What Honor’s Home Instead Deal Reveals About Looming Senior Living Disruption

In 2019, Reddit Co-Founder Alexis Ohanian told me that he expects senior living to be disrupted within 10 years. Here’s how I summed up his thinking:

“Ohanian believes that a new senior living brand could emerge that has ‘amazing software really built into every bit of the process,’ to better appeal to and serve the internet generation.”

I remembered his prediction following the recent announcement that Honor is acquiring home care giant Home Instead, creating a combined entity with revenue of $2.1 billion.

Founded by Silicon Valley entrepreneur Seth Sternberg, Honor’s claim to fame is a sophisticated tech platform. The deal connects that tech with Home Instead’s network of about 1,200 home care franchise locations throughout the United States and 14 other countries.

Leaders in the senior living industry should be paying attention to the Honor/Home Instead combination for several reasons:

• Honor’s history provides lessons for senior living tech startups and established industry leaders about how to achieve innovation

• A similar scenario, of a tech startup acquiring a large senior living provider, could unfold in the coming years

• The combined entity of Honor and Home Instead has big ambitions to transform senior care that, if realized, will affect senior living

The road to innovation

Honor burst onto the scene in 2015, with a $20 million capital raise and bold proclamations from Sternberg about plans to “completely modernize in-home care for seniors.” The basic premise was to use technology to pair caregivers with clients needing private duty services, increase transparency about care rendered, and gain operational efficiencies to support higher caregiver pay rates.

Leaders with many established home care providers reacted with a mixture of panic and scorn to Honor. On the one hand, they were concerned about being disrupted out of business.

“The industry was freaking out that these folks were going to come in and turn things upside down,” Peter Ross, CEO and Co-Founder of home care provider Senior Helpers, told Home Health Care News in 2018.

On the other hand, some home care industry veterans said that Sternberg and his team did not understand key aspects of the market, including the dynamics behind client acquisition, and would ultimately fail.

The Honor skeptics got louder as other, similar startups such as HomeHero folded. And Honor has indeed had to take its lumps; one major obstacle was a change in labor law that limited the use of independent contractors as caregivers.

Honor cooled its rhetoric around disruption as it pivoted its model toward partnering with existing home care agencies in revenue sharing arrangements, essentially providing a tech backend to support operations.

But, investors continued to believe in the unique and significant value of Honor’s model. While a rumored SoftBank investment did not come to fruition, the company secured a $140 million Series D last year, bringing its total to $255 million raised.

With the Series D in hand, Sternberg hatched the idea to pursue the Home Instead acquisition — which succeeded somewhat to his surprise, he told HHCN.

I think the path that Honor traveled in the home care sector highlights how innovation and so-called “disruption” is likely to play out in senior living, and reflects the comments made by Ohanian.

Ohanian anticipates innovation to arrive in two categories:

1. Tech that creates something “totally new,” with an example being Papa and its creation of “Papa Pals” to provide companionship and services to older adults

2. Tech companies that are “taking existing products or systems and making them better or more tailored to the senior user”

Category no. 2 seems an apt description of what Honor is bringing to the Home Instead platform.

Honor’s technology can simultaneously enhance the client experience while adding operational efficiencies. For example, Honor harnessed machine learning to identify which clients do not mind if caregivers are slightly late to shifts; armed with this information, Honor stopped removing care pros for habitual tardiness, which would sometimes upset clients.

Like home care, the senior living industry is largely fragmented and facing enormous workforce pressures, as well as the need to enhance the resident and family experience. So, I’m somewhat surprised that a company like Honor has not already made a play in the senior living sector. I’m confident that such startups are incubating right now.

I also wouldn’t be surprised if Honor itself ended up acquiring a senior living provider. The company already has partnered with senior housing providers to run their affiliated home care arms.

Furthermore, Honor and Home Instead are planning to leverage their scale and the data capabilities of the tech platform to go after payer partnerships. Eventually, Honor might see upside in controlling more of the senior care continuum, to even more closely control costs.

In any case, Honor’s acquisition of Home Instead should make senior living providers alert to the possibility that tech companies with talent and ambition like Honor will not be content to serve as vendors. Rather, they will be looking for ways to capture a piece of the financial benefits that should follow from operators leveraging more robust and sophisticated data analytics, to drive population health and bring down costs for payers.

Bold ambitions

While some of his home care colleagues were “freaking out” after Honor’s launch, Senior Helpers’ Ross remained calm.

“I think Honor’s a good company, I like the people managing it, but I look at them like I look at Home Instead, or Maxim, or Bayada — another competitor,” he told me in 2017. “I think Honor will do well over time, but they’re going to be just like us.”

Ross’ prediction seems prescient, given that Honor and Home Instead are now literally the same company.

But when Ross said that Honor would be “just like us,” it sounded like the “us” referred to the whole home care industry. I think that the “us” is actually a group of companies that are willing to take risks to meet the evolving market.

Senior Helpers is among that group; the company was acquired this year by Advocate Aurora Health, one of the largest nonprofit health systems in the United States, for a reported $187 million. This was a landmark deal that marked the ongoing elevation in how health systems view private-duty home care, as a type of service that can improve population health efforts.

So, Honor/Home Instead and Senior Helpers are similar in their willingness to pursue innovative models and tie up with new ownership groups, in a bid to play a larger role in the health care continuum. And senior living providers need to take their big ambitions seriously.

“Home Instead intends to be the default setting for people who are needing to care for their aging loved one — and not just for home care help with activities of daily living,” Home Instead CEO Jeff Huber said. “They’ll come to Home Instead for a variety of products, services and direction, so that they can help their aging loved one navigate the aging process in the most successful way possible.”

There’s a lot of heavy lifting to do before this vision can be achieved; in particular, Home Instead’s franchisees seemed surprised about the deal and unsure about what the combination with Honor means for them.

But, Huber should be given credit for taking an expansive view of what Home Instead could become and for recognizing an obvious pain point in the U.S. system of aging care and services; namely, that consumers are confused about their options and not sure where to turn for information and assistance.

Some senior living providers, such as Five Star, have indicated they will try to address this pain point as well. Five Star CEO Katie Potter spoke on this topic at the SAGE/2020 virtual conference hosted by Honor.

But even if they don’t try to address this huge challenge, I think senior living providers need to recognize and pursue the ingredients that Honor and Home Instead have put together with their deal:

• sophisticated technology
• committed investors
• access to a sizable consumer base
• a big-picture strategy that fits with consumer preferences and evolving health care payment and referral frameworks

I think senior living providers that pursue these imperatives will set themselves up for ongoing success, while other providers will become increasingly vulnerable to disruption.