For a while now, home care giant BrightStar Care has gone above and beyond the standard franchise model.
It introduced senior living communities into its network to assist seniors with their care transitions while maintaining those clients. Recently, it has launched its new “care homes,” a twist on those senior living communities. BrightStar has always had its medical staffing segment, too.
But there could be more on the horizon – much more.
“I’ll still be at this brand 10 years from now, regardless of whether I’m sitting at the house making all the decisions, or I am an employee within a larger ecosystem staff,” BrightStar Care CEO and founder Shelly Sun told Home Health Care News. “I think that over the next three to five years, we will see that opportunity to align within a payer, with a hospital network, with a Medicare home health organization. We’ll need to, because I think we need to be closer to the government-funding model.”
Sun also said there’s opportunities for BrightStar Care to be the acquirer as well, of a home health agency or of other entities.
HHCN is pleased to share the recording and highlights of our HHCN+ TALKS conversation with Sun. Read on to learn more about:
– Why BrightStar Care wants to align itself with a broader network in the near-term future, or acquire to become that broader network itself
– Why Sun sees Medicare Advantage plans as imperative partners right now, no matter the pay rates
– How the company has dealt with staffing issues, and why its original ethos has served it well in that area
The below is edited for length and clarity.
[00:00:04] Andrew Donlan: Hello everyone and welcome to another edition of HHCN+ Talks. I’m joined today by Shelly Sun, who is the CEO and Founder of BrightStar Care. I’m very excited for this conversation. First of all, welcome, Shelly.
[00:00:20] Shelly Sun: Thanks so much, Andrew.
[00:00:22] Donlan: Let’s just get started at a high-level, Shelly, and then we’ll get more into your business. I would love for you to give the audience your background, because it’s a pretty interesting story, and then we’ll get more into the company.
[00:00:35] Sun: Sure. I founded the business in 2002, after going through a personal experience looking for care for my grandmother and not finding the breadth of services – both medical and non-medical – and the quality and service orientation that I would’ve thought I could have expected. My background was 20 years in corporate America in various different industries in senior-level finance and accounting roles.
I’ve always been known as a hugger, I have a big heart. I wanted to find a way to take scaling of businesses and that background of looking for key performance indicators, and blend it with a real desire to make a difference. And i had the ability to do so. Helping our moms and dads and grandmas and grandpas safely live at home became a way to blend both sides of myself, the head and the heart together, in the founding of the business. So, 20 years later, here we are. We have grown, initially through a few company-owned locations, and then decided to franchise the business model in 2005.
We opened our first franchise location in 2006. Now, we’re at over 350 locations, taking care of about 15,000 to 20,000 families on a given week, and employing a similar number of caregivers and nurses, generating approximately $700 million in system-wide sales.
[00:01:56] Donlan: Obviously, a lot of the audience probably knows you as a home care franchiser, but do you mind just giving a brief overview of where you’re at now with your other service lines, like senior housing?
[00:02:17] Sun: Yes, absolutely. For me, it’s always about trying to meet the consumer, our client, where they are. And what we saw is many of our families wanted to remain at home, but there might be a point in their journey where they can’t afford 24/7 care, or it’s not the safest setting for them. For instance, if there’s a dementia scenario. We began utilizing that knowledge and working with our families, and brainstorming where all we could be part of the value continuum.
We bought our first senior living community in, probably, 2012, and opened it in 2014. We now have four across the country. The last two years, we took an expansion hiatus – while going through the pandemic and supply chain issues – but we are seeing increased demand in multiple areas across the country of folks wanting to be in the senior living space, and understanding the need that’s going to be there. We’ll continue to look at that.
We’ve been in pilot mode with a franchisee in Idaho for the past three years on a care home format, which is 8 to 12 rooms within a residential area that might have two caregivers, 24-hours a day, providing more of a one-to-five, one-to-six ratio, versus one-to-one in the home. It gives us an opportunity to meet clients where they are, but also address the labor challenges that we’re all facing to get some efficiency with our labor to do one-to-many versus one-to-one.
