‘Simplicity Is the Ultimate Sophistication’: Why Some Home Care Providers Are Sticking with Private Pay

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Over the last few years, home care providers have begun to embrace a greater mix of payers, including Medicaid waiver programs, veterans assistance (VA), managed care and Medicare Advantage (MA). At the same time, some providers have seen the value in further leaning into predominantly private-pay revenue structures.

In contrast to their home health counterparts working under Medicare, Medicaid or private insurance, home care providers often operate under the private-pay model almost exclusively. While providers have slowly begun to rely less on this payment structure, two-thirds of the home care industry’s revenue still came from private pay in 2020, according to data from Home Care Pulse.

For instance, private pay still makes up the bulk of Right at Home’s business. Across the company’s entire franchise network, roughly 75% of revenue comes from its private-pay clientele.

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This is a deliberate strategic decision for the company, Brian Petranick, CEO and president of Right at Home, told Home Health Care News.

“From the day that we launched as a franchise system over 20 years ago, we talked to our franchise owners about having a nice balance to their business,” he said. “We like Medicaid waiver and VA programs, but … those programs can go away with the stroke of a policymaker’s pen. If 80% of your business [is tied to] a waiver program, and there’s a significant change to that program, then your business is at risk.”

Founded in 1995, the Omaha, Nebraska-based Right at Home offers in-home care to seniors and adults with disabilities across its more than 600 franchise locations in the U.S. and seven other countries.

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While Petranick sees the value in the highly reliable private-pay model, franchise systems often give their owners the latitude to make autonomous decisions. Such is the case with Right at Home.

“It’s their business, so if they’re going to go heavy on outside reimbursement models, it is really imperative for them to understand the real dynamics of that,” Petranick said. “This means they understand the reimbursement rates and the margins.”

David Robinson, owner and care coordinator of Always Best Care Senior Services of Greater Boston, has found that a predominantly private-pay revenue structure best suits his agency’s operating structure.

“Usually, the shifts that you get from private pay are going to be a lot longer,” he told HHCN. “We do a lot of 24-hour shifts. We do live-in shifts, and we have a minimum of six hours per shift.”

In contrast, the VA might ask for a caregiver to fill a three-hour shift, Robinson noted.

Roseville, California-based Always Best Care is a home care franchise company that operates across 224 territories in 30 states and Canada.

Currently, Always Best Care of Greater Boston employs 500 caregivers. In addition to traditional home care services, the business offers free assisted living placement.

Similarly, Petranick pointed out the potential staffing strain other reimbursement models could have on agencies when payers that fall outside of private pay make up the majority of their business.

“I would make an argument that going toward reimbursement models … where it’s shorter shifts and a lot more clients puts a significant burden on needing more caregivers,” he said. “I think it’s fair to say that, when I look across our system, our offices that do a lot of waiver business generally have a lot more caregivers on staff than the ones that do a majority of private pay.”

At Always Best Care of Greater Boston, private pay makes up about 95% of the agency’s business. Robinson has seen the upsides of having a payer mix that largely skews toward private pay.

“The benefits of this are pretty simple,” he said. “It’s a higher profit margin, and you’re able to pay the caregivers more, so it creates more loyalty amongst your employees.”

Another benefit is the clear framework it can provide an agency, Family & Nursing Care CEO Neal Kursban told HHCN.

“It’s my view that simplicity is the ultimate sophistication,” he said. “My staff, my executive team, my leadership team, the caregivers — they know this is the clientele we service, and they don’t have to wear multiple hats.”

Based in Maryland, Family & Nursing Care is one of the largest private-pay home care companies in the Washington, D.C., area. Currently, the company provides just under 41,000 hours of care per week.

Despite the benefits of taking on a predominantly private-pay revenue structure, not everyone will be able to replicate the success that Always Best Care of Greater Boston, for example, has seen.

“In order to make this work, you have to be in an area where people are willing and able to pay privately for their care,” Robinson said.

Another challenge providers may see is upward pressure being placed on pricing, according to Petranick.

“As an industry, we don’t have a really good grasp on elasticity models within home care,” he said. “In other words, where people will just stop paying for care because it gets too expensive. So far, people are still paying for and need care. There’s not a lot of alternatives. I think as more upward pressure gets put on pricing that’s going to be a challenge because it’s going to make it more difficult for some families to be able to afford care.”

Looking ahead, Petranick believes providers will continue to eye other payers, as an additional business opportunity but not as a replacement for private pay.

“[Payers] – like waivers and the VA – have gotten better,” he said. “Historically, VA was a poor payer. It would take months or longer to actually get paid. There has been improvement across the board, so it’s a much more attractive business. The reimbursement rates have also changed for VA due to the work of organizations like the Home Care Association of America (HCAOA) and others. Agencies are actively taking on more VA clients — but not in lieu of private pay.”

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