How Diversification Is Keeping Best Of Care Ahead Of The Business Disruption

Though the winds in Best of Care’s neck of the woods are blowing in a favorable direction, CEO Kevin Smith is always prepared for a change in weather.

“You’re always one regulatory, or legislative or sweeping change away from having something dramatically impact your business model,” Smith said during Home Health Care News’ latest episode of HHCN+ TALKS.

For Smith, the easiest way to combat bad weather is by having a big umbrella. This meant diversifying Best of Care’s portfolio and revenue streams.

“Diversification, throughout the course of my career, has helped this company in unexpected ways,” he said.

Last year, Best of Care purchased Moving Mentor Inc. — a move management, organizing and consulting company. The company has also acquired a few Assisted Living Locators franchise geographies. With all of these companies under one umbrella, the home care agency has the ability to serve its existing clients in a number of different ways, while attracting new clients.

That said, Best of Care hasn’t stopped expanding its core home care business. Last month, the company acquired another home care provider, Barton’s Angels.

The recording and transcript of the conversation with Smith are below.

Read on to learn more about:

— Why home care’s cost tipping point is less straightforward than one might think

— Why M&A is an effective way to grow a company’s workforce

— Best of Care’s biggest wins in 2023

HHCN: I am Bob Holly, managing editor of Home Health Care News. Welcome to this episode of HHCN+. I’m thrilled to welcome Kevin Smith, CEO of Best of Care.

Smith: Thanks, Bob. Great to see you.

HHCN: Kevin, thanks for your time today. Let’s get into it. I think the focus of this is really going to be on Best of Care’s 2023, and then what you expect for the company and the industry overall in 2024. Before we get into all that, I thought it’s worth, for those who don’t know you, getting into your background a little bit. How’d you get into home care and then how’d you become the CEO of Best of Care? It’s my understanding, you’ve really held every role along the way.

Smith: I certainly have. Best of Care is a family-owned and operated private home care agency here in Massachusetts. I live just south of Boston. Our most saturated area in terms of coverage is this neck of the woods, but we do have a statewide presence. I started with the company in 2007. I had just graduated from Providence College, and did not know what I was going to do.

I took a flyer and talked with my dad about seeing if there was anything that I could do at Best of Care, the company that he had started in 1981. To his credit, he never applied anything that resembled pressure of any kind on me, in terms of trying to get me to come and work with him or for him. It just always existed in my life as the company that my dad owned and worked for. Anyways, I started working there.

I was doing everything from verifying time cards to get people paid, scheduling home care shifts, going out in the field as a supervisor. I was working sometimes as a caregiver if we needed something, driving people to work during the snowstorms, going grocery shopping, literally every possible job. I’ve seen it from every angle. By 2012, I assumed more of a leadership role. I was running the company. Fast forward to 2019, I became the CEO. I have really held the role that I have today since then.

HHCN: Thinking back to those days in 2007, the line that we hear so often is home care is almost a “recession-proof business.” Obviously, there was a lot of financial market turmoil at that time. Did that factor into your decision to say, “Hey, I want to join the family business. I want to lead a home care organization.”

Smith: At that time, the prospects were not great. A massive recession and it was kind of grim. Of course, I’m very lucky to have had that opportunity. Since then, I’m confident and proud of the way I’ve been able to take it and run with it, and really take this, and bring it into a different universe than it was in the past.

HHCN: Let’s fast forward to this year, 2023. What were some of the major highlights for you, as CEO for Best of Care, as a company overall?

Smith: On the last day of 2022, we completed an acquisition of a company called Moving Mentor, which was a move management and consulting company out in the western part of Massachusetts in Amherst, Mass. That acquisition of Moving Mentor was part of our strategic initiative to build out this holistic model that Home Health Care News has certainly heard me blab and talk about for a while now, with the goal of trying to resonate with an audience or with a client, or with a lead, or a prospect, or a referral source in a way where we can help you in a number of different ways beyond just traditional in-home care.

Move management is something that we thought would be sticky in a way where if we are in people’s homes, helping them with moving, packing, unpacking, the logistical angles of that, the emotional angles of that, we thought that there would be a very natural connection to introduce our care management business and our home care business. The year started with that.