We have signed on for probably six additional communities in the last 90 days, and have a pipeline of probably 10 to 20 per year over the next 24 to 36 months, and just included a franchise disclosure document in the first quarter to allow us to begin moving beyond just our franchisees, but also to independent folks that might not be BrightStar Care franchisees, or have a desire to be in-home care, but have a desire to provide care in a residential small-format setting.
Utilizing the labor efficiency of a one-to-five, one-to-six model, it still meets needs of consumers to have high-quality, high-service orientation, customization and personalization that our brand has stood for since we started.
[00:04:36] Donlan: In 2022, what is your biggest goal? What are you most focused on?
[00:04:54] Sun: I think I couple them, which is probably not fair, but I’ll take my liberty. I think we really want to build efficiency into the business model, and be able to get data with which to inform our payer-contracting models and publishing of outcomes to show that we really, truly are the highest quality brand in the home care space.
We have our own technology platform, we’ve been investing very heavily – even during COVID – retooling and adding capabilities, as well as doing data studies. In order to continue to do that, we need to have locations with which to roll that out, and work through that transition. To do that and not cause disruption for our franchisees at that large of a scale, we have been focusing on buying back franchise locations, and acquiring additional locations, so we have a larger company-owned footprint to be able to do that technology migration, which will occur over the next couple of quarters.
We can begin rolling out those improvements in technology and efficiency for our offices. We can begin to look at some AI and machine learning for taking key processes that are very manual-intensive and utilizing technology to scale those. Then, we can free up more hands to do recruiting and retention, at the same cost scenario at the local level.
For us, it’s really a combination of technology and utilizing company-owned stores so we can use them to test and roll out the technology with minimal negative impact, and then take the disruption of positive impact for the business model on to our franchisees at a local level.
[00:06:34] Donlan: Is there a sweet spot in terms of how many company-owned locations you want to have?
[00:06:42] Sun: I think we’ll probably want to do that through three different states and probably 10 different geographies, so that we won’t limit our growth in company-owned to just being about technology. We have a very aggressive plan to continue to grow company-owned locations, both through franchisee buyback and de novo development, and we have the funds to be able to do that.
We’re going slow, so we can go fast. We want to make sure that when we take over a franchise, it has that culture at the local level that we can apply to two different models. One, if a franchise is looking to exit entirely, that we have the infrastructure in place with their team and appropriate incentive programs, so we can stabilize, and then have a good base to grow from. It doesn’t do us good to buy back a franchisee and have the business decline.
We also are finding there’s franchisees who love the brand, and love working with me, that want to come onboard as an employee with incentives for growing the business after they’ve sold, but understand they might not have the balance sheet to tinker with some of the value-based purchasing and risk-share models that we’re beginning to explore with partners.
We have the data – based on the study we did with Avalere – and we feel really good about that. We know we can really can make a big difference on outcomes, and so why shouldn’t we put our money where our mouth is, so to speak?
We need a bigger footprint to be able to do that, though, and so we’re looking at key states where we can get to scale. We can go out and negotiate those contracts to be able to do some learning and improve the business model so that we can take that out to all franchisees that we still have in the network.
[00:08:21] Donlan: You mentioned the Avalere study. We reported on that a few months ago. You told me at the time that you made a pretty large investment in those data and analytics. When did you first start thinking about doing that, and what especially did you want to really examine?
[00:08:41] Sun: We probably started thinking about it in 2018. In 2019, we started to capture key information that we needed our franchisees to input in their clinical teams and input into the system, so we could have a robust data study. We needed to have quality data, across enough of a statistically relevant population.
We contracted with Avalere late-2019, early-2020. Even in the midst of a pandemic, we were pushing the foot on the gas to make sure that we were ready to come out of it on the other side really well informed. We believe we’ve done the right things for the right reasons over 20 years. We were the first and only to mandate Joint Commission Accreditation across our entire network.
