Home-based care is often lauded for allowing seniors to age in place while saving the health care system thousands of dollars by decreasing hospital admissions. But with costs that don’t always come cheap to clients and nationwide caregiver shortages, home-based care isn’t without challenges.
An increasingly popular way to address them is with adult day services, programs that provide care and companionship for older adults.
Between 2002 and 2010, the number of adult day services centers across the country increased by 35%, according to a study by life insurance company MetLife. Today, there are more than 5,000 adult day centers serving more than 260,000 participants and family caregivers across the United States, the National Adult Day Services Association estimates.
Those figures will only grow in the years to come, Peter Ross, CEO of Senior Helpers, told Home Health Care News.
The in-home care services franchiser recently launched an adult day care franchising model focused on older adults with dementia. The model is called Town Square.
“My goal was to have between five and 10 [locations] sold in the first year, and we’re going to go right through that,” Ross, who also serves as president of the Home Care Association of America, said.
Senior Helpers’ Success
Baltimore-based Senior Helpers opened its first Town Square franchise location in San Diego last July in partnership with the George G. Glenner Alzheimer’s Family Center, the organization that created the original prototype.
Now, six months later, business is booming.
“We now have a location that’s being completed in Baltimore. We have a new franchisee that will be opening later this year in Louisville, [Kentucky]. We have a franchise candidate that’s buying 10 [Town Squares] in Chicago [to open] over the next 5 to 10 years,” Ross said. “We also have two other candidates, one in New Jersey and one in California, that are ready to sign and move forward.”
The initial investment to start a Town Square ranges $1 million and $1.5 million, according to Ross.
Town Square locations replicate scenes out of the 1950s, when seniors using the adult day care were young. Each center engages seniors with dozens of “vignettes,” or stations that recreate mid-century diners, movie theaters, hair salons and more, with the goal being to preserve cognitive function.
That’s not the only benefit.
Fiscally, it costs clients about half of what clients usually pay for home-based care, according to the most recent Cost of Care Survey from Richmond, Virginia-based insurer Genworth Financial (NYSE: GNW).
“In an adult day care setting, we could have a Senior Helpers caregiver work with seven or eight participants instead of it being one-to-one,” Ross said. “That allows for the cost to be much less, the programming to be very, very good and the caregiver to take care of more people.”
For example, instead of paying $24 dollars per hour for home-based care, clients who use Town Square might pay $11. In offering both services, Senior Helpers has been able to customize care plans to include both — drawing more business and referrals.
“A lot of families want us to be there as much as possible,” Ross said. “Then it comes time for, ‘Okay, this is what it’s going to cost for 40 to 50 hours of care.’ For families, sometimes that’s fine, but a lot of families say, ‘Geeze, I don’t know if I can afford that much. Is there another option?’ What we’ve been able to do is to combine the products and services.”
Private Equity interest
The cost savings adult day care offers has also attracted former Addus HomeCare Corporation (Nasdaq: ADUS) CEO Mark Heaney, who is looking to create a multisite, multidisciplinary system of community care services through a new private equity partnership.
In January, Heaney teamed up with New York-based private equity firm Post Capital Partners to make it happen. He’s leading the team’s search for its first acquisition target — and adult day centers are on his radar.
“We think that personal care — one-to-one care — is vital, but we believe that one-to-one care is becoming increasingly expensive, and we think the solution over the long term is group care,” Heaney previously told HHCN. “Group care will often be adult day services.”
For its first acquisition, Post Capital is looking to take on a platform — be it an adult day business, a home care company, meal delivery service or something of the like — with leading position in an urban market. The ideal acquisition target would have a large, stable patient population and pool of referral sources.
Another attractive aspect of adult day services is how they’re staffed — namely, that the centers require fewer caregivers than home-based care companies demand.
The nationwide caregiver shortage is often identified by providers as the biggest problem facing the home care industry — one that’s only projected to worsen in the years to come. But that’s less of a problem at adult day care centers, where one caregiver can monitor and care for several clients, Heaney said.
This allows centers such as Town Square to save drastically on payroll and guarantee caregivers consistent hours.
“That’s why the cost for care can be much less in the Town Square environment,” Ross said. “People can come in paying $11 or $12 an hour versus $22 to $24 an hour for home care, maybe more depending where you are in the country.”
For the most part, adult day services are paid for using Medicaid, according to the National Adult Day Services Association. Clients might also pay privately or use other government programs to provide at least partial coverage for services. Some options are available through Programs of All-Inclusive Care for the Elderly (PACE), the Veterans Affairs and by select Medicare Advantage (MA) plans.
Anthem Inc. (NYSE: ANTM), for example, announced in late 2018 that it was expanding its 2019 MA offerings across many of its affiliated health plans through a new benefits package that featured adult day.
And while retailers such as Amazon have taken measures to sway caregivers from the direct care workforce by paying higher wages, the online retailer has also presented unexpected benefits for Town Square franchise locations, Ross said.
As more consumers shop online, brick-and-mortar retailers have closed their doors, leading to more real estate options for Senior Helpers to explore.
“Originally, we thought we’d have to be in these industrial warehouses because that’s where we thought we’d get the best rent,” he said. “But what we’re finding is these retail and big-box stores are basically empty, so we’re getting cities and towns to approach us and basically say, ‘Look we’ll help you. Let’s do kind of an urban revitalization program because there’s nobody going out and looking for 10,000 square feet anymore.’ It just isn’t a high opportunity because of online presence.”
Editors Note (Feb. 21, 2019): A previous version of this article stated that adult day services are largely private pay. It has be changed to clarify that adult day services are typically funded by Medicaid.