Despite the operational and financial challenges caused by the COVID-19 virus, hardly any private-duty home care agencies plan on going out of business. Instead, most agency leaders believe they’ll actually grow their business over the next five years, both in terms of census and new locations.
That’s according to recent statistics that Home Care Pulse shared this month during the Home Care Association of America (HCAOA) Virtual Leadership Conference.
“Running a business is tough, especially a home care business,” Home Care Pulse CEO Erik Madsen said during a presentation at the HCAOA event. “There are a lot of demands on your time as owners and executives.”
Each year, Home Care Pulse surveys thousands of home care agencies to uncover industry trends, challenges and business strategies. Of the 872 home care agencies surveyed in 2020, not a single one said it expects to go out of business within the next five years.
Typically, agencies are not pushed out of business by competition in their markets. In reality, operating difficulties usually stem from internal shortcomings, Madsen said.
“Rarely do you see a company go out of business because of external competition,” Madsen said. “It just doesn’t happen. There’s such a demand and a need, which is phenomenal. What does happen is they go out of business because they lack the right internal processes.”
‘You can’t win’
Idaho-based research and education firm Home Care Pulse works with thousands of home care agencies to help them decipher what they’re doing well and where they can improve.
Often, if home care agencies go out of business, it’s because they don’t have the appropriately trained workers or data-driven tools — or it’s because they’re missing both.
“Without a system, you can’t win,” Madsen said. “But those that have a system are absolutely winning right now.”
“Winning” means agencies are tracking key metrics like inquiry-to-admission rate, caregiver hiring ratios, caregiver turnover and revenue per non-caregiver employee. Other important benchmarks include client lifetime value, as well as the net promoter scores of both clients and employees.
When it comes to new business, about 33% of home care inquiries will turn into a new client, on average. If 37% of an agency’s inquiries turn into a new client, that puts them in the 75th percentile among home care providers in terms of inquiry-to-admission rate. If an agency is at 40%, that puts them in the 95th percentile.
While most agencies would like to improve their inquiry-to-admission rates, many don’t even have the systems in place for tracking that data.
“Here’s the key: As an agency owner, you have to track this data,” Madsen said. “I was shocked to see what percentage of agencies are not tracking every single one of their new inquiries.”
Tracking inquiries isn’t the only area where agencies are falling short. Home Care Pulse data has similarly found that only 25% of agencies track hospital readmission rates.
As for inquiry-to-admission rates, improving them by just a couple percentage points can mean thousands of more dollars in revenue per year — or month.
Caregiver data tracking
Hiring and maintaining caregivers has been among the most consistent issues for home care providers over the years. But agencies shouldn’t view themselves as helpless bystanders and victims of a sometimes brutal job market.
Tracking caregiver hiring ratios is a great way to balance quality vs. quantity in the recruiting process, Madsen said. In fact, it’s one of the keys to staying in business — and breaking through persistent revenue plateaus.
Too high of a ratio can mean that an agency needs to invest in higher-volume recruitment sources. Too low may mean that it needs to bring in more high-quality applicants.
According to industry averages, about half of all home care job applicants progress to an interview, with half of those individuals ultimately hired.
“You can go back and look at your business [with these numbers] and say, ‘How are we doing as an organization?’” Madsen said.
Tracking caregiver turnover is also critical. It normally costs $2,600, on average, to replace a caregiver when considering both direct and indirect costs, according to Home Care Pulse.
Just like increasing inquiry-to-admission rates by a few percentage points can increase revenue in a significant way, decreasing caregiver turnover can similarly have an impact on an agency’s bottom line.
The median home care turnover rate in 2019 was 64.3%, down from 81.6% the previous year.
Net Promoter scores
Net promoter score (NPS) may be the single greatest indicator of future growth for a home care agency, Madsen said. NPS is all based upon how likely a client or caregiver is to recommend an agency to someone else.
The client NPS average is 6.5 across the industry, while the employee NPS is 6.7.
“Ask yourself the question, ‘Are these the individuals that we need to refer to our competitors down the street?’” Madsen said. “Maybe it’s time to say, ‘You know what, it’s costing us a lot of time, energy and effort with these clients. We’re just not able to make them happy. Maybe they would be better served by going to another home care company.’”