Background

Passion Home Health is a provider of home health care services in Camarillo, CA. The company`s challenge typically revolves around a shortage of care workers given the number of clients. There are two sides to this issue - one is the demand side. That challenge can be addressed in a different ways, but ultimately the goal of management is to have as many clients as possible for the capacity that it has. Thus for this task, the challenge will be on the supply side, for labor. It will be assumed that there will be sufficient demand for whatever the optimal labor configuration is going to be.

Care givers come in a number of different varieties, with different degrees of training. They typically visit the home site of the client. They perform a variety of duties for the client, including sometimes daily chores, for other care givers more of physiotherapy, and in some cases ensuring that the customer stays on their prescribed medication. So there are a variety of light medical tasks that are performed, along with other tasks related to the care and well-being of the patients.

The home care industry is worth an estimated $93 billion nationwide, and is growing at 4%. This growth rate is fueled by the aging of the baby boomer generation. However, the profitability of this industry has been challenged in recent years. Increased competition, and limited capacity to pay, along with the need to pay higher wages for skilled workers due to a shortage of workers, are all factors contributing to the tight margins (IBIS World, 2017). So while there are ample opportunities for growth, it is important for managers of home care companies to understand that growth has to be profitable, and that profitability is by no means a given in this industry.

Key Success Factors

The home care industry is quite competitive and there are a number of key success factors. Home care is one of the fastest-growing industries in the United States, the result of the demographic bubble that is seeing the baby boom generation enter into its senior years. This large cohort is already providing opportunity for home care providers, as many are in a state of questionable health already in their lives. The prevalence of chronic disease is one of the factors driving the industry, which means that the standard of care given is one of the key success factors. People suffering from chronic illness are the best customers because they have high need for home care services, and in many cases this need persists for years.

What this means is that one of the key success factors in the home care industry is the quality of service. Quality of service is driven by having talented staff. The members of staff will arrive into the industry with a variety of levels of training and knowledge, particularly about medical issues. Thus, more experienced staff are especially valuable, as they are able to provide better service to the more ill patients. Inexperienced staff requite more training, and may be in a position where they provider a lower quality of service, or are less efficient in the performance of their duties. It is assumed that most companies will have a mix of experience levels in their workforces. Cost competition is prevalent, what with margins being squeezed, and therefore the providers of home care need to manage their labor costs, as there is a limit to how much they can charge for their services to the average customer.

One of the biggest reasons why there is limited upside pricing power for home health care is that for many patients this is covered under Medicare. Medicare sets limits on what it will pay for different home health care services. If a patient requires home care that has limited Medicare coverage – such as for non-medical care – then that might be more free market, but the reality is that you cannot price non-medical care above the rates set for medical care, because most customers would see that as foolish. So there are fairly stringent limits set on upside price for this industry, for most patients, so the average home health care company needs to be not only high skilled at providing care, but they need to be highly efficient at doing it as well. Home health care companies need to be lean, with as little waste in their operation as possible

In order to take advantage of growth, home health care companies also need to be able to hire. They can only provide home care to the extent that they have the people to...
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Thus, hiring becomes critical. There is an acute shortage of home care workers relative to demand (Miller, 2017), which means two things. One, this creates upward pressure on labor costs, because companies have to pay more in order to service their demand. Two, this creates a situation where labor in the industry often has little loyalty – people will jump ship for a better offer because the work is not particularly well differentiated.
Interestingly, home care workers are often poorly paid, and a quarter of them earn wages below the poverty line (Newkirk, 2016). Retaining talent at low wage levels can be difficult. Workers in the industry are also often afforded limited protections, which means that employers can and often do exploit them for longer hours and that sort of thing. A provider can certainly seek to differentiate by offering a better working environment and better wages as a means of skimming the cream of the labor pool – which at the very least would allow the company to meet demand. This ends up coming back to the need to be as efficient as possible as to how that labor pool is utilized.

Key Challenges

There are some key challenges to achieve success for Passion Home Health. The first is recruitment, which appears to be an ongoing challenge in the industry, and the second is going to be retention. These are ultimately going to be two different functions. While wages and benefits might factor into retention, working conditions also can factor in, which means that scheduling matters. There are several challenges with respect to scheduling that will need to be overcome in order to arrive at the most economically efficient scheduling that also manages to make the workers happy enough that they are willing to stay with the company:

· Mandatory break of 15 minutes every 3 hours worked

· Mandatory break of 30 minutes after 5.5-6 hours worked

· Non-standard work hours

· Travel time between homes

· Break patterns are different from most other businesses

Non-standard work hours actually helps break free from constraint, because it provides the ability for management to schedule workers with early starts or late finishes. The breaks are normal according to government mandate, but the workflow is not always conducive to taking breaks. First there is the travel time in between sites, which can be variable depending on traffic. Second, the work itself can take differing amounts of time, depending on the task and the patient. Scheduling visits by length of time might leave some work undone, but scheduling based on tasks might also leave work undone, and furthermore it might make it almost impossible to schedule breaks. If workers are given more control over their schedule, then the company will lose control over a critical cost, and could easily become unprofitable, given the slim margins that exist in the industry.

Objectives

To resolve these challenges, the first step is to understand the objectives that the business faces. There are both long-term and short-term objectives for the strategy. The short-term objective is to develop a solution to the issue of staffing efficiency. Right now, there is the belief that the company can do better. A short-term solution would at the very least provide a framework for future optimization. It might not be possible to optimize right away, given that there might be some critical variables that will reveal themselves, but at least the short-term objective is to lay down a framework that can serve as the first iteration of the plan.

The long-term objectives are to increase employee satisfaction, and to deliver superior service. Delivering superior service is what will keep the business growing, but it is difficult to deliver superior service if the caregivers are always pressed for time, or stressed about things. While superior service can be achieved by simply adding more caregivers, the reality is that to do so would be unprofitable, but also likely very difficult, given the shortage of caregivers on the market; the company cannot simply hire its way out of this problem nor could it pass the costs onto customers even if it could find the workers.

So it must get the most out of each worker possible, while allowing for workers to be satisfied. Reducing turnover intention is critical, and there is a mountain of evidence to suggest that overwork…