It’s been a year of integration of a small business into a much larger business, and taking a specific geography that they covered, and trying to figure out how we’re going to expand it east and throughout New England. It started off with a bit of a splash and then it finished with a bit of a splash as well. I’ll go back to the middle. On Nov. 1st, we acquired a non-medical home care agency called Barton’s Angels, also out in Western Mass.

Again, that was to expand that footprint. That is a region of the state that has an aging population that is in demand of quality care. The way that Best of Care operates — wherever we have any of our state-funded Medicaid contracts, we also build out our private pay and care management teams around that to build that cyclical continuum model. Western Mass was no exception.

We added Moving Mentor and then we added a home care agency out there as well to expand on a very small market share that we had in that region. We identified a company in Barton’s Angels that was very reputable, shared a lot of the same contracts that we did, so it’s been a seamless transition. In fact, 100% of those caregivers working for that company came over to us, so what’s better than that?

It was a real successful transition, which I’m very proud of and happy for everybody who’s been working out there on that. In between, we had a few key hires to support the two acquisitions that I had either, A, completed or, B, been working towards. One was a consultant who has now become our director of strategy. In July, we brought in a consultant for the first time ever in my career because this thing has gotten to the point where I just can no longer be the idea guy, the brainstormer.

It’s difficult when you’re trying to put all of these puzzle pieces together in a way that not only fits, but that the people who are performing these services talk to each other and understand what we’re doing and make sure that we know how to make a referral to one another. We brought in a consultant who, Arona Bauer, has been nothing short of glue and concrete. She is putting all these pieces together in a super effective way.

Now, on Jan. 24th, she’s coming on full-time. She’s going to help us to continue to build this thing out and really make sure that the integration is not a phase but, instead, a living, breathing thing. In addition to Arona, we also brought in a new director of nursing. We really needed to make sure that from a quality perspective, we had the right nursing oversight on all of this in-home care that we deliver, which represents about 70% to 75% of our revenue.

A lot of that is compliance-based provision of service through Medicaid. Having the right person in that role was critical for us. Her name, Erica, she’s been outstanding in just wrapping her arms around the existing business that we have, and making sure that we’ve got everything up to speed from the compliance perspective. She’s also making sure that our private-pay business feels the high touch that a director of nursing should bring to those clients who want to feel that level of concierge service that’s important in the private-pay market, especially in Greater Boston, South Shore, Cape, Nantucket, etcetera.

HHCN: You’re certainly involved with industry-wide leadership as well. That includes speaking at Home Health Care News events this past year. What would you say were some highlights for the industry overall in 2023?

Smith: Sure. I’ll start with the local level. In Massachusetts, the trade association that I was the president of for a number of years, called the Home Care Aide Council, achieved some monumental reimbursement rate increases in Massachusetts.

Through years of advocacy legislation, lobbying, and beating the drum, we were able to take a lot of those temporary time-defined ARPA increases and make those permanent and see our contracted rates with the state reach a floor that we probably didn’t even think was ever going to be the ceiling. We’ve made some really nice headway. Now, there’s still a lot more work to be done, but that gives providers a great deal of latitude to give out pretty significant rate increases to the caregivers.

Nationally, a positive reaction to something that drew a lot of attention was the 80-20 thing. You saw so many stakeholders and so many industry leaders and leading agencies come together, and put together some common-sense responses and reactions to what was put in front of the industry.

That really speaks to, I think, just how intelligent, informed, and effective this industry can be when we see something that we can all identify as concerning. There were countless articles — a lot of ink spilled on this topic as a result of the efforts by the industry. I don’t know necessarily if there’s something that we can tangibly say came out of that yet, but the reaction to it, I think, speaks to the momentum that’s been built industry-wide.

HHCN: As somebody who’s been in the industry since 2007, 2008, and obviously grew up in it too, that sense of pulling from the same end of the rope, is that something that you would have seen 10 years ago, or is that a relatively new phenomenon?

Smith: It’s new to me personally. I can’t speak to what was taking place before. So much has changed with the enhanced spotlight, and level of natural attention that the industry gets now. The Wall Street Journal, the New York Times, now have dedicated sections where you’re going to go and read about aging and the issues facing the aging population in the country.

