In-Home Care Agencies May Look to Cut Costs by Scrapping Brick-and-Mortar Offices

The COVID-19 crisis has raised a complicated question for home-based care executives as they plan for the year ahead: Is the cost of having a brick-and-mortar office location still worth it?

Traditionally, home health and home care operators have maintained a corporate headquarters or local office as a place where administrative staff can come into work on a daily basis and where caregivers in the field can occasionally mingle with peers.

But as the cost of COVID-19 mounts, many agencies are beginning to weigh the possibility of going fully remote, as leasing real estate often comes with a steep price tag. For some, though, the thought of going completely remote feels like a logistical nightmare.

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Surprisingly seamless

While Addus HomeCare Corporation (Nasdaq: ADUS) still wants to get its employees back together in its 185 locations, leadership acknowledged during the company’s recent second-quarter earnings call that the switch to a near-100% remote workplace was done with relative ease.

“There’s been some benefits that we’ve all obviously learned from being remote that maybe we can take into the future,” Dirk Allison, president and CEO of the Frisco, Texas-based home health, hospice and personal care services provider, said.

Specifically, Allison mentioned cutting down on travel time as a perk of going fully remote.

For agencies with less financial flexibility, getting rid of the brick-and-mortar office seems like an efficient way to reduce costs.

In the Washington, D.C., area, for example, office space costs $595 per square foot, on average, according to Statista. In Pittsburgh, it costs $140 per square foot, on average.

The telehealth boom has already forced on-the-ground workers to deliver care differently. It’s doubtful that trend is going away, Mark Kulik, managing director of M&A advisory firm The Braff Group, told Home Health Care News.

“The situation has forced people to have more open minds about how to do business and how to provide care,” Kulik said. “From an expense perspective, economically, it makes all the sense in the world to not have offices dotting the landscape.”

Apart from having a central hub for workers, the conventional wisdom in home-based care was that agencies needed to have local visibility and be on as many corners in a given area as possible. The goal: to win referrals and build relationships within the community.

Remote work and COVID-19 have changed that.

To some extent, that evolution was already taking place beforehand, Kulik said.

Generally speaking, having a physical office means keeping it secure and stocked with supplies. Accomplishing that could mean hiring additional employees, something that’s not always easy to do in a normally tight labor market.

“Everywhere you have an office, you have to have someone there responsible for the office and staff, and it’s [generally] hard to find staff,” Kulik said. “Beyond just the economics of the facility and related expenses — copy machines, phone systems, utility bills and other repair costs — it’s also the challenge of finding that quality staff. And maybe that allows you to have [fewer] open positions because you’ve been able to consolidate your operations.”

By the numbers: working remotely

Market research and education firm Home Care Pulse analyzed remote-work trends in its 2020 Home Care Benchmarking Study, released in June.

In response to the public health emergency, about 67% of home care agencies that participated in the study said they shifted sales and marketing functions to remote status. Another 72% and 51% said they shifted team meetings and payroll to remote status.

Many agencies similarly shifted office-based tasks like caregiver interviews, caregiver training and scheduling to remote status, the Benchmarking Study found.

Less than 10% of the agencies that participated in the study said they had staff working remotely prior to the COVID-19 virus.

Now, more than half said they’ll likely continue working remotely even after the virus goes away.

A smaller footprint

If home-based care operators believe they should keep brick-and-mortar offices, they’ll have to make a compelling case as to why.

That’ll be difficult to do if months of remote work went relatively smoothly.

“I think what we’ll find is that the more progressive companies and agencies will begin to adopt a smaller footprint,” Kulik said. “Especially if the lease is coming up, it will really put the issue front and center: Do we renew our lease for next three or five years or do we just go ahead [remotely]?”

The only problem is that each state’s licensing requirements are different.

For example, in Pennsylvania, a home health agency has to have an office within one hour or 60 miles of the patient’s home. Agencies looking to downsize in states such as those will obviously have less flexibility.

In some states, home care companies are bound by the same restrictions.

In a state like Michigan, however, there are no such rules — at least for home health agencies.

“Technically, you’re able to provide care for the entire state via one office,” Kulik said.

Office perks and remote drawbacks

For all of the cost savings that remote work has to offer, there are plenty of home-based care executives who still believe in the power of the office.

“I think that a brick-and-mortar office is very important,” David Savitsky, the CEO of CareBuilders at Home, told HHCN. “[For one thing], recruiting is a constant thing — we’re always recruiting and always talking to people who want to work in the home care business. And I don’t think there’s really any substitute for having someone sitting down across the desk from you and having a conversation with them.”

CareBuilders at Home — the home division of ATC Healthcare — is a national network of private-duty home care agencies. It’s currently targeting a growth plan that would bring the brand into Michigan, Illinois, Texas, Pennsylvania and New Jersey, along with parts of California.

Savitsky plans to open up new offices in the locations CareBuilders at Home is expanding into.

“When it comes to caregiver interviews, you’re sitting across the desk from someone who wants to be a caregiver, and you get a sense of whether or not they are a caring person,” Savitsky said. “Are they that person who is going to make a good impression on a client? That’s so important because it’s not just a matter of capability when it comes to home care.”

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