Right at Home CEO Brian Petranick: Strategic Buyers Will Drive Future Home Care M&A Activity

This article is a part of your HHCN+ Membership

Since last spring, home care companies have had to battle through an ongoing pandemic and a worsening labor crisis. They’ve had to face those challenges, too, while trying to meet the needs of a rapidly growing U.S. senior population.

In many ways, it has felt like trying to stay afloat in an endless wave pool, according to Right at Home President and CEO Brian Petranick.

“Not only are our care providers tired, but I think the health care system, in general, is tired,” Petranick said during a recent HHCN+ TALKS appearance. “I think leaders of organizations are fatigued. Across our network, we’re definitely feeling that.”

Advertisement

Founded in 1995, the Omaha, Nebraska-based Right at Home offers in-home care to seniors and adults with disabilities across its more than 600 franchise locations in the U.S. and seven other countries. HHCN is pleased to share the recording and transcript of Petranick’s HHCN+ TALKS conversation with our members.

Read on to learn about:

— How Right at Home is navigating Year 2 of the COVID-19 pandemic and how its leadership views recently announced federal vaccination requirements for certain workers.

Advertisement

— Why home care M&A activity is likely to accelerate, with increased interest from strategic buyers.

— What Right at Home is doing to combat a worsening home care staffing crisis.

— Why Right at Home’s CEO sees “tremendous opportunities ahead,” even with today’s unprecedented operational challenges.

The below has been edited for length and clarity.

[00:00:06] Bob Holly: Good afternoon, HHCN+ members. Thank you for tuning into this TALKS conversation. I’m HHCN editor Bob Holly. For episode No. 2 of TALKS, I’m pleased to welcome Right at Home President and CEO Brian Petranick. Brian, thanks for joining us today.

[00:00:23] Brian Petranick: Thank you. Thanks for having me.

[00:00:26] Holly: This is episode No. 2, but it’s our first live TALKS conversation. Brian, glad we get to put you in the hot seat here. Before we dive into all the topics, I did want to go over a couple of quick housekeeping items for everybody listening in. First, please note that your audio lines have been muted. If you have any questions, use the question function on your screen. I’m going to try to get to as many relevant ones as I can, where appropriate.

Lastly, if you miss anything, don’t worry. We’re going to be posting a full transcript of this conversation to the HHCN+ dashboard. If you’re tuning in on an on-demand basis, welcome as well. Brian, if you’re ready, let’s get to it!

[00:01:16] Petranick: Let’s get to it.

[00:01:18] Holly: This is the first time that I think we’re talking since January or December. Obviously, a lot has happened since then. I think I’d start off by asking how are you doing? How have things been going?

[00:01:32] Petranick: Gosh, when you said that, it shocked me that it’s been that long. Time moves fast under normal circumstances, but considering the environment we’re all in, it is just flying by at lightning speed. I can’t believe we’re already in September, moving toward October. It’s crazy. I’ve been doing fine. Like everybody else, just dealing with the ebbs and flows of the industry — and the COVID environment.

[00:01:58] Holly: I was just talking to somebody earlier today about how it’s getting dark here in Chicago around 6 p.m. and it’s like, “Where did summer even go?” How has everything been going for Right at Home as an organization, as far as franchise growth, new programs, all that good stuff?

[00:02:17] Petranick: It has been relatively a solid year, surprisingly so in some ways. Coming off of last year, we weren’t really sure what we were going to have after what we hoped was going to be the end of the pandemic. But we’ve had pretty good growth this year. Actually, we’ve had one of our better years in franchising in the last few years.

As you know, we’re adding company-owned locations. We’ve had a good year already with adding company-owned locations. As far as initiatives and programs, I think we’ve done what I’ll call an admirable job of continuing to focus on the long term, but still staying present in the moment.

It’s been a little bit of fits and starts here and there because we’ve started some initiatives and we’ve stopped them. That’s just because we’ve had to focus on other things. But by and large, I think we’ve done a nice job of maintaining that long-term focus while making sure we’ve got our feet planted right in the present, with what’s happening now.

[00:03:20] Holly: I know that we’ve talked about this in the past, but what’s the value to a franchiser like Right at Home in adding those company-owned locations? What’s that do for you?

[00:03:32] Petranick: First and foremost, it allows us to expand our network and expand our reach, so we can look at the country and find areas where we don’t have as much coverage as we’d like. We can find markets where we don’t have a Right at Home flag planted. That’s one of the downsides to franchising, is you don’t ultimately control your growth. You grow where you have franchise ownership interest. When you do company-owned locations, you can be more selective and intentional about where you grow. That’s part of it.

