Home Care agencies pulling in more than $5M in annual revenue are almost all focusing on a few key areas more than anybody else.
Agencies pulling in more than $5M in annual revenue are almost all focusing on a few key areas more than anybody else.
In the 2021 Home Care Benchmarking Study, we surveyed 1,924 home care agencies across the country.
According to the data, 221 of those were deemed industry “Masters,” meaning that they’re billing more than 5 million dollars in annual revenue and represent the top 25 percent of the industry.
Simply put, these agencies represent the best of the best – and after our conversations with a couple of them, we were able to identify some of the things they’re doing to stand above the competition and achieve year-over-year growth.
#1: Diversify payer sources to have multiple streams of revenue.
We talk to hundreds of home care agencies every week, and there’s a clear trend that the providers that are diversifying their payer sources to meet the needs of their local populations have had more success in surpassing that $5M+ mark.
Based on data from the Benchmarking Study, we found some interesting insights into payer source percentage of revenue. Here are the top five broken down by masters and industry averages.
One of the biggest reasons why the Masters have seen so much success with their revenue is because of their openness to new sources. They try and diversify where they’re getting money in order to have other streams of revenue.
With referral sources, outcomes are your sales tool. New payer sources want to see what you’ve done, not just what you do.
Various payer sources are much more likely to want (or are mandated to require) proof of quality or outcomes. This includes KPI’s like client satisfaction scores, caregiver satisfaction scores, Net Promoter Score, readmission rates, fall rate, and more.
For example, you should be closely tracking your readmission rates. One agency told us that their numbers are just under 5%, which speaks volumes to their quality of care.
How are you using data and outcomes to earn a seat at the table with referral sources?
“Nobody else in our area is doing this,” says the owner. “When we meet with a referral source, we don’t even have to talk about our services anymore.”
#2: Focus on the lifetime value of your clients.
Masters have generally learned to maximize their per-client revenue; the average lifetime value of a client for Masters is $33,277, whereas the average for the industry is $15,569.
To calculate your client average lifetime value, divide your annual revenue by the number of clients you serviced in the same year. Then, multiply this number by your annual client average length of service.
In order to increase the lifetime value of a client, there are two things you need to be focusing on. These include increasing the revenue of each client and retaining your clients longer.
If you’re not sure how much you should be charging clients, we wrote a blog that walks you through the process of creating a pricing strategy. You can read more here.
One of the Masters told us that they’re a long-term focused company, meaning that they’re trying to provide services to their clients for an extended period rather than just days or weeks.
To do this, some of the Masters are using specialty care as their differentiator. They’ve done audits of other agencies in their area to see what they’re offering, and then they home in on the areas that aren’t getting enough attention. When clients come to them with certain conditions, they’re typically one of a few providers offering that type of care.
In this sense, they’re able to extend the time that a client stays with their agency, and they’re also able to charge higher rates.
On a similar note, in order to keep clients longer, you need to be focusing on what THEY want. While you might have ideas of what needs to happen, it’s ultimately up to the client and their families – hear them out. By focusing on their needs and wants, you’ll find that it has a direct contribution to keeping clients longer.
One way to make this happen is by using feedback processes like surveys to make sure you’re aware of and solving any issues that could be contributing to client turnover.
Take Your Clients from Satisfied to Loyal
Measure and improve client/caregiver loyalty, learn where you can improve, and boost retention across the board—while saving time for you and your team
Another thing to consider is how you provide care. Some of the best agencies are asking themselves the question “If this was my family member, would I be satisfied with the level of care we’re providing?”
#3: Be willing to spend a higher percentage of income on caregiver wages.
On average, Masters are spending 5% more of their total revenue on caregiver wages than other home care agencies. While 5% may not seem significant, it’s enough to offset their competitors and act as a differentiator.
Additionally, about 60% of revenue is used for caregiver wages, and caregivers are receiving about $13/hour. While this is the average for the Masters, the amount paid to caregivers will vary based on state and region.
So, why have the Masters opted to pay their caregivers more?
The agencies we’ve talked to are very passionate about this question. Not only are they striving to increase their revenue, but they’re also focused on providing the best care possible – and in order to do that, they knew they’d have to pay more.
