Home Health Care Staffing Strategy for Passion Home Health

Industry Background and Company Overview

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 relative to the number of clients it serves. There are two sides to this issue. One is the demand side, which can be addressed in a variety of ways; ultimately, management's goal is to have as many clients as possible given the capacity it has. For this analysis, the focus is on the supply side — specifically labor. It is assumed that there will be sufficient demand for whatever the optimal labor configuration turns out to be.

Caregivers come in a number of different varieties, with different degrees of training. They typically visit the home of the client and perform a variety of duties, including daily chores, physiotherapy, and in some cases ensuring that the client stays on prescribed medication. There are thus a range of light medical tasks performed alongside other tasks related to the care and well-being of patients.

The home care industry is worth an estimated $93 billion nationwide and is growing at 4%. This growth is fueled by the aging of the baby boomer generation. However, the profitability of the industry has been challenged in recent years. Increased competition, limited capacity to raise prices, and the need to pay higher wages for skilled workers due to labor shortages are all contributing to tight margins (IBIS World, 2017). While there are ample opportunities for growth, managers of home care companies must understand that growth has to be profitable — and that profitability is by no means guaranteed in this industry.

Key Success Factors in Home Care

The home care industry is highly competitive, and a number of key success factors distinguish leading providers. Home care is among the fastest-growing industries in the United States, driven by the demographic shift that sees the baby boom generation entering its senior years. This large cohort is already generating significant opportunity for home care providers, as many are experiencing declining health. The prevalence of chronic disease is one of the primary drivers of the industry, which means the standard of care delivered is a central success factor. Patients suffering from chronic illness represent the most consistent customer base because their need for home care services is high and often persists for years.

Quality of service is consequently one of the most important success factors. That quality is driven by having talented staff. Members of staff enter the industry with varying levels of training and medical knowledge. More experienced staff are especially valuable because they can provide better service to more seriously ill patients. Inexperienced staff require more training and may deliver a lower quality of service or be less efficient in performing their duties. Most companies carry a mix of experience levels in their workforce. Cost competition is prevalent given the pressure on margins, and providers must manage labor costs carefully, since there is a ceiling on what can be charged to the average client.

A major reason for limited pricing power in home health care is that services for many patients are covered under Medicare. Medicare sets limits on what it will pay for different home health care services. If a patient requires care with limited Medicare coverage — such as non-medical personal care — the market is somewhat freer, but even then, non-medical care cannot realistically be priced above the rates set for medical care without clients seeing that as unreasonable. These constraints place fairly stringent limits on upside pricing for most patients, which means home health care companies must be not only highly skilled but also highly efficient. They need to operate lean, with as little waste as possible.

In order to take advantage of growth, home health care companies must also be able to hire. They can only provide care to the extent that they have the people to do it. There is an acute shortage of home care workers relative to demand (Miller, 2017), which creates two pressures. First, it drives up labor costs, as companies must pay more to meet their service commitments. Second, it reduces worker loyalty — employees will move to a competitor for a better offer because the work itself is not particularly differentiated between employers.

Home care workers are often poorly paid; a quarter of them earn wages below the poverty line (Newkirk, 2016). Retaining talent at low wage levels is difficult. Workers in the industry are also frequently afforded limited protections, which means employers can — and often do — require longer hours. A provider can seek to differentiate by offering a better working environment and higher wages as a means of attracting the strongest available candidates from the labor pool. This approach ultimately circles back to the need to be as efficient as possible in utilizing available labor.

Key Operational Challenges

There are several key challenges Passion Home Health must address to achieve success. The first is recruitment, which is an ongoing issue across the industry; the second is retention. These ultimately require different approaches. While wages and benefits factor into retention, so do working conditions — meaning that scheduling matters significantly. Several scheduling-specific challenges must be overcome in order to arrive at the most economically efficient arrangements while keeping workers satisfied enough to remain 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 client homes
• Break patterns that differ from most other industries

Non-standard work hours can actually help break free from scheduling constraints, as they allow management to schedule workers with early starts or late finishes. The breaks themselves are a standard government mandate, but the workflow of home care is not always conducive to taking them at fixed intervals. Travel time between sites is variable depending on traffic, and the work itself takes differing amounts of time depending on the task and the patient. Scheduling visits by time blocks might leave some work undone; scheduling by task makes breaks nearly impossible to plan. If workers are given too much control over their own schedules, the company loses control over a critical cost driver and could easily become unprofitable given the slim margins that exist in the industry.

References

IBIS World. (2017). Home care providers in the US: Market research report. IBIS World. Retrieved December 12, 2017, from https://www.ibisworld.com/industry-trends/market-research-reports/healthcare-social-assistance/ambulatory-health-care-services/home-care-providers.html

Kim, H., & Stoner, M. (2008). Burnout and turnover intention among social workers: Effects of role stress, job autonomy and social support. Administration in Social Work, 32(3), 5–25.

Miller, M. (2017). The future of US caregiving: High demand, scarce workers. Reuters. Retrieved December 12, 2017, from https://www.reuters.com/article/us-column-miller-caregivers/the-future-of-u-s-caregiving-high-demand-scarce-workers-idUSKBN1AJ1JQ

Newkirk, V. (2016). The forgotten providers. The Atlantic. Retrieved December 12, 2017, from https://www.theatlantic.com/politics/archive/2016/09/home-health-care-workers-wages/502016/