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Top Trends for 2013 in Private Duty Home Care

By Stephen Tweed

You’ve worked hard this year to grow your home care business.  If you are like the typical company, your revenue is probably up by 15 to 17%, your total revenue is just over $1,100,000, and your owners income and net profit was around $130,000.  If you are above the median, your revenue and your personal income are higher.

What can you expect for 2013?  Well, we’ve been watching the trends, and paying attention to the changes that are taking place that will affect owners of home care businesses.  Here are the top five trends you can watch for next year.

1.  Tax Increases

Not a big surprise here.  The President and the Congress are in daily negotiations to come up with a plan to avoid the so called “fiscal cliff” of increased taxes and decreased spending.  The President wants to solve the problem by taxing the rich.  The Republican controlled congress wants to reduce spending.

For sure, you can expect to pay more taxes even if you are not a part of the 2% of Americans who earn more than $250,000 per year.  First of all, there are 21 new taxes in the Patient Protection and Affordable Care Act and many of them go into effect next year.  Things like pharmaceuticals, medical devices, and health insurance all have new taxes.

As I’ve watched this ongoing process of kicking the can down the road regarding taxes and spending, I keep reading some interesting articles that help us understand the bigger picture of the economics of our country.

University Professor Spells Out the Story

I read a very interesting piece by a professor from the University of Georgia who tells a story to make the point about who pays for our government.  He lays out clearly what happens when the rich are forced to pay a higher and higher portion of the total tax bill.  Read this article.

Tony Robins Tells the Story

Then speaker and author Tony Robbins gives us a real graphic picture of the problem of spending and taxing the rich.  You’ve got to watch this video. 

2.  Increasing Competition

Since we designed and implemented the very first private duty industry benchmarking study in 2008, we have been watching the growth of competition and the number of companies providing home care services.  We estimate that there are over 18,000 companies providing private pay, non-medical home care in the US.  We know that there are 60 companies selling franchises with over 5,000 offices.  We have data to show us that there are about 9,000 independent home care companies.

We also see that there are more Medicare Certified Home Health Agencies than ever before in the history of the Medicare program. According to the Centers for Medicare and Medicaid Services (CMS) at the end of 2011, there were 12,199 home health agencies. While we don’t know exactly how many of them also have private duty businesses, we do know that one of the biggest trends in our industry is for home health agencies to add private duty, or refocus on growing their existing private duty businesses.

3.  Health Care Reform

The election of 2012 is over and President Obama will serve another term.  That means that the implementation of health care reform will go forward.  Here are the provisions that will go into effect in 2013:

  • States must indicate HHS whether or not they will set up and operate insurance exchanges.  
  • Phasing in of federal subsidies for brand name prescription drugs for Medicare part D
  • The threshold for the itemized deduction for unreimbursed medical expenses goes up from 7.5% of adjusted gross income to 10% of adjusted gross income;
  • Limits the amount of contributions to a flexible spending account for medical expenses to $2,500 per year, increased annually by the cost of living adjustment.
  • Imposes an excise tax of 2.3% on the sale of any taxable medical device.
  • Creates the Consumer Operated and Oriented Plan (CO-OP) to foster the creation of non-profit, member-run health insurance companies.
  • Extends authorization and funding for the Children’s Health Insurance Program (CHIP) through 2015 (current authorization is through 2013).
  • Reduces Medicare Disproportionate Share Hospital (DSH) payments initially by 75% and subsequently increases payments based on the percent of the population uninsured and the amount of uncompensated care provided.
  • Reduces states’ Medicaid Disproportionate Share Hospital (DSH) allotments and requires the Secretary to develop a methodology for distributing the DSH reductions.
4.  Staff Shortages
While many companies have had adequate staff to meet growing needs since the economy turned down in late 2008, there is a clear trend toward coming staff shortages in many communities.  As the economy improves and more people are going back to work, more job choices are available and we will see a return to shortages of caregivers.  Two things will happen. Turnover will go back up, and it will be harder and harder to find enough new caregivers to meet the demand.
Several weeks ago, we posted an article about the explosive growth of jobs for private duty caregivers over the next eight years.  You may want to go back and take a look at that article.  
Our data shows that turnover has declined somewhat over the past three years, and we believe it’s primarily because of the uncertainty created by the soft economy.  Workers have been less willing to take the risk of moving to a new company.  When the economy shows some significant signs of improving, you can expect your turnover to go up, and the supply of available caregivers to go down.
The companies that prepare now for this trend will be in much better shape to grow than their competitors.
5.  Savvy Consumers
We’ve been watching the advertising, marketing, and public relations activities of hundreds of home care companies this year, including the large franchise companies.  Home care has spent more on advertising and promotion than ever before, and it’s working.  Consumers are much more aware of the availability of home care services.  They are also becoming more informed, and are beginning to know the questions to ask in selecting a home care company.  They are being more selective in their choices, more demanding in their expectations, and more savvy in their negotiations.  
This translates into a business where you get more inquiry calls, you have to work smarter and harder to convert those inquiries into admissions, and you have to work harder for every billable hour that you deliver.  This has never been an easy business, but we believe it will get harder for many owners as consumers become more educated.  
That means that those companies who do a better job of putting place people and processes to provide exceptional customer experiences and to differentiate themselves from the competition will grow and prosper.  Savvy consumers will tell their friends and co-workers about their positive home care experience and the overall awareness of our industry will continue to grow.
What Trends are YOU Seeing?
These are the top five trends we see. There are more trends that we can discuss in future articles.  In the mean time, what trends are you seeing that we could be tracking?  Give us your comments below.  
  

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