I just think that as the concerns and the challenges around delivering care in a way that can be sustained by the network from owners of companies all the way down to the people delivering the care, I just think that there’s more attention on it. I think that’s a really good thing honestly. I don’t know necessarily whether it existed in Mass before me, but certainly something that has not gone unnoticed by me. It feels like there’s more trajectory behind it than ever.

HHCN: Would you say that the year as a whole met growth expectations, exceeded growth expectations, maybe you didn’t hit all your growth expectations? How would you characterize the year for your business?

Smith: We exceeded our growth expectations in ’23. Top-line growth of about 15% from ’22 to ’23, and we’re expecting maybe north of 30% top-line growth in ’24. The winds are blowing in a very favorable direction in our neck of the woods. I’m not even just speaking for my own company, but we did exceed it. I think that there’s always that rate of organic growth that can be somewhat tricky to put your finger on in terms of a forecast. You just don’t necessarily know in January how things are going to be looking come November, December. I’m happy to say that we exceeded our expectations.

HHCN: Looking ahead at next year, what do you see as the major storylines that Best of Care is going to have to navigate?

Smith: I’ll say retention, but not from the traditional approach of recruitment and retention, those kind of boring old topics that anybody can introduce in a conversation like this with Home Health Care News, because they’re just part of the day-to-day. Through our lens, we’re looking at retention a little bit differently. We’re trying to go to the next layer of the onion.

It’s great to hire hundreds of people, and it’s great to keep hundreds of people. Now, what we’re looking at even more closely is, how many hours are they working over period X, then over period Y? How do we retain people, not just as employees, but how do we retain them at a certain clip based on hours worked? That’s going to be the challenge for us in ’24, to be a bit more analytical. Whereas we all know home care, especially for us Medicaid providers, it’s a volume game.

You are just trying to deliver as many of those billable hours as you possibly can to keep all of your home care workers employed. What we’re trying to focus on is, how do we take that 20-hour-a-week employee and try to convert them to a 40-hour-a-week employee and deliver the work of a full-time person with one employee as opposed to two or three, which is what the industry is known for? It takes two or three people to work one full-time job. When I say “retention,” that’s the angle that I’m coming from on that particular topic.

HHCN: Without giving away the secret sauce, what are some high-level things that you can do to increase that clip, as you said?

Smith: Well, rate doesn’t hurt, right? Trying to pull the right financial levers is incredibly important. Many companies treat it as a benefit in some sense. The financial lever is clearly the most effective way that we can do that. Our current starting rates that we’re recruiting for are incredibly competitive, if not near the top.

We’re trying to get to the point where our rate attracts someone on Indeed that never looked at home care before. We’re trying to figure out, to use your phrase, what’s that sauce? What’s that magic number that takes someone from one industry, and brings them over to home care? What is the profile of that person? What is that background? What skills do they possess that will translate to coming to work in a very unique sort of role that is home care?

How do we keep them? What do we need to give them in terms of education, skills, training? That’s where we’re at with that for ’24. It’s not that we can’t find people and retain them. The pool of people doing the work is so defined and finite that we need to expand it, and then find that profile of person, replicate it, put the opportunities in front of that next group of people, bring them in, and retain them. That costs money.

HHCN: Not to beat a dead horse on the workforce point that’s so often talked about, but do you see that as the number one challenge for operators next year, or is there something else that’s maybe flying under the radar a little bit?

Smith: Yes, it’s cliché. Yes, that’s the one thing that is just constraining the rocket fuel growth for a lot of companies out there, where the infrastructure is in place. Everything at the company would allow for fast growth, if there were a way to get the workers. That’s where people start to sniff around acquisition because that is one way to secure a ready-made workforce for your organization. Now, what does that do? Does that cannibalize the pool? Of course, it does, but it’s one way to get to where you want to go.

HHCN: I think another challenge that’s being talked about more is the affordability aspect. We just did a home care outlook webinar. Daniel Gottschalk, from Family Tree, said something to the extent that the industry was at a tipping point with clients being able to afford services. What’s your take on that?

Smith: I’ll give him that. That might be right, but that is so specific to regions, state, town, ZIP code. There is such a specificity undercurrent attached to that take. If you’re in Massachusetts, Connecticut, California, New York, it’s a different middle market than in other places. This point is well-taken, though, because there will be a market cap. There will be a number at which people say, “I can’t afford to pay whatever that number becomes, $55 per hour for in-home care. I can’t sustain that for however long I need to sustain that for, to keep mom or dad where they are.”

