When David A. Bell first took over as the CEO of GrandCare Health Services, the home-based care provider was stuck in limbo.
While the Southern California-based GrandCare had a solid orthopedic home health division, it was weighed down by several other service lines that really weren’t going anywhere. To get his company trending upward, Bell decided to go all in on orthopedic specialty care, bucking the trend of being a “generalist” home health provider.
That strategy has since paid off.
Home Health Care News recently sat down with GrandCare’s CEO for our latest episode of “Disrupt” to learn more. Highlights from the conversation are below, edited for length and clarity.
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HHCN: To start, can you tell our listeners a little about yourself and GrandCare? How long have you guys been around for?
Bell: Well, GrandCare has been around since 2003. I’ve been involved for about the last 10 years. Like a lot of people, I got involved with home health care sort of accidentally.
Over the last 20-plus years, I’ve been running private equity-owned companies. Almost everything I’ve done has been focused on that nexus between technology and finding ways to help people. GrandCare interested me, so I initially became involved as an investor. Then in 2017, I was made the CEO.
At that time, GrandCare was a good company from a quality standpoint. But financially, it was in some distress. The business was unprofitable and shrinking. It made sense for someone like me, someone who has done this for a living over two decades or so, to come in and help keep the good while fixing the bad.
My PhD was focused on rehabilitation engineering, so this was an area that wasn’t completely unknown to me. But I had been involved with a lot since then. I lived in India for a while and built a factory that makes electric vehicles. It’s still one of the largest producers of electric vehicles there. I had been involved in building apps for birdwatchers, too. I’ve been involved in water-treatment-plant projects, running laboratories and a variety of different businesses.
I wanted to connect with you and learn more about GrandCare Health Services for a few reasons. One, you’ve developed the reputation as a best-in-class employer. Two, you recently completed a deal with 24 Hour Home Care. Three, you’re not really your typical home health provider. Can you talk a little bit about that latter point?
We don’t think of ourselves, or refer to ourselves, as a home health provider. We are pretty different from most home health providers. In some ways, I think we’re kind of a combination of a startup and an in-home rehabilitation provider. We focus exclusively on optimizing the in-home care of orthopedic patients.
Although it isn’t sexy, we believe that there’s a ton of value in just optimizing how that works. We’ve invested over $1 million, which for us is a lot of money, over the last couple years to develop proprietary technology for delivering better care, earning better quality scores, streamlining back-office processes. All that stuff adds up. It makes our employees’ lives better, and it makes our patients’ outcomes better.
We believe that life is too short to be mediocre at a bunch of things. Our mission in life is to be the best at one thing. That is somewhat contrary to the way the whole home health industry works. Home health businesses are 99% generalists, and that simply is not our approach.
Has that always been the operating model for GrandCare? Or was that maybe part of the turnaround when you joined?
It’s a little bit of both. When I first became the CEO of the company, we were certainly a generalist. I mean, it’s no joke to say we probably had more than 10 businesses. We had a hospice business, a VIP-shift nursing business and a bunch of other stuff — detox and lots of things. And it’s just hard to run a lot of businesses and be good at all of them, especially when they’re all pretty sub-scale at the same time and all trying to grow. Now, we were, at that time, good at orthopedic rehabilitation. We had some good relationships, and it was a sizable percentage of our total business.
Since then, that part of our business has been growing because we’ve been focusing on it. Slowly and over time, we’ve been shutting down all the other parts of our business.
Can you walk me through how GrandCare has grown over the years? Where are you at today, in terms of number of patients, for example? How does that compare to maybe pre-pandemic times?
We obviously got hit pretty hard in 2020. There were shutdowns of elective surgeries. But currently, we are operating at record levels, in terms of referrals and patient admissions. Obviously, the mix of those patients has completely changed. If you look back to five years ago, that mix was maybe 35% to 40% orthopedic. Now, it’s north of 90% orthopedic. So the orthopedic business has grown, in revenue terms, roughly 15% to 20% a year, with the exception of 2020.
But for 2021, we’re pretty much back on trend. And the rest of our business has been sold off or shut down over that same time frame. So the top line hasn’t changed that much over the last five years, but the composition of that revenue has changed dramatically.
All home health providers have been impacted by COVID-19 in a variety of ways, from staffing shortages and volume swings, to regulatory changes and more. But I imagine as a provider that focuses on those hip-and-knee patients, so to speak, the pandemic must have been really, really impactful, just considering the elective-surgery suspensions you referenced.
It was extremely disruptive. Fortunately for us, I think we were a little bit ahead of the curve, as far as anticipating there was going to be a problem. We were able to buy masks and do the stuff that we needed to do to be ready. Still, at the end of the day, 80% of our revenue went away when the elective surgeries shut down. That was certainly not a situation in which it was helpful to be an orthopedic specialist.
