G. Scott Herman has been in the home health industry for a long time. But when it comes to his new venture – New Day Healthcare – he’s not running the company based on what worked in the past, or even what may work best right now.
He’s trying to build a forward-looking, sustainable home-based care business. To do that, he’s relying on strategies that he may not have relied on at prior stops.
That’s how he picked the mantra for New Day: “Burn the ships.” To him and his leadership team, “burn the ships” is about rethinking home-based care delivery in a completely new environment – one with lots of challenges, but also opportunity.
“That is our mantra, burn the ships,” Herman told Home Health Care News. “So we can redesign home care. We’re not forgetting the past, because we learned a lot of lessons there. Instead, we’re constantly looking forward. We’re not going to fall in that trap of, ‘This is how we’ve always done it.’”
Based in Fairview, Texas and founded in 2020, New Day has made seven acquisitions to date. Last week, it publicly announced one of those for the first time when it acquired the East Texas-based AdvantageCare Home Health.
Its footprint spans Texas, Kansas, Missouri and Illinois at this point. Outside of AdvantageCare, it has also acquired AssistCare, Home Care Partners of Texas, New Age Hospice, Envision Health Partners, Pride PHC Services and Phoenix Home Care and Hospice.
Its census includes about 3,200 daily home health patients, 500 hospice patients and 6,000 personal care patients.
As for Herman, he was previously the CEO of Elara Caring, one of the largest home health providers in the country. Before that, he held leadership roles at six other home-based care companies.
Even with the “burn the ships” mantra, that experience is likely to serve him well as New Day grows. But when it comes to what may be different about New Day, Herman didn’t leave much areas of the business out.
“We’re rethinking everything about home care delivery,” Herman said. “Everything from operating and labor models, to infrastructure support, to contracting, and even around how we assess and close on acquisitions.”
New Day put acquisitions on pause for a while given how high valuations had gotten, particularly in 2021 and early on in 2022. But now, with the market normalizing, the plan is to continue growing in a disciplined – but rapid – manner.
Herman believes the company’s overall patient census will eclipse 10,000 patients this year. As that mark gets closer, he and his team will be evaluating acquisition targets that help fill out the company’s footprint, stacking those three service lines on top of each other.
“Our M&A strategy is very disciplined,” he said. “We won’t stray from that discipline. We understand that quality companies are built from quality contributors. We don’t mind companies that need help. But we’re not really interested in large-scale turnarounds.”
New day, new operating realities
Like many companies that launched in 2020 during the pandemic, New Day started off as a fully-remote operation.
It has continued to operate that way, however, and for a specific reason.
“This is one of the many guiding principles that makes operating overhead extremely low for us,” Herman said. “It allows us to pump resources back into clinical care and labor, such as our employee benefit offerings.”
Instead of opening up brick-and-mortar locations across its footprint, New Day is investing fully in that remote operational model in Texas – while providing in-person care – to differentiate its benefit offerings.
The company offers full benefits to part-time and PRN staff, for example. Those benefits include medical, dental, short-term disability and life insurance.
Then, in its M&A strategy, New Day is able to seek out providers that have large managed care populations on their censuses.
Though the amount of Medicare Advantage (MA) beneficiaries are growing, the health plans those beneficiaries are under tend to pay less for home health services compared to traditional Medicare.
But Herman and his team are not shying away from that. That’s another reason why keeping operating costs low is imperative.
“We can create low overhead and low cost of delivery, which allows us to take large swaths of managed care or per visit clients, with multiple payers, in a very cost effective manner. That produces a healthy gross margin,” he said. “We proved that model can scale, and now we can replicate it. So, with our acquisition strategy, we can buy and integrate companies that have large managed care populations.”
To prove its worth to payers across the board, New Day developed its own software system: “Carelytics.”
The plan was never to be in the software business, but New Day’s model called for it, Herman said.
“We had to develop something that we could look at all payers through, all aspects through, and [be able to] track,” he said. “We’ve done that internally. We don’t ever intend to be in the software business, but we’re in the patient data business. We had to create our own avenues. That’s what changed the most: as payers shift, as populations grow, we have to be able to consolidate data, rapidly interpret it and get teams on the ground to intervene to really move outcomes.”
“Burn the ships” comes from a song of the same name by the band KING & COUNTRY.
The first verse of the song begins with, “How did we get here?” The answer to that is better suited for a book than an article. The point is that home-based care is here now, in a different place than it used to be.
The third verse appropriately begins with, “step into a new day, we can rise up from the dust and walk away.”
“Home care is different, it’s moving under our feet, it’s changing right in front of our eyes. And it has been for a decade, right?” Herman said. “If we’re going to continue to watch the market shift to Medicare Advantage, continue to watch our aging population and census grow, continue to see chronic disease as a big problem for the financing of America, then we have to completely rethink everything we do.”