Health System Acquires 26 Private Duty Franchises

In what’s being described as an industry first, one of the nation’s largest not-for-profit health systems has turned to franchising in a big way to expand its home care services.

St. Joseph Health is acquiring 26 Southern California locations from Nurse Next Door, with an option to buy another 12, the companies announced Monday.

The move creates an estimated $50 million revenue line in the future for St. Joseph Health. The company is based in Irvine, California, and currently offers home health care in three California counties, along with operating 16 hospitals, physician organizations, outpatient services and community outreach services.

Nurse Next Door is a Vancouver-based home care organization that now has 80 U.S. locations. The total investment necessary to begin operating a Nurse Next Door franchise is $106,000 to $158,700, according to a December 2015 disclosure document filed with the state of California. If no discounts are involved, that puts the total St. Joseph investment in the $2.8 million to $4.1 million range. Financial details of the transaction were not disclosed by the companies.

The Nurse Next Door locations that St. Joseph is acquiring will offer basic companionship, Alzheimer’s and dementia support, among other services.

St. Joseph Health will be engaging general managers for the home care locations, which is slightly different than the typical Nurse Next Door model, in which franchises are owner-operated, Nurse Next Door CEO Cathy Thorpe told Home Health Care News. But Nurse Next Door will be providing training, marketing, and other support as it does for other franchises.

“In the most simplistic terms…St. Joseph is now a franchisee of Nurse Next Door across the Orange County area,” Thorpe said.

St. Joseph approached Nurse Next Door after seeing the company’s signature pink vehicles on the roadways, and then looking into the services that the company provides, Thorpe explained.

The companies discovered that their values are aligned. In particular, Nurse Next Door’s emphasis on whole-person care to increase clients’ happiness, not just improve their health status, was a differentiator, executives from the two companies said.

“We got really excited about this opportunity because it’s really the first to happen in the U.S.,” Thorpe said. “When you look at the ability for people to not only provide care in the hospital but help people stay at home and have that continuum of care, it really does elevate the relationship between health systems and private duty.”

Nurse Next Door sees the St. Joseph Health partnership as a strategic initiative and intends to replicate this type of arrangement across the country, she added.

St. Joseph makes this move as hospitals increasingly are seeing payments tied to how well patients fare after they are discharged. For instance, hospitals face Medicare penalties if too many of their patients are readmitted.

The health system has reportedly been looking into expanding its home health service line for some time, and sees the new partnership as a means to achieve those goals with infrastructure already in place. St. Joseph Health’s current private duty home care business will be transitioned into these franchises, Chief Administrative Officer John Bennett told HHCN.

“Having experienced the challenges of building a home care service line from the ground up, we’re confident we can jump-start this offering with all the operational expertise Nurse Next Door is known for,” Bennett stated in a press release.

The majority of franchise locations will be built from the ground up, although a few are being acquired from an existing owner, Bennett said. The franchises initially will be providing non-skilled care but are pursuing state licensure to also provide skilled services.

St. Joseph Health will operate franchise locations in Orange County, San Bernardino County and part of Los Angeles County. The health system has already started providing home care services and anticipates the partnership will create about 600 jobs over the next three years.

Written by Tim Mullaney and Amy Baxter