Then the other thing is, we’re just a better home care company and a better company to our franchise owners because we’re operating our company-owned locations. We’re learning a tremendous amount. We’re able to test things more in real time, where we control the variables. It has been really helpful for us over the last year and a half, as we’ve really gotten to some level of scale with our company-owned stores.

[00:04:29] Holly: Looking at some recent headlines, Right at Home recently partnered with the National Minority Health Association and the Flex for Checks program around COVID-19 vaccinations, which remains a really important topic right now. What’s the goal of that collaboration?

[00:04:49] Petranick: It’s really to provide additional tools for our offices to help incentivize caregivers to get vaccinated. We know that’s the movement, that’s the desire. Certainly, we know after last week’s White House announcement that’s the desire of our administration — to get people vaccinated. I would say our officers have done a really good job over the course of the last number of months, respecting people’s wishes, but also creating opportunities to incentivize where it was appropriate. When this became an opportunity, we said, “Let’s put this in our toolbox as well,” and it has been a great partnership. I think since we announced it, it’s been picked up by several other organizations as well, so I just think it’s a great program.

[00:05:34] Holly: To recap, the Biden administration rolled out a six-pronged COVID plan that did include new vaccination requirements for health care providers reimbursed by Medicare and Medicaid. I know that Medicare and Medicaid might not be your bread and butter, but this impacts you as well from a couple of different angles. What was your take when you heard that news?

[00:06:26] Petranick: The first thing I’ll say is that I understand what the Biden administration is trying to do. This obviously is not going to be a political conversation. There’s multiple sides to this. But I understand what’s trying to be done there. From our standpoint, I think probably the biggest benefit we’re going to get from it as an industry, to some degree, is this: One of the fears providers had is, if they made a decision to mandate vaccines for health care workers, but if somebody has made the choice they don’t want to get back vaccinated, that person can go down the road and work somewhere else.

There’s national top cover now, which also raises awareness. There are a lot of people talking suddenly about vaccine mandates. There was some of that before, but it really has become part of the national discussion now. That, to some degree, levels the playing field. It’s still for businesses that have over 100 employees, too, which is important to note. As a company, you don’t have to be the bad guy, so to speak.

Having said that, I think the reality is what poet Robert Frost said, “We have miles to go before we sleep.” There’s going to be all kinds of legal battles in court, and I know there are governors lining up to challenge the mandates. So we’ll see how it actually comes out, when it comes out, what the reaction to it is, and what impact will ultimately be.

[00:08:10] Holly: I know that the No. 1 challenge for home-based care providers across the continuum — from non-medical home care to Medicare-certified home health, to in-home palliative care to hospice care — is staffing. There’s just not enough people to go into the home and take care of clients and patients. What kind of impact do you think something like this, a kind of blanket vaccine mandate from the federal government, could have on the senior care workforce overall?

[00:08:42] Petranick: Well, again, the more that it proliferates within the health care ecosystem, the better it is for everybody because you can’t leave, for example, the acute care setting and go work in home care. When you start having all of the players within the health care ecosystem requiring vaccinations or something similar, it levels the playing field.

I think the biggest fear that people have is, “Are we going to force people out of the health care sector entirely?” We’re already incredibly short right now. I know everybody’s feeling the pain of that. We’re feeling the pain of that as well. Are we going to push people who were engaged, who did like the industry, into other professions?

Every industry right now is impacted by the employment shortage and the workforce shortage, but the one place that we can’t afford to lose workers is in health care. We have a really stressed health care system right now, and there’s going to be incredible demand over the course of the next three, five, 10, 20 years. That is a concern for sure.

[00:10:17] Holly: That’s a great point. We’re just at the leading edge of that silver tsunami. We’re just starting to feel what that demand is going to look like. It’s only going to increase moving forward. While we’re on the topic of vaccinations, I have to ask: What’s that picture look like Right at Home? I think when we covered your participation in the Flex for Checks initiative, one of your executives mentioned that it was somewhere between 57% and 66%, your overall vaccination rate.

[00:11:18] Petranick: Yes. I don’t think it’s moved a whole lot from those numbers. I think we’re going to be in that same ballpark. It’s interesting when we look across our locations in the U.S. We’re operating in 47, 48 states. Some areas, some municipalities and some states have already mandated some sort of vaccination requirement. In those cases, you’re going to see those numbers in the 80% or 90% range — or even close to 100%. In other areas, it could maybe be as low, in some cases, as 30% or 40%.

