Market Forecast: COVID-19’s Long-Term Impact on Home Care

The home care industry has historically been built on nonmedical services and a private-pay revenue structure. It has also long been underappreciated by the health care sector at large.

But all of that’s changing.

Nonmedical home care providers have proven their worth and range amid the COVID-19 crisis, keeping high-acuity seniors safe at home while cutting down on their risk of virus transmission.

While agencies are still very much in the thick of navigating the crisis, their success in doing so is setting them up for a new, professionalized era of home care — one where providers get more attention from consumers and policy makers alike.

Home Health Care News predicts that home care’s long-term outlook will be defined by diversification of payers, more expansive services offerings, improved retention metrics and a slew of other positive changes.

Private pay will no longer dominate the payment landscape

Historically, the nonmedical home care industry has been mostly private pay, with some Medicaid and managed care opportunities. That’s been slow to change.

It wasn’t until 2019 that the Centers for Medicare & Medicaid Services (CMS) first opened up Medicare Advantage to home care providers via expanded supplemental benefits flexibilities. But that year, less than 4% of plans chose to offer home care benefits.

That number rose modestly in 2020, with a total of 619 MA plans nationwide — out of more than 3,000 — offering some sort of home-based care benefit.

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COVID-19 has added fuel to the fire, which will likely lead to an explosion of MA and other federal payment opportunities for home care providers in the years to come.

Why? The virus has exposed some of the weaknesses of nursing homes and senior living facilities in keeping residents safe. Widespread outbreaks at congregate care centers have inspired family members to pull their loved ones out of those settings and move them back home, where the risk of catching COVID-19 and other infectious conditions is much lower.

As states reopen and people go back to work, those family members will need more help keeping aging loved ones safe at home, prompting even more people to turn to home care.

Home care providers could soon see some more help from the federal government, too.

“Going into next year maybe, there are going to be some proposals on the table to make the pot of money available for home care from public paying sources bigger,” Anne Tumlinson, CEO of ATI Advisory, previously told HHCN. “There’s a recognition that people really do need these services to stay home and to stay out of nursing homes.”

Amid the coronavirus, CMS has already started to act on that recognition. It announced new mid-year benefit flexibilities for MA plans, effectively allowing them to immediately add new home care benefits and other supplemental services to grapple with the COVID-19 emergency.

It’s likely that those additions will become more widespread and permanent in a post-COVID-19 world. Success in the MA realm could also lead to opportunities elsewhere, including in fee-for-service Medicare.

“Traditional Medicare pays for ‘skilled services,’ but it really may be time to move on beyond that limited definition of home care for Medicare,” CareAcademy CMO Madhuri Reddy previously told HHCN. “I think a couple of the issues we’re facing now blur the lines of what requires ‘skilled care’ versus ‘non-skilled care.’”

Regardless, the home care industry is poised to move away from its traditional private-pay model. And the latest Home Care Benchmarking Study from Home Care Pulse shows it’s already starting to happen, slowly but surely.

In 2018, home care agencies said private pay accounted for 72.1% of their annual revenue. In 2019, that percentage had dropped to 67.5%.

HHCN predicts the coronavirus will push the 2020 figure even lower.

Demand for home care services will boom — and those services will be more expansive

The growing recognition for home care will prompt demand for service to boom. While some of that demand will be traditional, a lot of it will look new.

For one, as more people choose to age in place as a result of COVID-19, home care providers will be caring for more higher-acuity patients who will require more assistance.

Additionally, in light of COVID-19, senior living facilities have turned to home care providers for help meeting their staffing needs. As such, agencies have pivoted to make it happen, developing ad hoc staffing offerings.

One such agency is Caring People, a New York City-based home care provider that operates in five states and also has a Medicare home health offering. While Caring People never had a designated staffing arm in the past, CEO Steven East told HHCN in April that it was engaged with 40 to 50 communities in different staffing capacities.

“We had one community who needed 72 full-time employees,” East said. “Obviously, there’s no way we were able to do that, … but we just hired as many people as we could for that scenario.”

Meanwhile Cincinnati-based in-home care franchiser FirstLight Home Care is going beyond supplemental staffing and helping facilities actually replace existing employees unable to work their shifts.

“We are probably running an 18% to 20% increase in hours per week purely from staffing requests from facilities,” CEO and co-founder Jeff Bevis told HHCN in April.

Staffing isn’t the only new service line home care agencies will be prompted to launch. Some have added new transportation and grocery pick-up offerings, while others are thinking even more outside the box, sending caregivers to office places to take temperatures for COVID-19 health checks.

In-home care franchiser Senior Helpers is leaning into the latter, according to CEO Peter Ross.

“We’ve seen new types of services that we’re doing in home care, where you now are servicing plants [using us] as the temperature-control checkers,” Ross said on an HHCN webinar. “We are starting to see some of those services request ramp up, even different kinds of services that we weren’t doing before.”