I have to be honest; I had a lot of sleepless nights. There were some periods at the very beginning — before the government provided aid, such as the Paycheck Protection Program (PPP), for example — when I didn’t know if we were going to make it. I saw what was coming, but it wasn’t clear how long it was going to last. I really didn’t know if we were going to make it.
But our team did fantastic. Our team pulled together. Everybody on our team took voluntary 20% furloughs. We doubled down on trying to be an employer of choice in our industry. We made sure people didn’t lose their livelihoods, that families didn’t lose their livelihoods or health benefits. We were largely successful in that effort. We did ultimately get PPP loans, federal grants and other forms of government aid. And honestly, without that, I don’t know how we would have made it through the year. But we did. We had a little bit of a wave in January and February of this year, but that didn’t come with the same impact. At this point in health care, we’re feeling pretty acclimated to COVID-19, particularly in California. I don’t anticipate more shutdowns of electric surgeries unless there’s some crazy new variant.
In September, GrandCare and 24 Hour Home Care announced a transaction, where you actually sold your non-medical home care division. Walk me through that decision.
Sure. Not to sound like a broken record, but it is a continuation of our focus on being the best at orthopedics — and in-home non-medical care is just not something that’s a core business for us.
There is potentially a lot of overlap, though. One of the things that caused me to delay as long as we did, in getting our private-duty business transitioned to somebody else, was that overlap. There are situations where it makes sense to be able to provide both medical and non-medical care to a patient, and so we did spend some time trying to sort that out.
But what we ultimately decided was that our private-duty business just wasn’t big enough, just wasn’t strong enough, just didn’t have the geographic footprint to really be able to support our needs in that regard. We determined we were better off partnering with somebody to be able to provide that non-medical portion of care, while we provided the medical portion. 24 Hour was a perfect fit for us from that standpoint.
Like us, they focus on being the best at what they do. They’re not trying to do 50 things. They’re trying to be the best at one thing. And they are — like us — recognized as one of the great places to work in senior services in California. We felt good about transitioning our employees over to them. And they provide great, quality care, so we felt good about transitioning our patients over to them. What I’m really excited about going forward is now we can provide, through our partnership, non-medical care to patients who need it throughout our footprint.
Also we can go into hospitals, including our existing bundle partners and our existing referral relationships, and hopefully provide them with a package option that will benefit both 24 Hour and us by getting us in the door.
GrandCare has evolved into an expert when it comes to bundled payment models and value-based care, I understand. Can you tell me a little bit about that?
First of all, if you’re going to be the best at orthopedic rehabilitation — which is mostly knee and hip, total-joint replacement after care — then you better be good at bundles. That’s where a lot of those patients are. It is, as you probably know, one of the few areas where the data suggests bundles actually work. They deliver better quality for lower costs. The secret for us is that we understand when we go into a bundle, we’re going to earn less money. And what I always tell my team is that’s okay.
We want to be on the value-based care train — not under it. Value-based care isn’t a fad. Value-based care is going to continue. We believe that whoever figures out how to do it right and do it best is going to be in a good position to succeed.
There’s no silver bullet. We focus on being a good partner. We focus on providing excellent day-to-day communication. We provide data transparency. Bundling is all about metrics, all about data. You are going to get measured. And if you don’t perform, you’re going to get fired. That is where we shine. It’s not about sales and marketing. It’s not about slogans. It’s about producing results. For us, we have to just keep getting more efficient. We have to keep getting our processes streamlined. But there’s enough opportunity to make money in it. If you focus on being a good partner and keeping the success of the bundle as your main priority, it’s an environment in which people who are good can succeed.
What excites you most about what you’re seeing in home health care?
I think the trends are great. Five years ago, 10 years ago, most patients who were getting joints were going to skilled nursing facilities, which just isn’t a great setting for them to get the care they need. Many were being readmitted due to failures in care, too, not just from skilled nursing facilities but from home health as well. Those readmission numbers have just gotten tremendously better. I think that’s fantastic. I think, though, that we are, just halfway to where we need to get to.
In terms of the trends going forward, we’re seeing the growing baby boom population. Orthopedics especially is positioned to grow even more because that is disproportionately something that is common among this senior population. We’re going to see an increase in volume.
What else?
I believe we’re going to see it becoming harder and harder for generalist home health agencies to compete because in-home care and orthopedics is a specialized area. If you’re sending out people who spend all day taking care of cardiac patients to take care of your orthopedic patients, you’re not going to be optimizing in the best way. I think that one of the trends we’re going to see is that this area will increasingly be controlled by specialists like us.
What do you see as some of the biggest challenges for GrandCare moving forward?
Every night, it’s a different thing, to be honest. But what I’m worrying about right now is our ability to keep up with growth. Last year, I worried about how we were going to keep the doors open. This year, I’m worried about keeping up with growth. There’s a big opportunity in front of us, and there’s just a huge need for better technology to handle this specific niche. There’s a bunch of people out there building home health software, but that doesn’t really help orthopedics specifically.
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