One of the things I think that’s really important, probably for everybody that’s listening to this as well, is getting a better handle on that number. That’s a pretty good number for us, but I wouldn’t say that was done scientifically. We’re in the process right now of trying to figure out what that exact number is. Because of that announcement last week, we need to know — and we need to be thinking long term. What does this mean? When this gets clear, how is it going to impact our organization? How is it going to impact our larger offices? Where are they standing? Then what resources do we need to bring to the table to help? It’s going to be an important number to measure. I think we’re going to find we’re probably in that range, maybe a little bit better. I can tell you that that’s a key initiative to find that out.

[00:12:42] Holly: The other big topic at the federal level is the negotiations going on behind the scenes with the reconciliation package that Democrats are trying to push forward. According to whatever report you want to look at, there’s going to be anywhere from $150 billion to $400 billion going toward Medicaid home- and community-based services (HCBS).

A lot of this funding really is for state Medicaid programs. I’m just curious — there are a lot of providers out there that don’t operate in the Medicaid space or the Medicare space. Why, in your view, is it important to maybe start thinking about how to support companies like Right at Home and other private-pay providers, just as we are starting to think about the future demands for aging services in the U.S.?

[00:13:44] Petranick: It’s a great question. In some places, there’s this mindset that the government’s going to come in and start thinking more about private pay, about how to help individuals access care. What I generally think about when this question comes up is, we’ve got a pretty substantial math problem in this country. Actually, it’s all over the world. But in this country, we’ve got a math problem. The number of people going to be over the age of 65 in the next 20 to 25 years is going to be 2 or 3 times what it is today. We’re going to double, triple the population of age-65 individuals.

We’re adding years to people’s lives because of medical technologies and pharmaceutical technologies. But we have a shrinking workforce. One of the downsides of the baby boom generation is they quit having kids. Our workforce behind that generation isn’t working as much, and there’s just not as many workers. That impacts the taxes that are being paid to fund these entitlement programs. When you start to think about all of these macro-environmental things that are happening out there, it’s really the answer for everything that you’re seeing. We have to bring down the cost of care in this country. Without a doubt and that’s what our policymakers are trying to do.

They realize there’s going to be a whole lot of people over the age of 65 that are going to need care, and there’s a limited amount of resources to spread around. To provide care to all of those people, we have got to bring down the cost of care. All the value-based models you’re seeing are really the byproducts of that design.

I think what we will see is the government, with these types of packages, is going to put as much as it can into entitlement programs to support people who have the greatest need. It’s a pure population health mindset, but that’s exactly what the government has to do. The government has to think about, “There are people out there who just don’t have resources who are going to need care, so how do we take care of those individuals?” I think, for those that have resources, the government is going to continue to do things like empower Medicare Advantage programs because those individuals can go in and pick their care. They’re able to contribute to those programs to customize their own care plans, whether it’s through tax incentives or additional tax incentives or people who are paying for their own care.

There are tremendous opportunities ahead. I think the government is going to first take care of the people that it needs to take care of. I think we will see even more focus and more opportunity for private pay down the line because basically, it’s going to come down to this: Those who don’t have resources are going to have to lean heavily on the government, and those who have resources are going to have to find care and take care of that themselves in some way, incentives from the government through Medicare Advantage or tax credits for those things.

[00:16:38] Holly: I don’t want to spend too much more time on COVID because I want to dig into what Right at Home is going to be doing through the remainder of 2021 and what you’re looking at for next year. Just lastly, on that point, what does the situation look like on the ground now across your footprint? I know caregiver burnout is a huge problem right now. Caregivers have been battling through this pandemic for 18 months or longer. A lot of them are exiting the workforce just because it’s been too much for too long. What does the situation look like on the ground across your footprint? Then what is Right at Home doing to try to retain those caregivers and make sure they are supported during this unprecedented public health crisis?

[00:17:30] Petranick: Great questions. I always think about this analogy of a wave pool. When you go into a wave pool, you’re in there for five minutes or so. You’re just getting beat with these waves. They’re big, and you’re trying to tread water. It’s fun. You’re having a great time. After a few minutes, a horn goes off and somebody tells you the break is coming. This last year and a half has felt like we’re in a wave pool, but there has been no horn. There’s not a single break that has come.

Not only are our care providers tired, but I think the health care system, in general, is tired. I think leaders of organizations are fatigued. Across our network, we’re definitely feeling that. I think there was this national resolve a year ago when this thing came, back in March and April. “60 days to bend the curve,” or whatever the slogan was. There was this resolve to just do what we had to do to get through this.

