Senior living executives routinely tell me that the sector’s biggest competitive threat is at-home care, which enables older adults to avoid moves into communal settings.
If that’s true, senior living leaders should be quaking. While they strive to regain their financial and operational footing, capital is pouring into the at-home care space. In just the last few weeks, these transactions and public policy goals have been announced:
— Advocate Aurora Health’s investment arm acquired home care franchise company Senior Helpers, reportedly valued at $180 million
— At-home companionship startup Papa raised $60 million in a Series C
— Private equity firm RiverGlade Capital acquired major home care franchiser Home Helpers
— The Biden administration called on Congress to allocate $400 billion for expanding access to home- and community-based care
The backdrop for all this activity is Covid-19. The pandemic highlighted the value of providing care and services for people in their homes rather than hospitals and other congregate settings, where infection risk was higher and resources needed to be conserved for seriously ill patients.
Senior living executives should be paying attention to how the at-home care space is expanding and transforming, and In my view, two major trends to focus on are increasing health system involvement, and the rise of tech-driven home care innovation.
Health systems get in the game
Advocate’s acquisition of Senior Helpers — which encompasses more than 320 locations across 44 states — could be a watershed transaction, as it shows that major health systems are seeing the value in non-medical, private-pay home care.
Health system ownership is rare in the private-duty sector; of the 872 home care providers that participated in Home Care Pulse’s annual benchmarking survey last year, only 0.7% were part of a larger hospital system.
Senior Helpers previously was owned by private equity firm Altaris Capital, and private equity has dominated corporate ownership of private-pay home care companies.
“It was private equity everywhere,” Senior Helpers CEO told Home Health Care News (HHCN), describing the recent sales process for the company.
In fact, Advocate Aurora was the only strategic buyer in the running to acquire Senior Helpers. Being a health system with 26 hospitals and more than 500 outpatient sites, Advocate not only brought capital to the table but access to “thousands of clinicians” and the potential to expand Senior Helpers’ offerings in areas such as telemedicine, Ross noted.
Advocate, meanwhile, is interested in how to better address patients’ social determinants of health, which can improve health outcomes and keep costs down by preventing expensive hospital stays. The health system is aware that the home is the lowest-cost care setting, and the setting preferred by consumers.
“We do believe that the home should be the care delivery platform of the future, or the focal point for care delivery,” Advocate Aurora Enterprises President Scott Powder told HHCN.
The synergies between home care and health systems are so apparent, Ross believes more health system-home care deals are coming. And, the timing is right for health systems that want to make a play.
At least nine large home care franchise companies have been acquired since 2015, with the majority being private equity deals. As these PE firms now reach the end of their 3- to 5-year hold periods, deals should be imminent. The Home Helpers sale is one recent example, although that company went to another PE firm, not a strategic buyer like Advocate.
Health system ownership of private-duty home care companies could create care ecosystems that make it easier for more older adults to age in place, avoiding moves to senior living communities.
Senior living providers also should consider that as health systems acquire private duty companies and seek to own more of the care continuum, their interest may extend to owning private-pay senior living companies in the years ahead.
Already, health systems such as ProMedica, Sanford, Ascension and Trinity own senior living providers. And keep in mind that the largest U.S. hospital system, HCA (NYSE: HCA), recently bought 80% of the home health business of Brookdale Senior Living (NYSE: BKD).
Brookdale is a Medicare-certified home health agency, not private duty, but the principles at play are similar to the Senior Helpers deal: HCA wants to control more of the care continuum, and Brookdale sees an opportunity to grow the home health platform and expand clinical capabilities.
With the $60 million Series C round announced on April 13, Papa has now raised a total of $91 million. The company exemplifies how tech-forward startups are transforming home care and rapidly expanding in the age of Covid.
Papa was founded in 2017, and initially provided on-demand companionship and assistance to older adults through a network of “Papa Pals,” many of them college students. More recently, Papa Health launched, providing older adults with access — largely through telehealth — to physicians, nurse practitioners and behavioral health specialists.
In 2021, Papa has experienced 600% year-over-year growth, and is looking to create a “suite of services to empower a completely new type of care to support members’ full spectrum of unmet needs—both social and clinical,” Founder and CEO Andrew Parker said in a press release.
Papa now is available in all 50 states and has partnered with more than 40 large health plans.
But Papa is just one of several companies leveraging tech to deliver senior care and services in new ways, in people’s homes.
Other startups, such as UpsideHom, are creating tech-enabled co-living platforms for older adults. Behemoths like Amazon and Best Buy are making health care plays focused on the home through remote monitoring and voice-enabled tech.
One of Papa’s backers is Reddit Co-Founder Alexis Ohanian, who predicted to SHN that the rise of these tech-forward companies will disrupt senior living in the next decade. As the Papa funding shows, such disruption is already being fueled by increasing amounts of venture capital; disruption could be further accelerated if the Biden administration meets its American Jobs Act goals, including dedicating $400 billion and adopting regulatory flexibilities to expand home- and community-based care.
Companies like Papa could benefit if shifting Medicaid and Medicare Advantage policies lead more managed care payers to partner up with organizations offering home- and community-based services. And investment into the caregiver workforce could make it easier for older adults to find affordable at-home care, which could be enabled or supplemented by services from the likes of Papa or UpsideHom.
Eclipse CEO: Don’t panic
Senior living providers could be forgiven for panicking about losing market share to home care, given all the activity and momentum in that sector. But Kai Hsiao — CEO of Eclipse Senior Living, which operates more than 100 senior living communities — does not view the situation with such alarm.
The growth of the aging population means that home care options can increase at the same time that demand for communal senior living increases, Hsiao said during a recent SHN+ TALKS appearance.
However, senior living providers need to strengthen and convey their value proposition.
“The more attractive we make senior living in terms of the social side of things, I think the better for us,” Hsiao said.
And, senior living providers do need to accept that health systems and payers — which many times are a single “payvider” — are seeking to own more of the care continuum. That continuum includes private-pay senior living, and Hsiao believes that a major insurance company could be the largest owner of senior living within a decade.
This prospect should not frighten the industry, in Hsiao’s view. He noted that in other countries, insurance companies already are the major owners of senior living. But, he stressed that providers need to be collecting data — such as resident hospitalization rates — showing their value to the overall health care system.
In other words, as the Senior Helpers deal might illustrate, at-home care providers are already finding value in connecting with the larger health care ecosystem, and senior living providers could have a similar future.
If this occurs, being under common health system ownership might turn home care and senior living providers more firmly into collaborators rather than competitors. But, to be properly valued in this future system, providers in home care and senior living alike need to be high performers and measure their performance, starting now.