How does home health care compare to assisted living in the M&A market? There has been a tremendous push for home health-based supports and services for the elderly, including allocating state and federal funds to allow more elderly to remain in their homes rather than moving to a more institutional setting. How will it impact the value and demand for seniors housing and care settings? In this article, we’ve gained insight from leading industry experts, including Rita Altman, Senior Vice President of Memory Care & Program Services, Sunrise Senior Living; William Dombi, Vice President, National Association of Home Care & Hospice; and Debbie Reilly, Regional Vice President, Belmont Village Senior Living. The topics discussed include what the true cost of home health is relative to the all-in cost of an assisted living community, how technology will change the future of these markets, and if assisted living providers are pursuing the home health business to complement their existing care services.
When dealing with prospective residents from the senior housing side, what’s the number one concern they and their family members have before making that decision to leave their home and move into a community?
Debbie Reilly of Belmont Village Senior Living says that the biggest concerns of the senior and his or her family is whether they will fit in with the other seniors. Also, a lot of seniors are unfamiliar with today’s assisted living, and think of it as it was 20, 30 or even 40 years ago. They are usually pleasantly surprised when they come into an assisted living community. For these reasons, spending time in the community prior to moving in has become an important part of the onboarding process. Debbie notes that of course sometimes the concerns are cost-related, but around the time of moving in, they are usually about fitting in.
But, before any cost or social concerns can be considered, there is the reluctance that comes with leaving the home in the first place. “We always say the home is the number one competitor, which it is; there’s no one that wants to leave their home.” When seniors reach the point of leaving their home, there are a series of issues that have led up to that point, such as falls, medication issues, or reluctance to have a caretaker in the home. And at this point, staying at home isn’t viewed as a feasible option.
As our national conversation evolves, where will home health fit in?
William Dombi, National Association of Home Care & Hospice, responds “Anybody who claims to know where things are going in Washington today, you shouldn’t listen to them.”
On the home health side, there is strong bipartisan support in looking at home health as a solution rather than as a spending problem, although not a perfect solution. But in comparison not to senior living, but to skilled nursing facility care, rehabilitation hospitals, long-term care hospitals and the like, home health is being viewed as a solution. And when it comes to the future of federal financing of health care, home care will likely have a favorable position.
Comparing Costs
What role do cost differences play when people are deciding between home health and seniors housing? Are they looking at a fair comparison?
Debbie Reilly responds with, “Typically in most cases when they do a side-by-side, it does come out the same cost or less in an assisted living community, which is really surprising to a lot of people.” And these comparisons only include the monetary aspect, not the added value of peace of mind when it comes to security, care, and no longer running a household. These cost comparisons also depend on the level of care that is needed in the home. There are seniors who require 24/7 in-home care, and in these instances, they come to find out that moving into a senior housing community can be significantly cheaper.
So let’s assume $3500 a month, and then add in over time that level-one care of $500 a month. Does this seem about right?
Rita Altman Senior Vice President of Memory Care Services, Sunrise Senior Living responds, “I think that’s in the ballpark, but it’s kind of hard to give a specific ballpark figure because when you think about it, a really thorough assessment is done, and a big part of the determination in terms of the care cost has to do with the amount of care that that person needs.” Rita explains that many families experience “sticker shock” when initially looking at assisted living prices. But, this shock diminishes once family members understand the value of the services offered by assisted living, including around-the-clock assistance, and the peace of mind that comes with not worrying about groceries, house repairs, lawn care etc.
So, what exactly is the cost of receiving care in the home?
Home health, depending on location, can range from $17-$28 an hour, and when you’re looking at home visits by an RN, this price increases to about $50-$60 an hour. But, like seniors housing, William Dombi believes that financial analysis is not necessarily the sole factor in decision making. Sometimes family caregivers view home health as the cost of not needing to be in their elderly family member’s house all time. And conversely, the elder may view it as the cost of not having to see their kids hang around the house so often.
The role of the unpaid caregiver, usually a family member, certainly exists. But how sustainable are their roles as an alternative to home health or seniors housing?