We took that on as an initiative from 2008 to 2010. We’ve had our entire network accredited since 2012. We just received our 10th year of enterprise champion for the quality designation from Joint Commission. We wanted to know that we were doing the right things, and having nurse oversight and mobile technology, so that we were capturing key data from our caregivers – and alerting our clinical team of change of condition – so we could proactively avoid an emergency room visit or a hospitalization.
We knew we were doing the right things for the right reasons, but all home care companies say that, even if they really aren’t. And so we needed to be able to put our money where our mouth is, and be able to have a data study that we could share with potential partners to say, “We really are, and here’s the cost savings, where across 30 different health care conditions, our average savings per patient was $13,000. We even had that all the way up to $30,000.”
That’s relevant, real dollars, as we start looking at pilots and building in capabilities between us and hospitals, between us and insurers, between us and Medicare home health and hospice. So it was worth making a six-figure investment in an Avalere study, and the ongoing relationship to have the data to publish.
Then, as we enhance different clinical models for different care pathways, we can do an A-B: run through and see what our savings are and our outcomes are within “A” population, change the clinical protocols, so we continue to learn more and enhance, and see if “B” can save even more money, and have even better outcomes. That is what this relationship allows us to do on an ongoing basis.
We weren’t just focused on a one-time study, but continuing to lay out a discipline, where we can continue to hold ourselves to continuing to be better on outcomes that we can deliver for those that pay the bill, and for the clients we have the honor to take care of.
[00:11:46] Donlan: What has that yielded so far in terms of talking to partners?
[00:12:00] Sun: We’re in exclusive relationships to be the only point of provider with hospital chains. We are a preferred provider with Amedisys (Nasdaq: AMED). Right now, that’s on a referral basis. We believe with time, there will likely be more of a risk-share opportunity, as we have more company-owned markets to start with, and collaborate on those initiatives, and take some risks on both sides.
We don’t expect our franchisees to be willing to have the appetite for that day one, but we believe that the network can evolve to that, as we’re willing to experiment and evolve because we have the data to feel comfortable in doing that. We’ve had a lot of relationships in hospital-at-home models, where this data allowed them to feel confident utilizing us as the exclusive – if not preferred – provider.
[00:12:55] Donlan: What can home care do for the hospital-at-home model?
[00:13:13] Sun: We’re bringing certified nursing assistants, RNs or LPNs, depending on what the level of in-state regulations there are, so that the care coordination is being mapped out, and the physicians are being added by the hospital-at-home coordinator.
They tend to be relying on our nursing staff, so that’s where it’s a combination of non-medical and medical, because we tend to be providing the nurses and the certified nursing assistants to the equation.
[00:13:50] Donlan: In terms of the data, let’s go back to that for a second. Obviously, the home care industry is notoriously bad with it, right? Here you guys are making the six-figure investment. Do you see this as something that’s going to separate you from the pack, so to speak?
[00:14:08] Sun: Absolutely. I think we’ve already seen that. I made an early bet back in 2004 and hired programmers for hire and owned the intellectual property for our technology platform. We’ve evolved and invested in it to redo it several times, as technology has evolved, but we own all the data since 2004. Every patient we’ve ever taken care of, every single time we’ve opened a franchise location, we have that longitudinal data that we’ve been able to use for these data studies.
To see how we’ve evolved, how we’ve improved, and to really do the study with Avalere, we had to be able to take three years of all patients, so there wasn’t picking and choosing. I believe we’re the only network that, on the personal care and franchise side, has 100% of our data all in the same database. Therefore, we were able to provide that to Avalere, where there wasn’t a picking and choosing, and there was enough relevant data to be able to have them feel confident signing off on a data study and publishing it.
They published it, and we had the rights to the data then as well.
[00:15:23] Donlan: We’ve heard that a lot of home care companies have had to raise their rates because of wage pressures. Have you guys had to raise rates, and if so, what has been the client reaction? Has it been mostly fine, or have they been upset by the raising of the rates?
