Sky-high equipment costs and staffing shortages tied to the COVID-19 virus have made it drastically more difficult to run a profitable home care business for many operators. That’s not true for Caring People, CEO Steven East told Home Health Care News.
Caring People has had to face its fair share of challenges over the past several months, but the West Palm Beach home care provider has been able to leverage its scale to stay in the black. A portfolio company of private equity firm Silver Oaks Services Partners, Caring People currently operates in New York, New Jersey, Connecticut, Florida and Texas, serving an average of 1,700 clients per day.
In addition to avoiding “going upside down financially,” Caring People has also had success recruiting caregivers and adding to its leadership team.
HHCN recently connected with East to learn more about COVID-19’s impact and the toll it takes on home care operators. During the interview, the CEO also touched on what Caring People looks for in its acquisition targets and how the company is tapping into new service lines.
Highlights from HHCN’s conversation with East are below, edited for length and clarity.
HHCN: Providers have incurred higher-than-normal operational costs in 2020 because of the COVID-19 pandemic. What has “the cost of COVID” been for Caring People?
East: If you want to break it down to a micro level, every visit that a provider performs, you have to protect your caregivers and clients with personal protective equipment (PPE). In the past, we didn’t have to do this. It’s definitely increased per visit costs by several dollars. If you’re going through multiple gloves and masks, then that increases costs exponentially. While it is a cost, we haven’t found it to be a very significant impact on the business.
One of the interesting things that evolved during the pandemic was the need to have safer transportation service for our caregivers, too. They were not comfortable going on public transportation. The clientele didn’t want someone who just rode the train to go in and take care of them. We had to become more reliant on Ubers and similar services.
We were also lucky because we had our own internal van service. We were able to start leveraging our fleet of vans, with about four or five vans driving all over New York, New Jersey and Connecticut during that initial wave of the pandemic. We were able to get our caregivers from Point A to Point B. Clients were more comfortable knowing caregivers were taking the van and not riding on the train with 50 or 60 other people. That was a cost we incurred, but it also helped us continue services for our clients.
With the added costs in mind, how do your financial margins compare to last year? Is it harder to run a profitable business?
At our scale, No. I remember the days when I started out, doing eight different jobs in the office. Margins were so tight back then that if my cost of care went up by 10%, I probably was upside down financially.
Now, we’ve been doing this for 20-plus years. We have significant back-office support. We’re able to really navigate the situation a little bit better than if I was still just a single-site provider. I could definitely see how PPE and other COVID-related costs can adversely impact someone, but we’ve been very fortunate.
Caring People is currently experiencing growth in administrative staff and caregivers. Can you provide some details and numbers around this?
We added two new executive positions: chief operations officer and the chief people officer. There is a need to have super-talented individuals in leadership positions as we continue to grow. We don’t ever want to sacrifice our delivery of care because of growth. We want to always make sure we have the right people in the right positions, at the right time.
As far as caregivers are concerned, we have a very comprehensive recruitment process. We have a completely centralized recruitment team, which has worked tirelessly since COVID-19 first hit. They were doing everything they could to source caregivers and onboard them. We went to a completely virtual onboarding process, so we’ve been able to keep our pipeline of caregivers going. We were very lucky that we weren’t seeing a dwindling workforce while demand continued to increase.
We saw a significant influx of folks coming from the service industry to work with our clients, individuals who could benefit from just the companion-type of service. For our companion business line, non-certified caregivers, we definitely saw more availability.
Your company has been active on the acquisition front, with its latest purchases being Acappella In Home Care, Aging Care LLC and AMR Care Group. Will acquisitions continue to play a major role in the company’s growth strategy moving forward?
It’s definitely part of our growth strategy, especially when we look at new potential markets and also adjacent markets to where we are now.
We have an approach that focuses on acquisitions, as well as organic growth, which includes new branches and also new service lines.
When it comes to acquisition targets, we definitely look for culturally aligned owners. It’s not our preference to do an acquisition where you go to closing, then the owners disappear right afterward. We like owners who want to stay on and be part of a larger company. We support the parts of the business they’re passionate about by removing all the stuff that kind of bogs you down, such as payroll, making deposits, etc. Once that’s off of an owner’s plate, they get reinvigorated with the business.
That’s the stuff that we really enjoy — sitting at a table with the owners. I’ll sit with 10 or 12 owners of companies that became part of the Caring People family. We’ll talk about different ideas, different growth strategies, different things they’ve always wanted to do but couldn’t. For me, having owners who want to be part of that vision is critical. Everything else will fall into place if you have that.
Do you have any specific goals when it comes to acquisitions? Are there new markets that Caring People is trying to enter? A specific amount of targets the company wants to purchase?
We’re very disciplined, so we’re not going to get out of our comfort lane when it comes to acquisitions. We’ll look for companies that, as I said, have that cultural alignment. It’ll probably be in a geographic location that’s desirable to us. We don’t ever go into the year saying, “Well, we want to get 10 or 20 done this year.” I don’t think it’s realistic to ever position it that way. It’s about finding the right opportunities. We have a great system and process for meeting owners and sourcing opportunities. So it’s just finding the right people, then we kind of see where the conversation goes. But we’ll focus primarily on markets that were attracted to.
What do you expect in-home care M&A activity to look like in 2021?
I don’t have a crystal ball for that.
I think you’re seeing a lot of activity now because people want to take some of the tax benefits of 2020, and there’s a lot of uncertainty about what 2021 looks like. I think there’s going to be a lull for a bit in 2021. It’s been such a volatile year, to say the least, I think things are going to slowly come down at some point. The election will be over, the vaccine will be out, kids will be back at school, and I think people will take a deep breath and evaluate where they are.
It’s a great time to be in home care and a great time for people who are thinking about getting out or joining a larger company. But I think once January comes, that first-quarter gets a little slow.
Aside from acquisitions, what else has helped your company see growth?
We are now getting more involved in understanding how to implement different service lines for our clients, such as telehealth, collaborating with physician practices that do video assessments. We’ve begun offering different geriatric care management services in most of our markets now, which we’re also doing virtually. I think there’s a lot of opportunities to grow organically, especially as people are embracing the digital space.
Last month, your company launched an Alzheimer’s and dementia care program. Can you provide an overview of the program and an update on how it’s going?
About 80% of our clients have a primary or secondary diagnosis of Alzheimer’s and dementia, so it behooves us to really start to dive into understanding the best way to deliver care for that client population. By advanced training with our staff members and hiring certified dementia specialists, we now are able to add that next layer of services to our clients.
Our caregivers go through a very rigorous continuing education program that is customized for our caregivers and our clients. We call it the Caring People University. We’re slowly continuing to evolve the way we can offer support services to our clients.
We have other ideas that we’re looking to further deploy over the next several months.
For me, the bottom line is really a byproduct of everything else that goes into the business. If you provide a high level of service, your turnover is going to be less, caregivers will stay longer, and clients will have a better experience.