By Stephen Tweed
Who is your biggest competitor for private pay in-home care?
Many owners and CEOs we talk with believe their biggest competitor is the solo independent caregiver who advertises on Craigslist, does “under the table” deals with families, and is paid in cash. Certainly there is a huge black market for personal in-home care.
However, the much bigger competitor that most leaders underestimate as the “Affiliated Home Care Company.” These are private pay in-home care companies that are affiliated with a home health agency, hospice, senior living community, or post-acute care provider.
At the recent Post Acute Care Link Continuum Conference, David Ellis, President of Lincoln Healthcare Leadership talked about the growth of home health care and personal care in the post-acute care continuum. He talked specifically about the major home health companies setting up joint ventures with hospital systems. However, he also mentioned briefly the growing awareness of in-home personal care by these large post-acute care organizations.
Managed Care Organizations and Accountable Care Organizations want to know what’s happening with patients in their homes. Who knows better what’s going on at home than a personal caregiver who is with the patient four to eight hours a day. The payers want the data. Ellis suggested that home health agencies could launch their own personal care agencies, or they could partner with an existing business.
What he may not be aware of is the number of Medicare Certified Home Health Agencies who already own and operate a private pay personal care business. There are over 12,400 certified home health agencies according the Medicare. We estimate that as many as 50% of them already provide private pay personal care at some level. Some do it as part of the Medicare skilled business. Others have set up separate private pay business units.
Most of these post-acute care organizations that offer private pay don’t do it very well. They tend to be larger but less profitable than their independent or franchise competitors. They also tend to be less efficient operationally, and often have lower client and caregiver satisfaction measures.
This is because private pay personal care is not their primary business, and it is much smaller in volume that Medicare skilled care. Therefore, the private pay business often is set off in the corner and does not get the time, attention, and talent to operate effectively.
However that is changing. As leaders in home health, hospice, senior living, and skilled nursing facilities recognize the advantages of having a significant private pay business, they are focusing more attention. This is especially true as Medicare and Medicaid reimbursement becomes more problematic, and they see private pay as a way to reduce their dependence on government payers.
Threats and Opportunities
The growth of affiliated private pay businesses in your local marketplace can be either a threat or an opportunity.
The threat comes when larger post-acute care organizations get serious about growing their private pay business. When they allocate time, talent, and treasure to this business, they are likely to succeed because of the connections they already have with key referral sources such as hospitals and physician groups. If a large successful post-acute care provider can figure out how to to private pay well, they can make a huge impact on the marketplace.
We have worked for a number of years with a home health agency that is part of a hospital system in New England. They retained us to select a new Executive Director of private pay, and develop a strategic plan to grow that business. The new director brought significant experience in private pay, and an entrepreneurial leadership style.
She was able to grow that business from about 3,000 hours per week of private pay to over 9,000 hours is a very short period of time.
The opportunity for independent and franchise private pay companies is to partner with post-acute care providers. There are a number of ways you can set up a Preferred Provider Arrangement to assure high quality care to clients, and a steady flow of referrals to your agency.
You can also set up a joint venture with a hospital or post-acute care provider. I was having coffee the other day with the Director of Business Development for a successful private pay company. She handed me two business cards. One was for their independent private pay business. The other was for their joint venture with a large hospital system.
If you are a home health agency or post-acute care provider who wants to grow your private pay personal care business, you need to have a dedicated entrepreneurial leader who dedicate 100% of their time and attention to growing that business. Then you need to private the resources and the autonomy they need to grow it.
If you are an dependent or franchise private pay business, and you want to partner with post-acute care providers, you need to develop a clear understanding of their business and why then would want to provide personal care. Then you need to focus on developing mutually beneficial relationships in the form of a PPA or Joint Venture.
Private Duty Planning & Coaching
If you want to grow your private pay business, I’d like to help. For the past two decades I’ve been working with owners, CEOs, and executive directors of large, fast-growing private pay home care business to create Strategic Focus. Our approach to private duty planning and coaching has five phases:
- Assess – conduct an assessment of your current business to create a clear picture of of your agency as it exists today.
- Diagnose – determine the biggest barriers to growth and profitability and prescribe some solutions.
- Plan – develop a focused strategic action plan with goals, target dates, and who to do.
- Implement – regular video coaching conferences to guide you through the implementation of your plan.
- Evaluation – developing and implementing a private pay scorecard to track on a weekly and monthly basis the key metrics for your business. We then help you measure performance and make adjustments to your plan.