[00:15:50] Sun: I think it varies based upon the individual franchisee location. But I would say we’ve always held ourselves out to be the high-quality, high-service brand. We were never known as the cheapest price. Our prices were already above market in terms of our competitors. Our client was already prepared for that. So to be able to continue to deliver the same quality and services we have been known for, we needed to increase the wages for our frontline workforce, and our franchisees did for theirs. We naturally had to move up in proportion.
I think our franchisees have a greater than 90% retention rate for clients, even with the wage and rate increases they’ve had to implement. And some are at a 100% retention rate of clients. But we stood behind the quality and the service already. I think it’s been harder, probably, for brands that were known as the cheapest in the industry, to then have to do a 50% increase to be able to have any chance at getting the workforce that they need, versus where we were already higher there – we were already paying above our competitors by 2% to 10%.
Did we need to go up 50%? No, but we probably needed to come up 10% to 20% to just keep in lockstep to still be the highest payer to our caregivers, to attract and retain the best ones, but our consumers have been well-positioned for that.
[00:17:17] Andrew: Then, in terms of staffing, obviously, like you said, you’ve already been paying above market rate for caregivers. Still, I assume, you guys have had a lot of problems with labor. Do you see that leveling out a little bit? Have things gotten better of late?
[00:17:39] Shelly: We’re tracking our workforce total counts, new applicants and new hires on a weekly basis. And yes, I think in the last 90 days we’ve gotten better. I think we tend to have some of the highest retention rates and lowest turnover numbers in the industry. We get that data from Home Care Pulse.
We feel good about what we’re doing, but there’s always room to improve, and we’re continuing to work on that with investments in LMS – learning management systems – so we can provide career pathing for our caregivers to progress in their careers and progress in their wages.
We’re investing in that, and then looking at gamifications – rewarding the right behaviors, and rewarding taking on more hours and taking more shifts. I think what we see is, we have enough workforce to probably meet the client demands over the next couple of years.
Then, we’ve seen a migration, which I think has benefited us, away from institutional settings like nursing homes and hospitals. Especially as everyone went through their need to comply with vaccination mandates, those had not hit the home care industry yet, but did affect the institutional settings that were taking Medicare.
So I think you had a shift in labor from institutional settings to home care, which I think was a benefit for the home care industry. Now, it’s just important to create the right environment to retain them. We get really high marks on employee engagement scores, and people like working for us in ways that I think are really difficult for our competitors to replicate. All of our locations have a full-time registered nurses as directors of nursing.
We have technology that the caregivers are using, which includes change of condition alerts. They actually have an ability to feel like they’re preventing a senior from going into the hospital. We have testimonials galore on, “I would have gone into the hospital, had it not been for this caregiver.” I think caregivers are drawn to want to make a difference and really want to provide great care. We enable them more than, I believe, any other brand does. I think if we can pay them fair, have career pathing in place, the right mentoring programs in place and also utilize gamification, it will allow us to win the war for talent.
My hope is through the next 6 to 12 months to see a greater return to the workforce for those that have been sitting on the sidelines. Now, it might be after the summer. They may take the summer to enjoy their children that might not have daycare programs, because a lot of our workforce might be working mothers.
I think we, hopefully, will see a return to work, as all schools generally will be in session in the fall. I think September would be when we start to hold out hope and belief that more workforce participation will occur than what is occurring today.
[00:21:15] Donlan: Have you heard that inflation is affecting your workers, and that that may be contributing to some workers coming back to the workforce?
[00:21:29] Sun: We’re not seeing or hearing an increase in hours because of inflation. I would say we’re having to do a better job – which is where our technology comes in – matching our caregivers with closer proximity to their clients, because gas prices matter. I think there probably will be a time over the next 6 to 12 months, where rates might stabilize.
But the expectation for mileage reimbursement will increase, and we’ll need technology capabilities. If it’s normal for a caregiver to drive 10 miles to any job, anything above 10 miles, do you have to get to the point where you’re paying for that to incentivize an offset inflation? Probably.
