Who pays is challenge for senior care
A Home Instead caregiver and client do the grocery shopping.
Home Instead Inc.
Senior care franchises have been a fairly recent phenomenon in the United States, getting a start in the ‘90s, yet they have expanded their global footprint to take advantage of the explosion in the demographics ripe for their services.
For example, Right At Home, headquartered in Omaha, has expanded to Canada, UK, Japan, China, Australia, The Netherlands, Ireland, and recently signed on for the Czech Republic. Home Instead, also headquartered in Nebraska, has expanded to Austria, Australia, Canada (including Quebec); China (Shenzhen and Wuhan); Finland, Germany, Ireland, Italy, Japan, The Netherlands, Switzerland and the United Kingdom.
The biggest challenge for these franchises has been figuring out who will pay for what service in markets with the greatest potential.
And here is the rub: the countries most amenable to senior care franchise expansion, i.e. (mostly) English-speaking countries in the West, anchor healthcare services on a public single-payer model as opposed to the U.S. private system. Relying on government to provide the kind of services that senior care franchises render creates two headaches: first, the frequency of delivery is very limited. In the Czech Republic, for example, government-based care allows services to be delivered for just three hours a week, much less than what senior-care franchises are set up to do. The second issue has been payment: governments pay very little.
When the government pays
“The biggest learning curves have been in figuring out how to complement care systems that are government-funded,” says Mike Boyer, vice president of international operations at Home Instead, citing the example of Germany, where the franchise has worked closely with the government and consumers in educating customers about how the kind of services that Right At Home delivers can be used to complement national services. Countries like Germany follow a Consumer-Directed Care (CDC) approach to healthcare and related services and seniors are given a cash benefit, which they can then choose to use as they see fit. Senior care franchises have figured out how to work within such a system to complement care.
“The biggest roadblock is that there’s often an expectation that government is going to pay for all services,” says Eric Little of Right at Home chief development officer, “We have had to show that there is indeed a private-pay market for these services in many of these countries.” But education has made a huge difference in outcomes, especially because the market has been burgeoning across the globe.
A whole host of other cultural factors have to be taken into consideration when translating an American-based personal care services model across the world. “In China for instance, families approach the care of a senior within their own family very differently,” Boyer says, In Japan, it’s a very different cultural proposition to have a guest caregiver in your home on a daily basis.”
Making markets work
So how have these franchises determined which country to make inroads in?
The Home Instead Market Index, developed in 2015, aggregates 60 data points related to social, economic, cultural and other factors and will be the first filter to determine how well a country’s market would take to the senior care services. A few of the data points the market index considers include median household income, senior population, business climate, government policies and labor availability.
Home Instead’s current international partners have been considered on a case-by-case basis and the Market Index will be applied to all future expansion models, Boyer says, adding that countries that might score low in the index are not necessarily ruled out. Case in point: China, where Home Instead has been making an “aggressive play” to see if it can be successful.
Little of Right at Home says that demand and market acceptance of services offered are critical expansion considerations as are unit-level economics. “We want to make sure that the unit-level franchisees can build profitable, sustainable businesses. The specifics for this are what the market is willing to pay for services like ours, and the associated labor rate to provide these services.”
While Right at Home and Home Instead have pursued aggressive strategies, BrightStar Care, headquartered in Gurnee, Illinois, is taking a more cautious approach to international expansion. “We don’t want to just plant a flag, and then not support our master franchisee to get to the level of growth that really maximizes the potential of the brand and the country,” says Shelly Sun, CEO.
Brightstar’s strategy has been to watch their competitors be the first ones in a country and then watch and learn from their adaptations. “It is very expensive to educate a marketplace about paying for a service. It’s better to be second, to enter a market that is primed for your services and then it’s easier to differentiate your franchise from there on,” Sun says.
Brightstar, which also delivers medical care at home, has that extra parameter to factor in, says William Edwards, CEO of Edwards Global Services Inc., which helps franchises expand internationally. “Every time you have the medical piece, it gets complicated. On the other hand, you can add more services and charge more,” Edwards points out.
For Brightstar, expansion to Canada is underway. The UK and Australia are being considered as is the UAE and preliminary investigations of Asia are in the cards.
While senior-care franchises such as Right at Home and Home Instead have expanded internationally by seeking master franchisees who then build a network of franchisees in the country, Edwards says that multi-unit franchises, where one franchisee builds all the locations in a country, are increasingly being considered. This latter strategy, Edwards says, dictates that potential franchisees have more money but also allows franchisors more control.
On the other hand, Interim Healthcare, headquartered in Sunrise, Florida, has increased its global footprint by strategic acquisitions. “Our desire was to find high-quality care brands that grew through franchising with strong entrepreneurs,” says Linda Shaub, senior vice president of marketing.
The first acquisition in the fall of 2013 was Bluebird Care, a well-known care brand in the UK and the Republic of Ireland. In September 2014, Just Better Care, a care franchise company operating in Australia with twenty-five locations also joined the family of care franchise brands.