Because the COVID-19 virus is novel, it’s anyone’s guess how long such services will be in demand, but home care providers’ flexibility is likely to continue winning them new service opportunities into the future.

Home care will go on the hiring offensive

To keep up with the growing demand for services, home care will get creative when it comes to hiring.

Amid COVID-19, it’s already started to happen. Instead of losing caregivers to restaurants, retailers and corporate giants like Amazon, it’s been the other way around: Home care agencies have successfully poached workers away from other industries that were disrupted as a result of the coronavirus.

Take FirstLight again, for example. In April, the franchiser was able to hire 450 to 500 new caregivers per week, with many of those new hires coming from retail or food services.

“That’s where we’ve always been recruiting in the past,” Bevis said. “It’s just that we’ve got many more [candidates] to choose from now with some people being laid off.”

Amid the COVID-19 outbreak and the economic turmoil it caused, unemployment skyrocketed to 20.5 million in May 2020. While COVID-19 restrictions are starting to ease nationwide, sending some people back to work, it will be months, if not years, before the economy fully recovers.

That’s especially true considering the fact that, pre-COVID-19, the unemployment rate had hit a 50-year-low of 3.5%.

In other words, hiring in home care will be easier — a trend that had already started to take hold in 2019, when the industry turnover rate dropped to 64%.

More states will adopt home care licensure requirements

As home care providers take on high-acuity patients and new tasks, a higher level of professionalism will be required across the board.

While most home care advocacy organizations require members to uphold certain practice standards and meet a set of requirements, not all states do the same.

Currently, only 30 states have some sort of home care licensure requirements, meaning home care agencies in 20 others aren’t bound by any training or practice standards.

But COVID-19 makes the case for nationwide home care licensure requirements.

Licensing would ensure proper training around issues such as infection control and allow for best practices regarding the coronavirus and other topics to be easily disseminated to providers nationwide. It would also ensure patient safety and uphold the reputation and credibility of the industry at a whole.

“At the very basic level, you need some consumer protections, and licensing allows that,” Darby Anderson — a vice chairman for the Partnership for Medicaid Home-Based Care (PMHC) and chief strategy officer at Addus HomeCare Corporation (Nasdaq: ADUS) — said on a recent HHCN webinar. “It can’t be overreaching. It can’t be putting in place regulations that don’t improve the quality of homecare or aren’t relevant to home care. But, certainly, knowing who your providers are … should be done across the board.”

Remote work arrangements will become commonplace

Working from home has been common across all industries in light of the coronavirus — and home care is no different.

Data from Home Care Pulse’s recent benchmarking study suggests the trend will likely remain popular even after the virus is no longer a threat, creating new opportunities for caregiver and office staff to work from home.

Of the nearly 900 home care agencies surveyed by Home Care Pulse, the majority said they’d adopted new virtual work innovations amid COVID-19 that they plan to keep even after the crisis subsides.

For example, 51% of respondents said they would continue to allow staff members to continue working from home, though they did not allow them to do so pre-COVID-19. Another 24.6% said they would continue doing new telehealth visits, creating remote work opportunities for caregivers as well.

The same holds true for remote onboarding.

Most agencies — 63% — said they intend to continue newly adopted virtual hiring practices even after the COVID-19 crisis subsides. Meanwhile, another 41.5% said they would continue with new online training practices.

Consolidation will accelerate

Over the past few months, M&A activity has largely taken a back seat to COVID-19 risks.

In the first half of Q2 2020, there were only two home care acquisitions, compared to six total in Q2 2019 and seven in Q1 2020, according to a mid-quarter report from Mertz Taggart.

Instead of M&A, the main priority for home care organizations has been keeping patients and staff safe.

However, the pause won’t last forever. In fact, the turmoil of COVID-19 is likely to accelerate transaction activity in the space in the near future.

It’s true that the federal government has doled out a record amount of federal aid to help small businesses amid the coronavirus, including more $500 billion in paycheck protection program (PPP) loans for small businesses; but not every home care agency is well-positioned to take it.

The industry has long been highly fragmented and filled with mom-and-pop providers run by former nurses and clinical workers. They aren’t all necessarily equipped to navigate a complex government loan program, S. James Boumil, a home care attorney previously explained to HHCN.

“They find the paperwork to be very difficult, and they find the regulations to be impossible,” Boumil said. “They call up and they’ll say, ‘Do we have to pay this money back? How much do we apply for? What can we use it for?’ Some of the regulations are really impossible.”

But without the money, financial strain is harder to navigate. Boumil said two of his eight home care clients have considered filing bankruptcy as of late, in part due to COVID-19.

If that’s any indication of the industry as a whole, well-financed providers who weather the storm will have their pick of agencies — and clients — in the months to come.

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