Front-line workers hold fate of fast-growing sector in hands
|At Executive Care, they work hard to match the right employee with the client.|
Barking dogs. Stinky rooms. Cranky clients. All challenge the providers of in-home care. Add a proposed overtime mandate, and the task becomes tougher. These operators fight hard to turn a profit.
The house was “horrendous,” one in-home care executive said, piled with clutter and reeking of garbage. His agency had to hire a cleaning crew and a plumber to shovel out the muck before the client could return from the nursing home.
Everyone has a story, if they provide care to people in their homes. Dogs barking for hours. Rooms stinking of cigarette smoke. A family who speaks only Hmong except for one son (but he’s away at college.)
Sometimes patients are in denial. “That’s a fact of life. They don’t want to admit they are frail, so they get very frustrated and they let it out on our aides,” said Lenny Verkhoglaz, founder of Executive Care, an 8-year-old company in Hackensack, New Jersey, that just started franchising in September.
His company works hard to match the right caregiver to the right client, and offers a guarantee to keep sending aides until one clicks. “This is our motto: Take care of the caregiver, who will take care of the clients. Then we’ll see profits,” he said.
Such realities have always posed the biggest challenge for franchises providing in-home care. How can they find, train and retain employees to do difficult work for modest wages? Now add a new threat to the mix: proposed U.S. Department of Labor rules calling for mandatory overtime and minimum wage requirements for home-health employees.
Employers say the rules will torpedo their business model, and some are spending heavily and lobbying loudly to defeat them. But those who speak out risk inflaming caregiver-rights groups, one of which blasted businesses in USA Today for “pinching pennies” when it comes to workers.
It’s a challenge for a business often cited as one of the fastest-growing and most profitable in franchising, and usually promoted with sweet photos of smiling grannies and heart-warming tales of the rewards of providing care.
Behind the feel-good images is a complex business where only the savviest operators can thrive.
‘Get the heck out’
In-home care is a profitable niche—gross margins can hit 40 percent, according to market research firm Franchise Business Review, in part because overhead is low (workers are not in a store or a restaurant; they’re in clients’ homes).
It’s fast-growing, as populations age around the world and those who could care for their elders head out to jobs. Home Instead Senior Care, for example, the largest in-home care franchise, saw sales grow 13.2 percent last year, according to the Franchise Times Top 200.
And it’s rewarding, many players say, as they tell positive stories—far outnumbering the horror tales, to be fair—about helping people age with dignity.
Gary Kneller, president and co-founder of CareMinders Home Care in Alpharetta, Georgia, started thinking about the business when sitting in a hospital chemotherapy room with another 25 patients, “anywhere from 6, 7 years of age to people in their 80s and 90s.”
He was undergoing treatment for “stage 3-plus” non-Hodgkin’s lymphoma, and he noticed throughout treatment the level of home care didn’t meet his needs. (“I’m in my eighth year of remission,” Kneller said. “You learn what’s important in life.”)
His company stands out for the number of services it provides—11, including several types of skilled nursing—and the age groups it serves—all. He calls it a “continuum of in-home care.” By contrast, many companies specialize in personal and companion care only; or are only private pay and don’t accept Medicare or Medicaid; or only serve seniors.
CareMinders also has the most rigorous accreditation in the business—known as the Joint Commission seal of approval, and usually sought by hospital systems and other healthcare institutions. In-home care agencies are not required to seek such credentials, and Kneller believes his company’s Joint Commission “gold seal” gets attention from insurance companies, hospitals and other sources when they refer patients.
“They put us through the proverbial hell, eight months of visits here in Atlanta. We spent loads of money,” Kneller said about seeking the accreditation in 2009. Each franchisee is required to be accredited as well, based on a local visit from a commission rep who signs off on the unit’s policies and procedures for giving care. Kneller quotes the former CEO of General Electric to explain the big investment. “Jack Welch said in his book, if you’re not No. 1 or No. 2 in the quality of the service or product you’re offering, get the heck out,” he said.