Things shut down. Now we’re an environment a year and a half later, where things have opened back up. We’re seeing stadiums full of people every week. There’s this feeling and the general consensus out there that, yes, we’re moving past this. We got the Delta variant. We got all this stuff. But by and large, “Hey, our favorite restaurant is open. We can go to the movies again.” Meanwhile, the health care industry is now really feeling the effects of this because we’ve been there for 18 months.

We’ve been focusing on just taking it day by day. What can we work on? How do we get to the next day? To your question about how it’s coming across the network, some of our offices are just fried. They’re in tough areas. It’s been tougher to recruit in those areas. They were hit harder last year. Maybe they’re getting hit harder again. Then there’s some parts of the country that are actually doing really well, and they’re seeing record numbers. It’s a little all over the board. But I think, in general, the industry is just worn down and tired. We’re looking for that horn. We’re looking for that break.

[00:19:43] Holly: Beyond supporting your caregivers and your Right at Home employees in the context of the pandemic, what else is Right at Home doing to both attract and retain talent? I’ve heard some folks talking about exploring alternative labor pools, for example.

[00:20:39] Petranick: I would say, at this point, really everything is on this table. We’re constantly thinking about how can we engage better? How can we make the processes easier? How can we provide better training, a better onboarding experience? How can we get people to work faster?

There are just those day-to-day things that we’re thinking about, then there’s the more strategic stuff. How do we create new workers? How do we find them? Can we do that through immigration programs that might be being worked on at the national level or is there a different staffing model? Is there a different approach? Really everything is on the table, and we’re evaluating it all.

I sometimes think about our structure of the corporate office; we had a relatively small caregiver experience team at the corporate office five, six, seven years ago. So much of that was done locally. It was really pushed down and down at the local level. We did some support here and there. But now, our two fastest-growing teams at the corporate office are our care experience teams, those people who are thinking all day about how we engage with our workforce, and our data and our analytics team. Those are the two fastest-growing because both of those are supporting very strong strategic initiatives through the organization and really the needs of the industry going forward.

[00:22:10] Holly: I want to get a question we just got from one of the folks tuning in because it’s officially our first HHCN+ TALKS question ever. I’m not sure there’s enough data on this point for you to provide a concrete answer, but this person is asking, “Do you see a correlation between providers with higher vaccination rates and higher resilience or less burnout with their caregiver workforce?” Do you think that those few topics might be in some ways linked?

[00:22:44] Petranick: That’s a really good question. I agree. I don’t think there’s enough info. Not only do I think there’s not enough data to support it yet, but I don’t think the data has been looked at that way. I can’t really even speculate. Well, maybe I will speculate when I say this: We know that some clients are demanding vaccinated caregivers. If you are vaccinated, I think that means you’re probably being relied on a lot more heavily in some cases, so could that lead to more burnout? We haven’t measured that, haven’t looked at it yet. Beyond what I just said, I don’t think I can speculate. It’s a great question.

[00:23:47] Holly: Shifting gears entirely because this has been another major theme throughout this year: Dealmaking activity. There has been a lot of change in home care this year, with some really big companies changing hands. Why do you think we’re seeing some of these moves in the home care market, and do you think that this kind of action is going to continue?

[00:24:23] Petranick: Oh, without a doubt. Without a doubt it’s going to continue. There are a lot of smart people out there who are purchasing into the health care space or looking to do so. There’s a lot of private equity money still coming into the space. They are doing that because of the long play.

This is a tough environment right now — and it’s probably going to stay this way for a while. But the long game, the long-term potential for this industry, is still really, really, really strong, even with some of the employment labor shortages and those types of challenges.

I think you’re going to continue to see lots of activity. If I had to predict one trend … I don’t know when this is going to occur exactly. Let’s say it’s in the next, I don’t know, two to five years. I think one thing that you might see change is this on the private-pay side, the personal car side. It has been heavily influenced by private equity over the last number of years. A lot of private equity companies have come in and purchased organizations. I think you’re going to see more strategic buyers down the line. You’re going to see more hospital systems and insurance companies, more care management and those types of companies potentially buying into this space. There’s such an incentive. From a reimbursement standpoint, the country is focused on bringing down the cost of care and putting these value-based models together. That’s going to bring more strategic buyers into home care, at some point in the future.

[00:26:17] Holly: Any particular M&A priorities or goals for Right at Home? I know you mentioned opening up new corporate-owned locations, but anything else beyond that?