William Dombi seems to think that the chances of sustainability are less than most would like to think. He jokes, “If I use my own personal circumstances, my parents grew up with four children who were available to help them out in their advanced age, and I have two kids. My parents were likable, I’m not; so that will reduce my chances too.”
Today, there are about 44 million unpaid caregivers, which are family members, typically baby boomers, who provide support to their families. A myriad of economic and demographic factors make this set-up a less-than-favorable alternative to professional care. The responsibility of informal caregiving falls on the shoulders of the “sandwich generation”- the age group that have their own children, work full-time (probably with a later retirement date than their parents) and who have elderly, often widowed family to look after.
Again, it is the hidden costs, and not necessarily tangible financials, that come into play. Debbie Reilly states that while it may appear affordable, the hidden costs and the stressors do begin to layer in on that situation making it overwhelming. And, it can reach the point where it is no longer realistic.
Socialization Versus Isolation
A Rush University Medical Center study found that very social seniors had a 70 percent reduction in their rate of cognitive decline compared to their unsocial peers. Rita Altman admits that the social opportunity of seniors housing is a big selling point. “[Some people] think that a person who moves into an assisted living or nursing home environment—any form of continuing care—it’s almost like the chapters of their lives are closing. And what we see is quite the opposite. We see—and families comment on this often, and residents—that their life story continues. They bloom and grow and continue to thrive and make new friends.”
But seniors housing is not the only way to satisfy social needs, William Dombi points out. Many individuals receiving home care do not live alone, and in addition to interaction with family members or caregivers, an entire market exists for non-medical companionship services. And seniors who are still mobile, or not impaired by memory loss, can utilize senior programs, adult day care for example, outside of the home for social needs.
But, the optimal level of socialization varies by individual, and even more so by levels of cognitive function. As Rita Altman points out, very small group programming specific to individuals with mild cognitive impairment or early Alzheimer’s can be extremely beneficial. These groups are run like an adult day program for residents within assisted living. “The anecdotal as well as some of the metrics on improvement in cognition and wellbeing are pretty astonishingly great in terms of seeing them isolate less, feel more self-confident, and engage more.”
Technology: Where will Uber, driverless cars, and robots fit into these markets?
Will technology keep seniors in their homes longer?
Not necessarily. For those seniors who are still somewhat independent and living at home, Uber or self-driving cars may be of benefit to them, as far as grocery shopping, doctors’ appointments and errands are concerned. But this same technology could be dangerous for seniors who have mental or physical limitations, and they may still require the personal touch that is provided by transportation services at seniors housing communities.
But there is still a role that technology can play in assisted living. Debbie Reilly mentions the potential for implementing Alexa or Echo voice response systems in assisted living apartments, allowing seniors to voice command simple tasks such as turning off the lights or calling their caregiver. And, regarding memory care wings, she points to the usefulness of sensory systems, which allow caregivers to know the movement and location of a senior throughout their home or apartment.
Can robots replace the role of caregivers?
William Dombi seems to think so. According to the Department of Labor, personal-aides are the number one category for job growth. But due to lack of public funding, these positions offer no benefits and wages in the $10-$14 range. For this reason, personal-aides are becoming increasingly difficult to recruit, creating a large potential space for technology to fill. “We’re really seeing the technology as a means to provide greater degrees of self-care, and to provide ways of substituting for more costly humans in that regard. The technology allows for quicker scalability to address an expanding need for services.”
Are “smart homes,” or homes that are stocked with GPS devices, predictive devices, remote monitoring devices and the like, something that may actually come to fruition in the future?
William Dombi believes the investors that this technology has attracted is very telling. Intel, Microsoft, GE, or as he calls it, the biggest players in the world, are staking a big part of their business future on bringing these technologies into the home for the senior market. They are also betting that people will trust these technologies enough to keep their family members safe at home in their advanced ages.
But, similar to how we never witnessed the consummation of robots replacing educators, there may always be an aspect of human to human contact that technology can’t replace. Rita Altman argues that GPS tracking and other innovations will benefit seniors, but a cutoff exists when it comes to human interaction. While a senior may be “safe” in their smart home, they may not feel adequately cared for or socialized.
