Senior Living’s History of Home Care Failure May Repeat Itself

Back in April, I observed that capital is pouring into the home care sector, and that senior living providers need to be alert to threats and opportunities posed by growth and innovations in at-home care.

So, I’m not surprised that there’s an emerging trend of senior living providers starting or expanding at-home care business lines.

Among recent examples:

— Bickford Senior Living is launching Bickford Home Care, a private duty business

— Kendal at Home is expanding throughout Ohio and into Massachusetts

— Five Star Senior Living (Nasdaq: FVE) is planning to grow its home health business

— The Springs Living is considering re-starting a home care venture or merging with an in-home care group

Diversifying into home care could be a shrewd strategy for senior living providers, allowing them to tap into consumer demand for aging-in-place, defend against fast-growing home care companies, add a revenue stream, and control more of the care continuum.

But, senior living providers historically have struggled with home care, and one industry leader believes that the cycle might be starting again.

“History will repeat itself, and that means the same errors will occur,” Senior Living Communities (SLC) CEO Donald Thompson told me during an SHN+ TALKS.

He speaks from experience, having lost $5 million getting started in home care, before righting the ship.

History may indeed repeat itself, but I don’t think it has to, because of new partners available to senior living providers entering the at-home care space, new Medicare Advantage models — and the past failures that providers can learn from.

New partners

Bickford’s Alan Fairbanks — a veteran executive with the company who will be leading its home care venture — knows that other senior living providers have stumbled or failed with home care.

“We’re going into this with our eyes wide open, knowing that it’s a tough business,” he told me.

But he believes Bickford can succeed where other senior living providers have failed, and one big reason is a partnership with the HomeCare Advocacy Network (HCAN).

HCAN launched last year in the midst of the pandemic and is focused on helping senior living providers succeed in home care.

The company’s president and co-founder, Mark Goetz, previously was a VP with senior living provider Asbury Communities. He also spent 13 years in leadership with Home Instead, one of the largest home care companies in the United States.

Although home care and senior living providers serve similar older adult populations, the business models are vastly different. Most obviously, home care features a mobile, distributed workforce while senior living is a centralized model.

“It’s a very different operational platform – almost the opposite of a real estate-based business,” ATI Advisory CEO Anne Tumlinson told me, of home care.

Goetz is banking that his combined home care and senior living expertise could help bridge the gap between the two platforms. HCAN has a franchise business model, in which the firm provides training and systems to support senior living providers’ home care ventures. The senior living provider pays a one-time franchise fee of $45,000 and a 7% royalty on future growth, and can brand the home care business with their own company name.

One wrinkle is that Bickford will be responsible for staffing its home care operation, and labor is a major challenge in both senior living and at-home care.

In 2020, the median turnover rate among private-duty home care providers was 65.2%, according to the Home Care Pulse Benchmarking Report. By comparison, CNA turnover in assisted living last year was 48.51%, according to the Assisted Living Salary & Benefits Report from the Hospital & Healthcare Compensation Service.

Furthermore, staffing synergies between senior living and home care are not as robust as some might believe. Home care workers tend to value flexibility while senior living workers tend to value consistency, veteran home care consultant Stephen Tweed told SHN in 2016.

Still, HCAN is a new type of partner for senior living providers, and Goetz’s expertise could help Bickford surmount home care hurdles that other companies have failed to clear.

And HCAN is not the only new partnership option to emerge for senior living providers in recent years.

Honor made a splash when it entered the home care scene with $20 million in venture capital, and its funding has now exceeded $115 million. But the company has had to pivot in response to various challenges, turning to a partnership model in which it leverages its sophisticated tech platform to provide workforce and back-end support for existing home care providers.

Honor also is supporting the home care operations of some senior living providers, such as Eskaton. By working with Honor, Eskaton was able to expand its home care footprint while improving net promoter scores and staffing 99% of available hours.

Other tech-forward companies, including CareLinx, are also partnering with senior living providers to support their home care ventures.

Ensuring financial and operational alignment with any of these potential partners is no simple matter, but there are more options than in the past for senior living providers to tap into home care expertise and technology, which could breed success in these endeavors.

