revenue range who continue to grow through acquisition and organic growth.  Many of the companies in the top 10% of the industry ($4.5 Million or more) have made acquisitions this year.  We have seen several mergers of equals or similar sized companies take place. Another aspect of corporate consolidation is the fact that many senior living companies and home health agencies also offer in-home private pay home care.  These “affiliated” home care companies tend to be larger in revenue than the independents or franchises, but much less profitable.
  5. Invasion of Private Equity – The world of private equity capital is quite small, and word has gotten around that the in-home care industry is a great place to invest. They all want in.  Major announcements have been made this year about private equity groups buying or investing in home care companies, home care franchise organizations, and home care software companies.  A majority of the Top Ten home care franchise organizations are now owned by private equity groups and several of these companies have been bought and sold multiple times. The largest provider of in-home health care has become Humana, the giant Medicare Advantage Insurance company that now owns 40% of the country’s largest home health company, all of the countries largest hospice, and is a significant provider of in-home private pay home care.   Humana has made those acquisitions by partnering with two large private equity groups.
  6. Growing Bigger Companies – The median sized home care company in 2017 was $1,600,000 in revenue.  This is up only slightly from $1,544,000 in 2014.  However, we are seeing rapid growth of companies in the top 10% of the industry.  In 2012 we formed the $5 Million Mastermind Group with five companies.  Today, that group is known as the Top 5% Group with 13 companies between $7 million and $40 million.  Our Top 7% Group has 10 companies between $5 million and $12 million, and our Top 10% group has ten companies between $3 million and $6 million.  These are all independent companies. We are also meeting more and more franchise agencies that are in excess of $5 million in revenue.
  7. Conquering the Caregiver Crisis – The caregiver shortage along with increasing caregiver turnover continues to be the biggest barrier to growing a home care company.  The larger companies in our industry are in a position where if they can get the caregivers they can get the clients.  Caregiver turnover hit 66.7% in 2017 and we expect it to rise again when the 2018 benchmark report comes out in April.
  8. Attention to Retention – While recruiting continues to be important, caregiver retention and creating a corporate culture that makes an attractive place to work are the two major points of focus this year. We’ve learned that caregivers stay when they are doing meaningful work, when they feel valued and appreciated, and when there is a culture of attraction and accomplishment in the agency.  Agencies are putting in place innovative strategies to reach out to caregivers and help them feel valued.  Over half of the agencies in our Top 5% are working on crafting their corporate culture.
  9. The $15 Per Hour Minimum Wage Movement – States and municipalities across the country continue to legislate higher minimum wages and this directly affects home care agencies and their clients.  That, combined with the elimination of the Companionship Execution for overtime means that most companies have been raising their rates to clients and still seeing gross margins being squeezed.
  10. Readmission Reduction – Hospitals across the country are being penalized for unnecessary patient readmissions within 30 days of discharge.  They are working on improving their readmission rates, and they are passing the pressure on to skilled nursing facilities.  That in pressure in turn is being passed on to home health agencies and private pay home care companies who receive referrals from Hospitals and SNFs.  A small handful of home care companies have figured out how to earn a seat at the table to work with hospitals and SNFs on reducing readmissions and providing the data to prove it.  We’ve discovered that the two biggest causes of hospital readmission are medication compliance and physician follow up … getting patients to take their meds and keep their doctor’s appointments. Who better to make sure those two things happen than a home care company.

So What Does This Mean for the Future?

Trends are patterns of change that are driven by major socio-economic pressures.  By watching these trends, you can anticipate what is mostly likely to occur in the future.  While our crystal ball has home blurry spots, we can see some of the things that are coming for the future of home care.

  • The recognition by government and commercial payers that home care can have a positive affect on patient outcomes and cost of health care.
  • The continued application of technology to make home care more effective and more affordable
  • The growth of larger and larger home care companies and the eventual consolidation of the industry.
  • The on-going caregiver recruiting and retention crisis that will continue to be the biggest barrier to agency growth.

The home care leaders who watch these trends, anticipate the changes, and find solution in advance of the change will be on the leading edge of our industry, and positioned to drive the fastest growing segment of health care in America.

Learn More About These Trends at an upcoming Private Pay Business Builder Workshop

This year we will be offering a small number of one-day Private Pay Business Builder Workshops in key locations around the country.  As part of this workshop, I’ll be presenting an update on these ten trends.  Then we’ll take a full day to demonstrate a proven Seven Step Process to grow your Private Pay Home Care Business.

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.

Related Posts

The Forces and Trends Shaping the Future of Home Care.

May 14, 2024
By Stephen Tweed What will the Home Care Industry look like in five years? Over the past two decades I've been actively engaged in the Home Care Industry, and monitoring the Forces and Trends that are shaping the future of our industry. While much of the growth of Home Care is driven my the entrepreneurial…

What will the Future of Home Care Look Like?

May 4, 2024
What will your home care company look like five years from now? What will our industry look like? What are the factors that are shaping your future? These are some of the questions that were asked by our friends at AxisCare, the top rated home care software company. Back in the Fall of 2023, AxisCare…

What Raving Fans have been saying about Stephen Tweed

May 1, 2024
Stephen Tweed is a highly respected thought leader in the Home Care industry. Recently, in an unsolicited Linked In post, a number of raving fans commented on Stephen: "Stephen Tweed is a prominent figure in the home care industry, known for his pioneering efforts in establishing masterminds specifically catered to home care owners across the…