Forbes: Higher Wages Hurt Home Health Care

As the home health care industry grapples with changing wages in some states and a national “Fight for 15” that is pushing for a minimum wage hike across the U.S., one provider tells Forbes that rising wages have led to a 30% to 40% loss in business.

The provider, California-based Select Home Care, provides non-medical home care for seniors with 11 locations around the country. With new minimum wage legislation in California that will bring the state’s minimum wage to $15 after a phased-in approach, the company has seen firsthand the impact of rising employee wages on the home care business.

Some home health companies have pushed back against the wage hikes indicating that the added costs will ultimately will be passed on to the consumer.

“I want to be able to pay people more. I really do,” Dylan Hull, CEO of Select Home Care and Select Senior Living LLC, told Forbes. “But realistically, it’s driving costs up to the point that many senior citizens just cannot afford to have a private caregiver at home anymore.”

Select Home Care is having trouble with the changes, as the costs of private, full-time caregivers have continued to rise since the company opened its doors in 2005. It used to cost $6,000 per month for a senior to hire a full-time caregiver in 2013, but now it’s more than $15,000 per month, which makes it tough for the average senior to afford, according to Hull.

Other major home health care providers are taking similar hits from rising labor pressures. Executives from Addus HomeCare Inc. (Nasdaq: ADUS) and The Ensign Group Inc. (Nasdaq: ENSG), two of the most prominent providers in country, recently voiced their concerns over wage issues impacting the companies’ bottom lines during quarterly earnings calls.  

New legislation surrounding overtime pay is also hitting the home care industry especially hard. Caregivers in California are now paid for sleep time and overtime for any shifts exceeding nine hours per day or 40 hours per week.

“As a result, prices just skyrocketed,” Hull told Forbes. “That’s why the length of stay has decreased significantly. Since costs are too high, families are turning to each other to take care of their parents, grandparents, or they’re hiring independent caregivers, which are paid under the table. The latter is illegal but the easiest way to circumvent the law and the high price tag.”

The higher minimum wage and overtime laws may work well in other industries, but in home care, where prices increase each year, it’s challenging for companies that are looking for dedicated and trustworthy employees who will stick around, some argue. But when the pay is low for the type of skilled work caregivers are doing, turnover can be high.

Seniors are the ones who tend to suffer from wage hikes. As prices rise annually, seniors have limited payment options, Forbes reports. As a result, seniors typically rely on Medicare, a state-run medical facility, or a part-time caregiver for as many hours as one can afford.

To combat the changes to his business, Hull purchased three new residential care facilities for seniors that will offer a middle-of-the road option. Known as board and care facilities, this model will still offer privacy to its residents, but provide a round the clock care at an affordable price, the Forbes article says.

The new business venture, Select Senior Living will cost about $5,000 per month for a senior. The cost will include meals, transportation, medical support and full-time care. “When private care becomes too expensive we can offer this alternative to families and continue to provide the same quality of care,” Hull told Forbes.

Read the full article from Forbes.