What’s going to happen there? Well, maybe folks seek out the independent-living, assisted-living option that has long been available. Maybe we see more of an acceleration of the Medicaid spend-down, whereby the folks who are on that middle-class cusp, which the middle-class definition is something of a moving target in 2023 and 2024. I don’t necessarily even know what the ingredients are anymore for that.

I would not be surprised to see some of that accelerated spend-down of assets, so that folks become Medicaid-eligible in order to leverage some of the state-funded home care benefits that exist, especially like places here in Massachusetts, which is a favorable place to receive state-funded care. That would not surprise me at all. Yes, there will be a cap, but there will be a way that people can find funding for care without necessarily flocking to the community-based settings.

HHCN: What about on the other side of the coin? What are some of the emerging opportunities that you see for home care providers in 2024?

Smith: I think that what we will continue to see is more and more home care providers exploring some of these tangential opportunities. Adult day is a very logical place to dip one’s toe in my estimation.

I’m not saying I am, but it’s something of a cousin to home care because you have individuals in a setting receiving care and receiving human-based service provision for a defined period of time. Nobody knows how to do that better than home care providers. It wouldn’t be surprising to see people maybe start looking at that option. What better way to push something out in terms of keeping the lifetime horizon of your clientele than by offering them something that has some affordability relative to the ever-increasing costs of in-home care?

Now, the brick-and-mortar aspect is a consideration because, obviously, you’ve got to have a suitable location that can suit the needs of the clients who are coming in and you have to have appropriate staffing. There’s any number of considerations around the logistical pieces of it. Conceptually, it does make sense for a home care provider to at least maybe give that a thought in ’24 and beyond because retention of clients is also something that is super important.

How do we keep our clients with us for as long as, A, they can and, B, we can keep them with us? Baked into that philosophy is, of course, workforce retention because the best employees control their job security by delivering excellent care. If you can keep that client in some manner of speaking, whether it’s through an adult day, care management, move management following them into an assisted living or an independent living, I think those are definitely going to be on the minds of operators in ’24 and beyond.

HHCN: How do you plan to further diversify revenue in 2024? I know the answer is probably a little bit obvious to some people, but why has that been such a priority for you?

Smith: We talked about how important volume is in home care, especially in non-medical home care, Medicaid service delivery. You’re always one regulatory, or legislative or sweeping change away from having something dramatically impact your business model. Diversification throughout the course of my career has helped this company in unexpected ways. In our efforts to grow a private pay business, all of a sudden, we find ourselves as a preferred provider in an independent living community, for example.

Now, some of that is serendipity, but you also have to make your own luck at this. I think you have to do that. Now, as you’re trying to market yourself to communities to deliver care to their residents, there’s been an instance where we find ourselves now as the preferred provider in that community, and hundreds of residents utilize your agency.

Once you have that footing, it gives you a next opportunity to introduce, “Oh, by the way, we also have care managers on our staff. We have move managers because everybody at some point is moving in or out of this community.” Some of these explorations to diversify revenue have brought me down various rabbit holes and take me on different threads. The short of it is it’s great to have all of this steady stream, these endless referrals through the Medicaid network, but you just have to be open-minded and you have to be ready to look at every opportunity. That’s the way that we’re doing it.

HHCN: Let me know if you think this is a fair observation, but a lot of home care companies went from being mostly private pay to, now, recently looking at Medicaid as another opportunity. Best of Care is the opposite of that. You used to be mostly Medicaid business. Now, you’re expanding into these other revenue streams.

Smith: Yes, correct. Why am I doing that? That’s probably the question sometimes I’m asking and the team at the company because, again, the referrals that come in through the state-funded business, they are fast and furious. There’s plenty of them. Those are great to sustain and retain workforce, but those are not all 12-hour shifts. They’re not all 24/7s. They’re not all live-in opportunities. There are caregivers who really want those as well.

It’s our philosophy that if folks really want to work on those kinds of shifts and they want to keep working for Best of Care, then we’re going to try to help accommodate them because we don’t want to lose them. The moment that someone’s client goes into the hospital or dies, I have instant work to backfill that schedule coming through the Medicaid business. The systems in the divisions of services work have a very effective backstop against one another in your retention efforts with your employees. For that reason alone, it’s worth kicking the tires if you’re an operator or an owner to see how you can support the private-pay business with Medicaid or vice versa.