[00:22:11] Donlan: You’ve had that low turnover rate for a long time. Have you, over the last two years, had to switch things up at all? Have things changed? Has behavior changed among your employees?
[00:22:29] Sun: I think it’s harder to have the culture aspect when a lot of processes have been virtual – virtual interviewing, virtual onboarding, virtual orientation, during the height of COVID. I think we’re starting to get beyond that to a certain extent, but how do you go back and build that cultural connection for those that came into the organization in a remote manner?
I find that with my own franchise support center team. I’m going back through with people we’ve hired over the last year, and doing new-employee hire luncheons to get to know them and hear their stories. Even if it’s virtual, I’m making the time, because culture really matters. It’s really a big point of differentiation for our brand. I think I’m still – given the size and scale of our organization – the only founder that still owns 100% of our brand, and is still really active on a day-to-day basis.
That’s something we need to be leaning into. Most of our caregivers are women. And I think they love the fact that they’re working for a brand that’s run by a woman and owned by a woman.
There’s not enough workforce to go around, and so how do we differentiate with the message and the story to get people to want to work for us, versus working for others? We’ve got to amplify that story, which I think is a powerful one. That’s where my team is trying to spend a lot of time – getting me on things like HHCN+ TALKS, trying to make sure that we’re getting out there and telling a story.
[00:24:14] Donlan: Shifting gears to growth. You guys named Pete First as your first chief development officer. Why did you decide to put him in that role? And can you explain the care home side of things, the area he’ll be working in?
[00:24:37] Sun: Yes. Pete has been with me since September of 2018. It is a promotion for him. He’s been on a pretty steady track. We’ve been good at putting really concrete goals out there for people, that if they hit them, they get the next compensation hike, bonus increase, stock option increase and title increase. Pete started as a VP, and moved to a SVP, and now moved to the C-suite. And he very much earned it.
It’s a pretty large change. A massive change in bonus and stock options, and then 100% of benefits are paid for, for my C-suite executives.
He took on care home and senior living growth, in terms of selling new ones. But he also took over the operational responsibilities of overseeing the team that supports those franchisees’ day-to-day operations, and also the growth of the care homes and senior living. Because to me, those are brands that are still in incubation, and it is difficult to sell new brands if you don’t understand them all the way down to the operational level.
[00:26:41] Donlan: In terms of growth strategy, where do you guys want to grow the most over the next few years?
[00:26:59] Sun: I think care homes will probably be neck and neck with new franchise territories. Then, the second will be making sure we’re being proactive with franchisees that are looking to sell to the franchisor, and going through those transactions to increase our company-owned footprint. Senior living will continue to grow, but that’s a very large – greater than $10 million – investment.
While we have some groups that are very interested in either retrofitting hotels, or developing land that they might hold to do senior housing, to me, that’s probably a business where we’re doing three to five of those per year, versus 10 to 20 care homes, and probably 20 to 40 BrightStar Care territories per year. I think all of them will grow, but I think the greatest level of growth will be in BrightStar Care territories and care homes.
[00:27:55] Donlan: Where do you see BrightStar Care in the next three to five years?
[00:28:08] Sun: I think in the next three to five years, I see us probably more closely aligned with a strategic payer or provider network. I think that COVID has accelerated the need for a more closely aligned ecosystem around the patient. The nice thing for me is, I wasn’t running from something to create my own company. I have no problem being an employee again, I still love this brand.
I’ll still be at this brand 10 years from now, regardless of whether I’m sitting at the house making all the decisions, or I am an employee within a larger ecosystem staff. I think that over the next three to five years, we will see that opportunity to align within a payer, with a hospital network, with a Medicare home health organization. We’ll need to, because I think we need to be closer to the government funding model.
Either we will align within an ecosystem, or we will – because I have a strong balance sheet and access to financing to do it – go buy our own Medicare home health and hospice capabilities, so we can align around those abilities to cross refer, which will enable us to take Medicare, as the biggest funding source for seniors.
