Top Home Care Trends For 2024

The rising costs of home care were a trend in 2022 and 2023. They will remain one in 2024, and could finally come to a head.

That’s only one trend, of many, that will impact home care providers in the new year.

But it alone will also lead to other trends, such as increased M&A, adoption of future-facing technologies like AI, and further investment in tangential service lines and alternative payer sources outside of private pay. 

Below are all of the home care trends HHCN believes should be on providers’ radar in 2024.

Curious what we predicted for last year? Revisit our 2023 trends here.

Client retention, length of stay will become a major issue

Home care providers are regularly seeing the costs of providing home care services rise. With that, billing rates are also rising for Americans in need of care.

Over the past few years, those rates have risen anywhere from 20% to 40% – and sometimes more – based on the market. The most wealthy Americans will still pay for the hours they need, or their family members need.

But less well-off families will begin to look elsewhere for care, or at least cut down the hours of home care they’re willing to pay for.

Only 14% of American seniors can afford to pay for home care out of pocket, according to a recent analysis conducted by the Joint Center for Housing Studies of Harvard University. Again, based on the market, that number can dip far lower.

For home care providers primarily dealing in private pay, this will create burdensome volatility and unpredictability for their businesses. Those long-term clients that make the whole ship sail may be no longer, or at least few and far between.

“If anything goes wrong in the home, they’re canceling services,” Daniel Gottschalk, the co-CEO of Family Tree Private Care, told HHCN in December. “They’re going to find alternative options.”

That could affect retention, too. Caregivers that don’t have steady schedules or steady clients may jump ship, looking for more sustainable work elsewhere.

Home care providers will continue to diversify, whether that be in Medicaid or Medicare Advantage

Providers will react in a few ways to shortened client length of stays and rising costs.

First, they will do what they can to keep rates down.

“[Cost of care] has really increased,” The LTM Group CEO David Kerns told HHCN, referring to his company’s private-pay business in October. “But we’ve tried not to increase prices too much, just because you have to be hyper-aware of that access to care.”

Eventually, that will no longer be a viable option, however. Home care providers – in addition to making the aforementioned investments into operational efficiency – will either become companies tailored to the uber wealthy or, alternatively, look to diversify their businesses.

That’s already materialized. More home-based care providers are turning toward Medicaid, which has surprisingly become a steadying force.

Some are still interested in expanding Medicare Advantage (MA) business, though that has led to mixed results. MA plans make it tough for providers to have the steady stream of business that private pay once afforded, and that Medicaid home- and community-based services (HCBS) still does afford.

In 2024, providers will opt for one of a few different roads due to billing rates. But they will not stand pat.

“We’ve probably reached the tipping point of what consumers can actually bear, before they can just say, ‘Hey, enough’s enough, I can’t afford this option anymore,’” Gottschalk said.

Last year, HHCN predicted that billing rates would level off. That hasn’t quite happened. Instead of waiting for that leveling off, providers have begun to insulate themselves from the risk, and will continue to do so in 2024.

Providers will race to add tangential aging-in-place services

Home care providers are no longer just focusing on their core services. Instead, providers have increasingly found new ways to expand their offerings. It’s likely that this trend will continue in 2024.

Best of Care, a Quincy, Massachusetts-based personal home care agency, acquired the move management company Moving Mentor Inc. last year. One of the driving forces behind the purchase was synergistic opportunities between move management and home care.

“Moving Mentor is in people’s homes for significant periods of time, and working with clients and families who are in either a moment of crisis or a vulnerable position,” Best of Care CEO Kevin Smith previously told HHCN. “That’s usually the same starting point of entry for home care. There’s been some kind of key event or change in a person’s condition, or status that warrants some sort of an intervention. In the same way that Moving Mentor gets involved in people’s homes and their lives, so does Best of Care.”

Last year also saw another home care company, Executive Home Care Holdings LLC, acquire Grasons Co., an estate sales and business liquidation service. The deal brought together Executive Home Care, Assisted Living Locators and Grasons, and subsequently created Evive Brands LLC.

“With Evive Brands, we get a very similar customer and demographic,” Executive Home Care CEO Tim Hadley previously told HHCN. “You have complementary services across the different brands, so as we look to add additional brands under the umbrella, and be able to provide different benefits and services to our existing customers, we’re looking for things that complement one another.”

Providers will find ways to more seamlessly and strategically integrate AI

Though some home care providers have been early adopters, there was a while when Artificial Intelligence seemed like more pie-in-the-sky than a practical solution.

This has begun to shift of late, and it’s likely that more providers will find ways to incorporate AI into their strategy this year.

Providers are already using AI solutions for things like home-monitoring technology, virtual assistants and marketing solutions. Companies like Home Helpers are even using AI to identify expansion opportunities.

“We use AI in our franchise-development process around identifying potential new franchisees, and doing some specific psychographic targeting,” Home Helpers President and CEO Emma Dickison said during a HHCN webinar last year. “Internally, for the team, where we see the biggest lift with AI … is in the marketing department. I think it’s going to spill into how we can document care logs. There are just so many applications.”