Power in a tag line
Right at Home, based in Omaha, provides only companionship and homemaking to clients, and has stuck to those services even as other franchises have branched into skilled nursing and beyond.
“We turn away gobs of business” because of the singular focus, said Paul Blom, a franchise owner in Bloomington, Minnesota, but he thinks specialization improves quality. “Do I want to be Five Guys or McDonald’s? If I want a really good hamburger, I go to Five Guys.”
Blom said his screening process is the most important in company efforts to get the right employees, and cites especially a tag line they use. “We have recruited with the phrase ‘volunteering with a paycheck,’ and we service-marked that early on,” Blom said. The idea came from an early employee, who said she felt guilty for getting paid for taking care of people in their homes—she thought that was a service she should volunteer to do through her church.
Blom said when they recruit using the tag line, they get far fewer applicants but more of the right kind. Of their 250 employees, the average age is 54—older than at many agencies—and they’re primarily women, he said.
Also important, he added, is quarterly training sessions that are optional for employees but well attended. Fifty or 60 people generally show up for a Saturday training, on such topics as helping people with hearing loss, or assisting a client with Parkinson’s who “freezes” when walking. “It can help to sing a song,” Blom said.
An upcoming training will focus on caring for GLBT clients (people who are gay, lesbian, bisexual or transgender), a personal cause for Blom as a gay rights activist. (See related Operator Q&A, page 57.)
Emma Dickison is president of Home Helpers, based in Cincinnati, which launched a new internal credentialing system for caregivers in order to reduce the notoriously high turnover rate in the business. It averages 50 percent, according to the National Private Duty Association.
Caregivers can gain three levels of mastery through the Home Helpers University training program, and achieving each level in some locations is also linked to merit pay. “It shows the caregivers that our offices are willing to invest in their ongoing professional development,” she said. “It’s helped from a hiring and retention standpoint, certainly.”
Would Overtime mandate sqeeze staff?
Emma Dickison, president of Home Helpers, is among those health-care executives spending lots of time lately in Washington, D.C., to lobby against the proposed Labor Department rules mandating overtime and minimum wage for home health-care workers.
The latter requirement doesn’t affect her company, she said, because all Home Helpers employees are paid minimum wage or better. Others agree the market demands they pay at least minimum wage. So the overtime rule is the one she’s watching. Until December last year, people who provided companionship in homes were exempt from the requirement to pay overtime after 40 hours of work in a week; a U.S. Supreme Court ruling threw the issue back to the labor department.
She noted some states, including Illinois and Michigan, already have laws requiring the payment of overtime. If federal law changes in that direction, “it’s not a major threat, but it will have an impact. It will be on the backs of the clients,” she said, because companies will pass the costs along.
Jeff Salter, founder and CEO of Caring Senior Service in San Antonio, Texas, is emphasizing the effect the rule change would have on caregivers themselves—often, he said, single moms who depend on five or more 12-hour shifts a week to make enough money. “There’s a huge economic impact on the actual caregivers in this,” Salter said.
He said the average rate charged by agencies for this type of in-home care is $18.50, and it could jump as high as $27 or above if mandatory overtime pay was added. “From a practical standpoint, I don’t think a lot of clients can handle that,” he said. Clients would likely opt to hire different caregivers rather than a single person to keep the hours under 40, even though they usually don’t like having more than one person coming in and out of their home. And employees would have to work for different agencies to get the shifts they need.
Salter doesn’t expect any movement on the rules until later this year or early next. Whatever happens, his 43-unit company is prepared to make the business changes needed; they already operate in states that require overtime pay so they know how it works. But he thinks comments are misplaced when, in public hearings and in the media, people who support the rule change criticize employers as cheapskates if they are against it. “The fact that the companies are being portrayed as trying to pinch pennies and keep rates low is not at all what we’re trying to do. We’re trying to protect caregivers,” he said.
As demonstrated in states that require overtime pay, agencies and clients both manage around the rule. “It puts the squeeze on the caregivers quite a bit,” Salter said—and would add one more workforce challenge to the already long list.