[00:26:32] Petranick: Yes, we will certainly continue looking at independent home care providers. And even within our own network, when there are opportunities for us to buy and expand our corporate locations, we’re going to continue to do that. We’re constantly scanning the industry. We meet with lots of companies, whether it’s technology companies or other companies that allow us to engage our clients in a deeper manner and or in a different way. Nothing at the moment that I can talk about, but we’re very much active and looking for other opportunities that align with our strategic vision and where we want to take the organization.

[00:27:07] Holly: We’re also seeing more M&A activity around smaller agencies, smaller home care providers, which hadn’t always been the case in the past.

Beyond M&A, last time we spoke, you talked about wanting to turn Right at Home into something akin to a custom builder of aging in place. You’re building a house, you hire a contractor that ties all the different pieces together — the plumbing, the wiring, painters, etc. You mentioned Right at Home wanting to be that expert. How has that mission, so to speak, gone for Right at Home?

[00:28:20] Petranick: A little bit. Yes, first of all, a lot of what we’ve done up until this point has been through strategic partnerships. We’ve partnered with other organizations and tried to bring different care approaches into the home environment where our customers need different care.

We’re certainly looking into this space as well — if there is an opportunity for us to bring something into the system that provides value for our clients. But I’ll just tell you — I know personally, just a few weeks ago, my mother went into the hospital. She had a pulmonary embolism. I have been, along with our family members, providing care to my mom here over the last three or four weeks. My dad’s still living, but he’s certainly older and can’t provide a lot of care.

I am still shocked — after I don’t know how many years I’ve been in this industry, since the late 80s — when I see how poorly our health care system is at transitioning people into the home environment and taking care of them at home. I’m also getting a much clearer understanding of even the challenges of working with family dynamics and trying to coordinate care, making sure that things are happening in the home.

There are just opportunities there for us to engage our clients and families in a different manner and provide better experiences in the home, just beyond home care. We continue to explore that, look at that. We’ve made some progress on it, but it’s going to continue to be a focus of ours for the years ahead.

[00:29:52] Holly: Looking ahead for the rest of this year, what else could we expect from Right at Home? And if you could look into your crystal ball, what does maybe the first quarter of 2022 look like for your company?

[00:30:50] Petranick: Probably like everybody else, we’re going to be putting an extreme focus on the caregiver community and building relationships, doing what we can there. We are never going to take our eye off the need to continuously expand our network reach, our network density and market power. We’re going to continue to look for opportunities to expand into new markets while engaging with our clients in different, more meaningful ways.

I’ve talked about this before, but we’re also starting to deal with a different client. These are going to be baby boomers. They’re going to think very differently, have different expectations than the Depression era, the post-Depression-era generation, or the traditionalists. We’re putting a lot of thought around that. How are these new clients going to be thinking about home care? What expectations do they have?

Then we know the health care sector is changing dramatically. How are we going to engage with that, continue to engage deeper within the health care system and make Right at Home a trusted partner? We’re focusing a lot on our caregivers, on our market reach, market density, market power, then how we engage our clients, both private clients as well as health care ecosystem clients in a deeper manner.

[00:32:12] Holly: In addition to anything that we’ve talked about thus far, just to wrap up, any predictions that you have about the home care market itself heading into 2022?

[00:32:23] Petranick: I think I’d rather have that crystal ball than even one to pick the lottery at this point. It is so hard to know because the early part of 2021 looked really strong. Things were coming back, building back up rapidly. We were feeling really good, then I think the labor shortage hit, the unemployment. I think a lot of people were hoping that when the unemployment expired around August and September, we would see a number of people coming back. But that’s not happening. Now we’ve added the vaccine mandates right on the heels of that.

We don’t really know what’s artificial right now, what’s been exacerbated by some of these other factors. It’s hard to predict what the rest of this year is going to look like and how that’s going to roll into 2022. It’s easier for me to say I feel great about 2023 and 2024 than it is for me to say I feel great about 2022.

[00:33:19] Holly: All right, well, that does it for this episode of HHCN+ TALKS. Brian, thank you for spending the past 30 minutes or so with HHCN.

[00:33:38] Petranick: Thanks, Bob. I really enjoyed this. Thanks, everybody.

[00:33:40] Holly: Thank you to everybody who tuned in live and to those catching up on an on-demand basis. Keep an eye out for our next HHCN+ TALKS episode. I just confirmed one of the guests today, and it’s going to be another can’t-miss episode. I’m HHCN editor Bob Holly. See you next time.

Companies featured in this article: