Hometeam will now be accepting Medicaid in New York City, becoming the first of a new breed of home care companies to tap the government insurance program for low-income individuals.

Founded in 2013, Hometeam came out of stealth mode last year and announced an $11 million funding round. Since then, it has continued to secure capital, including $5 million from Kaiser Permanente Ventures in February. It is one of several startups, including Honor and HomeHero, seeking to disrupt the traditional home care model by leveraging technology to connect clients and caregivers and bring new operational efficiencies. Investors like the idea, committing eye-popping sums.

Up to this point, these new companies have offered services on a private pay model. Hometeam, which operates in New York City and parts of New Jersey and Pennsylvania, charges roughly between $20 and $25 an hour.

But accepting Medicaid always has been a goal for Hometeam, founder and CEO Josh Bruno told Home Health Care News. Hometeam has had to turn away prospective clients who were not able to pay out of pocket, he said. Another issue: Clients who can no longer afford to pay privately but do become eligible for Medicaid as a result of having spent their assets.

“As clients spent their assets down, we were forced to transfer them to a Medicaid agency,” Bruno said of some New York City customers. “I’m proud to say that now when a private pay member joins, and they spend down, they are going to be able keep the same home health aide and the same pattern to their day.”

A ‘Counterintuitive’ Play

New York City has moved aggressively in recent years to a Medicaid managed care system for long-term care, meaning that Medicaid benefits are handled through private insurers that have contracted with the state.

Hometeam will be accepting all the major insurance providers, Bruno said, although he did not specifically identify which of the managed long-term care plans servicing New York City the company is contracted with.

Bruno also did not share the specific Medicaid rates that Hometeam will receive. The city-wide rate for personal care services through managed long-term care plans ranged between $16.94 an hour and $20.77 an hour according to publicly available data last revised in September 2013.

Medicaid rates such as these typically are lower than what a home care agency charges a private-pay client, and accepting Medicaid creates a certain amount of complexity and adds some costs. For example, Hometeam has hired a billing department to handle Medicaid claims.

Still, there are reasons why providers take Medicaid.

One possible advantage has to do saving money on sales efforts. A Medicaid managed care organization may create a steady referral stream for its contracted home care providers, meaning the agencies have to do little work and expend few dollars to drum up that business, said Jim Moskal, who leads the Global Healthcare Practice for Livingstone Partners, a Chicago-based M&A and debt advisory firm.

Another potential benefit to accepting Medicaid is expanding the pool of potential clients. While he declines to say how many clients Hometeam currently serves, there are 150,000 users of Medicaid long-term care sevices in NYC, according to government figures cited by Bruno. Industry-wide, home care companies typically get 70%-75% of their revenue through private pay versus about 10% from government programs including Medicaid, according to Moskal.

But Hometeam’s decision to enter into Medicaid was not really about creating a referral stream nor even about tapping the larger market, but rather was driven by the company’s mission to provide care for everyone who desires it, Bruno said.

Still, he expects that the move to Medicaid will lead to such growth in New York that the company is slowing down its plans to enter new markets, although there are no exact targets in terms of how much of Hometeam’s revenue will come from Medicaid versus private pay. And despite saying that the Medicaid play is driven more by mission than potential business upsides, and acknlowedging that it flies in the face of conventional industry wisdom, he is confident it is a sustainable move.

“Is this a stable business long term? Yes,” he said. “Mainly it’s because we streamline so much of operations through tech. I think it’s counterintuitive to what the industry would recommend we do, and I’m okay with that.”

Next Steps

Hometeam is licensed for Medicaid and Medicare in a number of states, Bruno said. However, that doesn’t mean the company is chomping at the bit to either start accepting Medicaid in other markets or branch into the Medicare side of home health, which involves services such as intermittent skilled nursing care or therapy.

“Medicare is a very different challenge,” Bruno said. “Our core service is long-term, in-home care. How do we make mom or dad happy for many, many years?”

And on the Medicaid side, there’s significant variation from state to state. While there are “different flavors” of Medicaid managed care in New Jersey and Pennsylvania, they are not necessarily ones that Hometeam needs to sample right away.

“We’re going to do New York first and then see where we go from there,” Bruno said.

Written by Tim Mullaney

Photo Credit: “New York City,” but Aurelien Guichard, CC BY SA 2.0