HHCN: We want to shift gears a little bit and go back to your most recent acquisition, Barton’s Angels. Home care M&A activity in 2023 really was a little bit down compared to what we’ve seen in previous quarters. What went into the M&A process for you when you looked at Barton’s Angels, and what’s your take on where the market is as far as a deal-making perspective?

Smith: Well, I think last year, there was some degree of uncertainty market-wise around everything from interest rates, recession, you name it. Activity in general was somewhat paused. People were standing on a lot of different things, whether it was buying a home, buying a business, selling a home, selling a business. I don’t necessarily know that that was the driving force behind the reduction that you saw in the quantity of deals.

From my perspective, I’m a smaller operator than some. The deal that we’re talking about with Barton’s Angels, a deal of this scale is both art and science because there is not necessarily the hard and fast, cold, black and white valuation that one would apply on a much larger scale of a deal versus this, which is a small company, 27 years old, independently-owned.

Nancy, the owner, is looking to make sure that her legacy is preserved in a way that the existing caregivers feel comfortable with. It was certainly a very personal kind of intimate thing because it was just owner-to-owner. It was not necessarily armies of attorneys working this thing through. It took a long time to get to the place where we needed it to get.

As I said earlier in the conversation, I think evidenced by the fact that 100% of the employees who made their way from Barton’s Angels to Best of Care didn’t have to change any of their clients, change any of their schedules. They got a raise. They got a bonus. Everything worked out, nothing is simple, but it’s as simple as it could be on that front. For us, it was more about trying to find some market share in that region to support our previous and existing activities, which we did. I’m very happy with the way that it worked out.

HHCN: To go out on a limb, would you anticipate more home care deal-making in 2024, about the same or less?

Smith: I think it’s going to be more. I think that these things obviously ebb and flow and are cyclical. I think a lot of it just has to do with what we were talking about a moment ago where, as in demand as employees are, we just have not had that onslaught of new people coming into the industry yet. Now, some of that might come in out-years in the future in the form of family caregivers who have been working as family caregivers for years now, who might end up making their way into the industry, as a paid caregiver working for an organization, or an agency once their family caregiving commitment changes.

So many people come to apply for a job and say, “No, I don’t have a certificate, but I cared for my mom for 10 years while she was sick.” As the headwinds blow behind companies like ours and home care agencies, and the spotlight gets bigger, it may become more of a viable landing place for the family caregiver population out there, which is massive and, to a large degree, unpaid. Until that happens, I think an acquisitive mindset is probably going to be at the forefront, especially at the large agency level where demand continues to grow. Without acquisition, it’s not going to be met.

HHCN: I want to get to a few very quick predictions-oriented questions for 2024. Beyond something that we’ve already brought up, what’s one safe prediction that you have for the home care industry looking ahead at next year?

Smith: One safe prediction that I have is that you are going to see a lot more home care agencies completing acquisition-based activity around what I will call tangential industries, in terms of expanding and diversifying revenue-generating opportunities.

HHCN: With examples, again, being move management, adult day.

Smith: Care management, yes.

HHCN: Laundry services, meals.

Smith: Yes, I just read the article about Mike Trigilio in HouseWorks and that’s the blueprint. A lot of their activity, I think, is always a good litmus test for the way that wind is blowing in the industry. I think that smart organizations will very seriously consider that type of expansion and find ways to continue to keep their existing infrastructure in place, but add different revenue-generating activities under your roof, under your umbrella, under your name to make sure that you are not left holding the bag if there are major workforce changes.

HHCN: What’s a risky prediction then, on the other side of the coin?

Smith: I’m going to say that more folks will consider getting out of home health and transitioning to home care.

Home health is a tough business. It’s rife with challenge and it’s also rife with the balancing act of reimbursement, profitability. It’s tricky, it’s elaborate, and it’s complex. Everything that I read about it from what I follow is that it is hard to predict. On a much smaller scale, I have seen any number of home health organizations shrink, downsize, reshape themselves. That wouldn’t be too surprising. Maybe that’s not too risky of a take, but that’s what I’ll go with.