One other thing to look out for in 2024: home care companies leveraging AI to finally figure out schedule optimization.

Home care will see a more active year for M&A activity, with a few big names coming to market and PE coming off the sidelines

It wasn’t too long ago when home-based care M&A activity from strategic buyers and private investors alike reached record levels, propelled by the COVID-19 pandemic and the already present shift away from facility-based care. Home care dealmaking was especially hot.

During the 15-month period from the start of Q4 2020 through the end of 2021, there were nearly 100 transactions for businesses in the home care space, according to data from M&A advisory firm Mertz Taggart. But the following 15-month period paled in comparison, with around 60 home care transactions tracked by Mertz Taggart.

HHCN expects home care M&A activity to rebound in 2024 for multiple reasons.

For starters, the slowdown in 2022 and early 2023 was partly driven by the macroeconomic factors that caused normally aggressive buyers to deploy capital more conservatively. Those factors included the rising cost of capital and inflation.

“Stubborn inflation, high interest rates, geopolitical and economic uncertainty, and labor shortages exacted a toll on private equity markets in 2023, and health care private equity was not immune,” Bain & Company’s health care PE team wrote in a recent dealmaking outlook report.

Federal Reserve leaders recently suggested that benchmark interest rates could get cut three times in 2024, so some of those headwinds may be mitigated in the not-too-distant future. Additionally, as Bain & Company pointed out in its report, the valuation gap between buyers and sellers is starting to lessen, which could further pave the way for more home care transactions this year.

“Buyers and sellers have a vested interest in bridging valuation gaps to make 2024 a year for catching up,” Bain’s PE team noted.

What’s more, HHCN predicts private equity to return to home care dealmaking because of a simple reality: firms need to use the money that’s in their investment funds – and few business segments have as strong long-term tailwinds as home care.

To some extent, home care M&A has already shown signs of bouncing back.

Best of Care recently announced the purchase of Barton’s Angels, and Care Advantage has gotten back to its M&A ways. HouseWorks has executed a bevy of deals, too, with no signs of slowing down.

Home care M&A increasing in 2024 is a relatively safe prediction. To go a little bit further out on a limb, HHCN expects multiple big-name franchise companies to also come to market, with their PE sponsors’ windows nearing an expected close.

Some well-known names are already shopping themselves around, sources have told HHCN.

Home-based care companies will pick a lane between home health care, home care

Around the country, home-based care companies are facing critical decisions in defining their focus within the health care landscape. As the industry continues to evolve, agencies who provide both home health and non-medical home care are slowly starting to choose just one lane.

One of the reasons agencies have done that is because of simple business priorities. If home health reimbursements are healthy enough to offload home care expenses in a transaction, we are starting to see companies pull the trigger on those deals.

As was the case with Well Care Health, a North Carolina-based home health and hospice company. In 2023, Well Care sold one of its three core segments — non-medical home care — to the Chicago-based home care company Avid Health at Home.

Home care made up 7% of Well Care Health’s total business, its CEO Zac Long said at the time of the transaction.

Recent shifts in regulatory dynamics within the health care sector also play a factor in these changes. With its home care services offloaded, Well Care has said it will emphasize the strategic advantage of a refined service portfolio and focus on areas with growth potential within home health and hospice.

A similar move was made when Amedisys Inc. (Nasdaq: AMED) divested its personal care division to HouseWorks in February.

Amedisys leaders have said they fully support home care and see value in the model moving forward, but the decision to focus more on home health and its other offerings was — in hindsight — a preview of what’s to come in the industry.

“We continue to believe in the need for, and the importance of personal care services, as a key piece of whole person care,” former Amedisys CEO Paul Kusserow said at the time. “As such, we are committed to continuing to push to grow the utilization of our personal care network. Our commitment is to contract and build networks with personal care at this point — not to own it.”

The home care assets mentioned above, which were offloaded, now have the ability to join platforms that are laser focused on personal home care. That, alone, could be a boost for the caregivers and back-office staff within these organizations.

More regulation coming to home care

In the short-term, the Centers for Medicare & Medicaid Services (CMS) will make a decision on the “80/20 rule,” which would require that at least 80% of Medicaid dollars paid to HCBS providers go toward worker compensation.

That rule is likely to be finalized, but HHCN expects it to be less harsh – likely with a lower threshold – when it is.

Meanwhile, the Federal Trade Commission’s (FTC) proposal to ban non-compete agreements could also be finalized in 2024. That could have major ramifications for the home care industry, where non-solicit agreements are especially popular.

Ultimately, it’s likely that – just as it is now – certain states will be more stringent on non-competes compared to others.

At the same time, the finalized version of the 80/20 rule will make some HCBS markets look much more grim than others.

That will lead to home care providers regrettably picking their spots when it comes to expansion. Some providers may even exit markets, following the old adage: “No margin, no mission.”

Additional contributions from HHCN reporter Joyce Famakinwa, HHCN reporter Patrick Filbin and HHCN Managing Editor Bob Holly.