“I see that [technology] can absolutely help support care, there’s still going to be that cutoff point where technology isn’t going to be that person there that will be the listening ear. When it comes right down to it, there just comes that time when it’s human-to-human contact and the humanity of what we do that has to be the most important thing.”
The Future of Staffing
Is training any different for the home health aides than aides who work in an assisted living community?
Per William Dombi’s expertise in the home health sector, the standards for a home health aide differ slightly from a generic homecare aide or a personal care aide. To meet Medicare and Medicaid requirements, a home health aide must complete 75 hours of training, in addition to a competency test and 12 hours of ongoing continuing education on an annual basis. Once you get past the home health aide level of training for what is a more healthcare-focused entity, such as a home health agency, Medicaid personal care or private-pay personal services, there is no common standard in effect.
But, in the homecare sphere of the non-Medicare side, the companies themselves provide extra training and support, but this is not always mandated. For this reason, consumers who are shopping for a home care agency are encouraged to ask about the training and tech competency standards that are required for the workers, because in some states there are no requirements at all.
Assisted living, on the other hand, varies by company and by state. Arizona, for example, follows the state mandated requirements for a certain number of training hours in a classroom setting, whereas California requires in-house shadowing hours. On a company to company basis, Debbie Reilly states that her company training requirements far surpass the state mandated level with many more hours of extensive training, especially for memory care and dementia training.
Regarding home health, is there a material difference in the hourly rates charged for home health aides and home personal care services?
William Dombi explains that there is typically a $2-$3 an hour difference, because a home health aide would not just be functioning in the activities of daily living, but would be involved in medication administration assistance, exercise programs, lower-level skin care kinds of services and changes of dressings on wounds.
In some states, there are now changes in nurse practice acts, allowing nurses to delegate what were previously nursing tasks to a certified home health aide. And that comes with a cost difference because it comes with a compensation difference to that more highly trained person.
With home health’s slimmer margins, relative to assisted living and seniors housing, how will it adapt to minimum wage hikes?
A Department of Labor issue pertaining to personal aide compensation recently made its way to the U.S. Supreme Court. For nearly 40 years, personal care aides in the home were not entitled to minimum wage or overtime compensation. If the average wage for a personal care aide is between $9 and $9.50 an hour, and the wage is then raised to $12-15 an hour, the result is going to be less demand for these services. “There will be people who will say, I only want to buy $500 worth of care, whether that gives me X hours or Y hours. They’ve got a budget to spend. So you could see a demand shift that’s there.”
In response to the change in overtime laws, many companies responded by restricting working hours so that nobody qualified for overtime services, which also affects the demand for these services. The chief concern is that home care will become more and more expensive to cover the costs of wages, training, recruitment etc., that only the middle or upper class will be able to afford it. “With elasticity of demand on the services, people will not buy up to their need; they will buy up to their budget.”
Conclusion
What relationship dynamics can we expect to see between the two in the future?
Even with the ongoing boom in assisted living development, some forecasts claim that there will still be a 50,000-unit shortage of seniors housing by 2030. But, some opposing views claim that home health will disrupt the steady rise in demand for seniors housing, especially now that home health makes it possible to skip the skilled nursing or rehab setting and recover from hospital procedures at home.
William Dombi doesn’t believe that a shift to outpatient-focused care will necessarily disrupt the assisted living market. “They are not building more nursing facility beds anywhere in the country, but they are still building assisted living facility beds. And so if I’m a senior care investor, I’m looking more worried at nursing facilities than I am at assisted living facilities. I’m still seeing the assisted living facility as a plus.”
Debbie Reilly states that the availability of home health causes seniors to stay home longer, only to enter assisted living in older and frailer conditions. But, despite these implications, a collaborative environment between home health and seniors housing is still favored over a competitive one.
The lines between the two have already meshed, as many NAHC members maintain relationships with assisted living communities, and there are assisted living communities that are members of the association.
In fact, it is not rare for assisted living communities to implement an internal home health company that serves their residents. These companies then recognize how expanding their home services beyond their own residents can serve as a feeder into their communities. And the communities that do require additional caregiving services do not hesitate to partner with home health agencies.
