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In order to keep pace with the labor market, as well as other contributing factors, home care providers across the country have had to increase the cost of their services.
Those providers have also begun to wonder when — or if — those rising costs may start to affect client demand.
“We’ve been forced to raise rates because we’re forced to pay materially more in some markets,” Steven Turner, COO of Griswold Home Care, said in February at the Home Health Care News Sales First Summit. “At our national conference, I asked a whole bunch of [home care] owners, ‘How many of you have increased your rates in the last year?’ And every single person in the room raised their hand.”
Blue Bell, Pennsylvania-based Griswold Home Care provides personal care services across 200 locations in 30 states. The franchise has seven corporate-owned offices and also offers hospice care at some of its locations, plus an array of other services aimed at enabling aging in place.
Griswold Home Care isn’t an anomaly. In fact, costs for home care services increased more than they did in any other provider setting in 2021.
The cost of a home health aide — described as someone who offers personal assistance with activities such as bathing, dressing and eating — saw a 12.5% year-over-year rise to an annual median cost of $61,776.
Additionally, costs for home-maker services — described as cooking, cleaning and errand support — have increased by 10.4% to an annual median cost of $59,488, according to Genworth Financial Inc.’s (NYSE: GNW) annual cost of care survey.
States such as Minnesota, Washington, Colorado, New Hampshire and California have the highest cost of care for home health aide services, according to the survey.
Home care providers ramping up their use of personal protective equipment (PPE) and revamping their safety protocols and training amid the COVID-19 emergency are contributing factors to cost increases.
Plus, many home care providers have used this time to beef up analytics tools in an effort to improve their businesses.
Still, the biggest contributing factor in home care cost increases is staffing shortages. Providers are struggling to meet the greater demand for care services and the supply of workers isn’t enough.
Across home care, this has resulted in providers raising caregiver wages to attract and retain workers.
Such is the case with Family & Nursing Care. The company has increased the cost of services four consecutive years in a row, CEO Neal Kursban told HHCN.
“Historically, it’s a significant and rare occurrence to institute a rate increase two years in a row, let alone for four consecutive years,” he said. “These rate increases to clients were necessary to offset the increasing caregiver wage demand, mainly due to the minimum wage hikes, COVID-19 and the necessary effort required to attract, retain and engage the highest-quality caregivers. Every penny of our increased client rates has gone to paying caregivers — not to increasing our bottom line.”
On its end, Family & Nursing Care already has a reputation for paying above the industry average for caregiver wages.
Based in Maryland, the company is one of the largest private-pay home care providers in the Washington, D.C., area. Currently, the company delivers over 40,000 hours of care per week.
Similarly, Senior Helpers has also had to keep up with the rising rate for minimum wage in many of the states the company operates in.
“We have always paid more than minimum wage to our caregivers, and with the competition for caregivers at such a high, it is pushing wages even higher to recruit,” Peter Ross, CEO of Senior Helpers, told HHCN. “Wages are more important than ever to caregivers when recruiting, or deciding on whether to stay or leave.”
Maryland-based Senior Helpers has a national network of more than 300 franchise locations. The company is owned by Advocate Aurora Enterprises, a subsidiary of Advocate Aurora Health.
Though home care is still predominantly private-pay in terms of reimbursement, Ross noted that with the company’s non-private pay clients — Medicaid, Veterans Affairs and Medicare Advantage — the reimbursement rates are not keeping up with the increases.
In some ways, the cost increases are a byproduct of a paradigm shift in home care.
“When I first got into home care 20 years ago, the clients ruled,” Ross said. “Now, you have to put clients and your caregivers on the same level of how you look at the business. You can’t have one without the other. They’re both very valuable.”
Naturally, providers are thinking about how increasing the cost of their care services will impact their business in the long run.
“I don’t think the climate of cost and bill rates are going to stop going up for a period of time,” Ross said. “I do think eventually, the big question — that no one has the answer to yet — is, ‘When is too much, too much?’”
For now, the demand for home care remains, according to Kursban.
“Despite the rates going up, in 2021, we had a tremendous increase in service inquiries and new clients,” he said. “In fact, we reached a milestone with the highest service hours ever for our company. It comes down to basic economic principles of supply and demand. As long as the demand for private pay home care services remains high, we’ll continue to increase client rates as needed to ensure the caregivers are proud of what they’re earning.”
As far as clients, Turner believes they are more understanding than ever when it comes to cost increases.
“We really haven’t had pushback on rate increases,” he said. “At our conference, I asked those who said they raised their rates if they received any pushback and no one raised their hands. We’re paying caregivers materially more money than we were two years ago. Families seem to understand this more than ever.”
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