Thrive: Inside TheraCare’s Decision to Partner with Honor

Thrive is an HHCN series that explores the successes, struggles and strategies of home care owners and operators on the local level.

At times, technology-driven home care startup Honor has faced criticism for the way it operates.

First, its goal was to be an innovative, tech-savvy provider, which made the San Francisco-based company a competitor and a threat, especially to the little guys. Then, the company switched its focus to a partnership model — which some interpreted as a white or even red flag, depending on who you asked.

Advertisement

But now some small agencies — including Redwood City, California-based TheraCare — say Honor’s partnership strategy is helping their business thrive.

Specifically, TheraCare founder and CEO Greg McCarthy says his recent partnership with Honor is lessening the impact of the caregiver crisis on his business. In turn, the seven-year-old home care agency is able to consider new growth for the first time since hitting a plateau a few years back.

“In our best year, we probably grew 40%,” McCarthy told Home Health Care News. “In the last year to 2 years, [we were] seeing that growth starts to slow a little bit. We attributed it to — one of the major reasons being — the caregiver shortage.”

In other words, McCarthy didn’t have the care workforce he needed to take on more clients. As a result, McCarthy started — cautiously — exploring opportunities with Honor in late 2017.

“They were competitors to us before they moved to the [partnership] model,” McCarthy said. “I always looked a little bit closely at them. As the old adage goes, keep your friends close and your enemies closer.”

That once-enemy became a partner in October 2018, McCarthy said, with TheraCare completing the transition in December.

As part of the agreement, Honor now provides back-office capabilities for TheraCare, freeing up time for McCarthy and his team to focus on marketing, sales and customer satisfaction.

“I thought people were joking at first when I told them my phone would become less busy, but it has,” he said.

Honor also took over management of all things staffing, compliance and regulatory.

“All the management of the care pros, Honor is managing,” McCarthy said. “All the workman’s compensation issues and anything else that would have, as a small office, taken a lot of bandwidth to manage.”

The partnership has also helped TheraCare optimize schedules, scale care and grow geographically, McCarthy said.

“As we were working on transitioning and getting our clients over, things kind of leveled out for a little bit … but now we’re starting to pick up our growth again,” he said.

Currently, TheraCare is exploring the viability of opening a third office in Napa Valley, in addition to its current locations in Redwood City and Walnut Creek.

Financial impact

Partnering with Honor comes at a cost — usually a negotiated portion of the home care agency’s revenue.

While McCarthy declined to share specifics of his partnership agreement, he previously told HHCN Honor’s revenue sharing stance is a roughly 50-50 split.

McCarthy maintains that the agreement hasn’t affected Theracare’s bottom line.

“My actual level of profit has dropped, but my net profit — based on the fact that I reduced my workforce on my end — remains pretty close … to what it was prior to moving into the relationship,” he said, noting that company profit margins are somewhere between 12.5% and 18%.

However, company revenues are expected to spike, according to Honor. On average, Honor home care agencies have seen their revenue grow by about 30% after engaging in the partnership model, according to the company.

Still, some critics believe such an increase isn’t worth it, claiming Honor partnerships are one-sided and remove agencies’ independence.

McCarthy, on the other hand, believes partnering with Honor was the “best thing” for TheraCare.

Staffing solutions

Since it opened in 2012, ThereCare has specialized in serving clients with higher physical care needs, especially those transitioning to home care from a therapy setting.

McCarthy, a physical therapist by trade, says his agency is different than competitors, in that it brings a “medical edge” to non-medical home care.

“When we go in and do an intake or an assessment, we’re doing it through the eye of a physical therapist,” he said. “We’re going into the home and looking at safety, we’re looking at how [clients] move, we’re meeting with the therapists and the discharge planners and picking up the nuances of … treatment that was finished in the rehab setting or in the hospital and continuing that in the home.”

To do that, it’s important to provide caregivers with additional training so they’re able to replicate the services that were being provided to clients prior to transition.

Before joining Honor, TheraCare employed 200 caregivers to care for 100 clients. Caregiver turnover rate hovered between 50% and 60%, McCarthy said, still well below the industry average of 82%.

No longer having direct control over that workforce was a major concern for McCarthy when considering Honor. However, McCarthy said it hasn’t been a problem.

“We’ve been very involved in … working with Honor on the processes for training,” he said. “We do warm handoffs and meet caregivers as we introduce them to our clients.”

On top of that, Honor has helped TheraCare take on short-shift jobs it would have had to turn away before due to lack of resources, McCarthy said.

While the partnership has allowed the company to take on new clients — it also forced them to part ways with an undisclosed number of employees.

“At the end of the day, I had to make a business decision to adapt to stay at the forefront of the home care industry,” McCarthy said. “Everyone on my team either ended up staying in their same role at TheraCare, in a new role with TheraCare, a new role with Honor or in another great position in the health care industry.”

Companies featured in this article:

,