When you’re viewing caregivers as priceless assets instead of replaceable commodities, it’s natural for wages to increase – but along with that is also an increase in the quality of work.
In addition, when agencies are able to pay their caregivers more, they’re also limiting the cost of hiring new caregivers. Typically, there is a direct correlation between increased pay and reduced turnover – and based on the data, the cost of replacing a single caregiver is about 2,600 dollars.
While some agencies have leaders that are keen on budgeting, we’ve heard from others that they don’t have the skills necessary to fill that function. In this scenario, we’d suggest looking for outside help.
Hiring someone to take over your budgeting can be a huge weight off your shoulders, but also allows more time to be spent looking at every dollar used on cost per care. When you’re able to take a closer look at this, you’ll be able to decide where to raise client rates so that you can pay caregivers an attractive rate.
With $15 minimum wages being the new norm, it’s becoming more and more difficult to pay competitively without raising rates. While it’s not always feasible to simply pay a couple of dollars more, there are other things you can do that coincide with caregiver wages and can have a similar effect on satisfaction.
These would include benefits like recognition, ongoing training, and mentorships.
While not every benefit you provide has to cost money, there are some that do; however, they have a high ROI.
One agency told us that their caregivers were repeatedly asking for more ongoing training. Now, after offering and paying for training for all of their caregivers completely, it’s their number one benefit and their employees are more satisfied than ever.
#4: Be selective in the hiring process to generate more applications.
The Masters are some of the largest agencies around the country, and because of the year-over-year growth they’ve seen, they’ve been able to generate 66% more applications than the average agency. They account this growth to a few specific tactics.
The first, and perhaps most praised tactic is hiring a recruiter. After doing this, JFS Care went from getting 1-2 caregiver applications a week to 10-15. There’s something to be said for utilizing people’s specific talents – especially with something like recruitment. It’s not a skill that everyone has and can take time to learn.
While not every agency can afford a recruiter, it’s important to recognize how much money can be saved in the long run by hiring one.
The next suggestion we heard from our conversations was to be very selective. You’ve probably seen applications where it says something along the lines of “Don’t apply unless you meet…” x qualifications.
By forming a hiring ethos of selective recruitment, you’ll see an increase in quantity AND quality.
Remember though, these agencies are not hiring everyone who comes through their door. Some of the Masters are only hiring the top 10% of people — which is part of their strategy to maintain a high-quality workforce.
We also wanted to note: Best of Home Care – Employer of Choice awards can help to aid your recruitment process. According to Gregory Solometo of Alliance Homecare, they’ve seen an increase in applications after their many years of achieving that designation.
#5: Use ongoing training to increase caregiver retention and attract more caregiver applicants.
As we’ve already discussed a bit, ongoing training can play a huge role in the growth of your home care agency.
Masters are currently averaging 6 hours of orientation training (up to 16) and 9 hours of ongoing training (up to 33).
By making ongoing training a priority, some of the Masters that we’ve talked to have seen an increase in both, client and caregiver satisfaction.
They’ve begun to focus heavily on certain diseases (like Alzheimer’s and dementia) to provide more specialized care. This has helped to grow their clientele base and give caregivers the opportunity to focus on their specific areas of interest.
In fact, from what we’ve seen, the more you’re able to increase training hours, the more your revenue will increase.
While it may not be feasible for every agency to go from 3 orientation hours to 8+ overnight, it’s worth noting for the future—especially as your agency continues to grow.
800+ Course Employee Training Library for Post-Acute Care
Home Care Pulse now offers training for care providers and office staff in the senior care (or post-acute) industry.
Learning from the Masters
If you’d like to hear more insights from the Masters, we recently hosted a webinar where they discussed how they use some of these strategies in their own businesses. You can watch the webinar replay and download the slides here.
It’s important to remember though: growing an agency to more than $5 million in annual revenue is a marathon, not a sprint. It’s about achieving year-over-year growth and maintaining steady progress.
Of course, there are always going to be those agencies that go from 0 to 100 in less than a year, but that’s not the norm.
As long as you’re continually improving and setting bigger goals for yourself than the last, you’re probably on the right track.
With that being said though, there’s always something we can learn from agencies that have successful track records.