The rise of Medicare Advantage

Over the last decade, new health care payment models have become more entrenched in the U.S. health care system, which also could alter the calculus as senior living providers make home care plays.

In one change, Medicare Advantage (MA) enrollment has climbed, and insurers now have more flexibility to offer benefits related to at-home care, including chronic condition management and social determinants of health.

But, these supplemental benefits are still relatively rare.

“Garden variety MA plans are still not offering home care as a supplemental benefit at scale, and the typical plan’s care management function is not sophisticated enough to administer a ‘personal care’ clinical intervention that deploys home care aides,” Tumlinson cautioned.

She does see some opportunities that could take shape in the future.

One scenario involves MA plans specifically tailored for senior living residents, such as those designed and owned by the Perennial Consortium. If these plans were to include in-home supportive services as a benefit, residents enrolled in the plan could tap into these services as needed, defraying their out-of-pocket costs and possibly extending their length of stay.

“I’ve not seen this in nature yet,” Tumlinson said. “I would emphasize, though, that this is not going to be a lot of revenue for the home care business. But it could be a nice way to attract residents into the plan.”

She and Juniper Communities CEO Lynne Katzmann — a driving force behind the Perennial Consortium — agree that home care is not an MA “slam dunk” for senior living providers.

Home care benefits would have to be set up properly, and likely could be utilized only when there is proven evidence that regular monitoring of a particular condition helps achieve the triple aim, Katzmann said.

The other scenario that Tumlinson envisions involves a medical group under an at-risk contract with a payer.

“The medical group then has the flexibility to pay for a variety of non-traditional interventions if they believe them to be effective in reducing costs,” she noted. “I could see this happening as part of a post-hospital care transitions program where the home care is a more effective and efficient way to deliver post-hospital care in the senior living setting, bypassing more expensive home health or SNF care.”

Consider the recent acquisition of Tealwood Senior Living by Lifesprk — a medical group in at-risk contracts with MA plans. Lifesprk intends to drive better population health outcomes and lower costs by bringing more services to senior living residents.

In other words, medical groups built on a home care foundation are starting to acquire senior living providers to build out their continuum. To my mind, it stands to reason that senior living providers — particularly those that are already involved in Medicare Advantage or are making moves in that direction — have similar incentives to build out their home care capabilities.

Lessons learned

Finally, senior living providers that are entering home care today can learn from other providers’ past mistakes, as well as success stories.

Here are just two of those lessons:

Separate the home care business from senior living, with a dedicated leader.

Discovery Senior Living operates a CMS five-star rated home health business; a key to that success was the “wall” between home health and senior living, according to CEO Richard Hutchinson. The home health president did not get easy referrals but had to earn the business of Discovery’s communities.

It’s a point also emphasized by Tweed, whose research shows that senior living-owned home care companies tend to produce lower margins than independent home care outfits. When home care is entrenched within the senior living operation, existing staff are often tapped to handle marketing, IT and HR, but get stretched too thinly, and the home care leader is essentially a middle manager who cannot compete against entrepreneurial home care agencies in the market.

Keep it simple.

As Discovery demonstrates, it’s possible for a senior living company to also operate a Medicare-certified home health agency. But pursuing Medicare certification can be complicated and expensive, and was one of the errors that SLC made early on, Thompson said. A larger patient population is required to justify the additional overhead related to this play, in his view, and SLC now partners with certified agencies for this level of care. “We stopped trying to be everything,” he said.

It’s a lesson that can apply to other aspects of home care, as well. For example, SRG Senior Living initially tried to serve home care clients outside of its communities, but did not manage to attract the volume of business to justify the marketing expense, and scaled back to providing almost all its home care on senior living campuses. Discovery also provides services only within the company’s senior living communities.

Senior living providers that enter into home care services are seeking to be “more” — to offer additional services and expand their reach to new consumers. But as Thompson said, a pitfall is trying to become “everything.” If senior living providers can find the right balance between diversification and overcomplication, it’s possible that they will succeed where operators in the past have not.