We’re also leaning very heavily into Medicare Advantage.
I think that’s going to be a big change in how home care must evolve over the next three to five years. We’ve benefited over the last 10 years, up until the change in Medicare Advantage, from consumers just coming to you through marketing or through hospital discharge, right? If 7 out of 10 new Medicare enrollees are enrolling in Medicare Advantage, and 50% of Medicare will be Medicare Advantage in the next 10 years, well, that means that every single enrollee that is accessing their benefits is going to start with hours of personal care being paid through the Medicare Advantage plan. Only those additional hours beyond that will be private pay.
Well, if you’re not there to be a part of the service for the Medicare Advantage hours that are paid for by the plan, you won’t get an opportunity to be there to sell them on having us as the private pay provider. If it’s one of our competitors that’s in the home, willing to take Medicare Advantage, and our franchisees get locked out of those networks, you’ll never get a chance to get those consumers back on the private-pay side.
What I’m stressing over and over again to our franchisees is that you must lean into Medicare Advantage. If you don’t, three years from now, your growth rates on customers will be down, and your volume of business will probably be down 30% from what it is today. Because your seniors, as they grow in age, some of them will pass away. If you’re not filling the inflow with the same numbers you’ve been used to, your business will decline.
We have to realize that the paradigm of client acquisition has completely changed with Medicare Advantage. That’s what I’m preaching to our franchisees. Where they’re not participating, those are the ones I’m most interested in buying out, because we will absolutely participate in a company-owned market, and that’s how I’m prioritizing where I want to be and why I want to be there.
I think we have to be participating in Medicare Advantage, and we will look to be more closely aligned in that ecosystem over the next three to five years. I think we will need to be to provide the care to all of the consumers I want to take care of, and that is a recognition that the landscape is changing.
[00:32:06] Donlan: So you believe, despite the pay, making those relationships right now is worthwhile?
[00:32:36] Sun: I think it’s critical. I think you have to look at it as a client acquisition and the cost of doing business. Two years ago, I would have had more franchisees with dedicated salespeople that would’ve been calling on hospitals for discharges. That took a salesperson. You didn’t know if you were ever going to have an ROI on a salesperson. Now, I have a built-in mechanism for having our franchisees get referrals through Medicare Advantage.
Is what we get paid in Medicare Advantage enough to be sustainable? Absolutely not. You have to make a bet, though, that for a given consumer that might get 80 hours of Medicare Advantage, they need another 1,000 hours. That 1,000 hours will be at a different rate than what Medicare Advantage is paying for us.
You have to look at the opportunity to provide the care. I think that’s how our franchisees and all in this industry need to be thinking about Medicare Advantage’s lower rates – it’s more of a cost of doing business and a client acquisition cost. Does it cost you a few dollars an hour to get a new client, in terms of having a salesperson, or doing pay-per-click, or whatever form of advertising you’re going to do? Probably.
Therefore, can you take a slight discount off of your normal rates as a client acquisition cost? If you reframe that in a different bucket, it makes sense.
[00:34:15] Donlan: Okay, great. Final question, Shelly, is there anything about the home care industry that you think is going to change the next few years? Is there a prediction that you have that you’re willing to share with me and the listeners?
[00:34:27] Sun: I think we’ve touched on it, but I think data is absolutely going to matter. I think if you can’t prove that you can influence the outcomes and avoid negative health outcomes, in terms of needing to go into a skilled nursing facility, have an emergency room visit, or be hospitalized, payers are not going to be willing to work with you. And I think right now, Medicare Advantage plans are just opening their networks and whoever will take it, will take it.
I think three years from now, Medicare Advantage will pay $10 more to a provider like us that can demonstrate the quality. Data has always mattered, or should have mattered. It will matter so much more in the coming years.
[00:35:25] Donlan: Okay, fantastic. Shelly, that’s a great place to leave off. Thank you so much for joining me, and thanks to our audience for listening.