What is Home Care?

---

Content Home Care Franchise Industry............................................................................................ 2 What is Home Care?........................................................................................................ 3 History of the Home Care Industry.................................................................................. 3 Size of the Home Care Industry....................................................................................... 4 Who Receives Home Care?............................................................................................. 4 Demand for Home Care: ................................................................................................. 4 Table 1: Projections of the Population by Selected Age Groups for the United States: 2010 to 2050................................................................................................................ 5 Types of Home Care:....................................................................................................... 6 Table 2: Specific assistance provided by franchises represented in this report: ..........6 Graph 1: Depicts the growth of selected home care franchises in the U.S.A. ............ 8 Regulatory environment ..................................................................................................8 Franchise Information........................................................................................................ 10 Table 3: Franchise Fees.............................................................................................. 10 Table 4: Average Ongoing Franchise Fees:............................................................... 11 Average Rates................................................................................................................ 12 Table 5: Average rates for 2008 – 9 for Nursing Homes, Assisted Living, and Home Care. .......................................................................................................................... 12 Outlook.............................................................................................................................. 14 Sources........................................................................................................................... 15

1

Home Care Franchise Industry

This report is based on the US home care franchise industry. The data contained in this report was drawn from the Franchise Disclosure Documents (FDD) of a representative sample of 18 home care franchises and published industry sources.

What is Home Care? Home care refers to a wide range of services that are provided for individuals with restricted mobility either in their own homes or in a senior care facility. The U.S. Senate Special Committee released a report on Aging in February, 2000 that described home care as the following: “It [long-term care] differs from other types of health care in that the goal of long-term care is not to cure an illness, but to allow an individual to attain and maintain an optimal level of functioning…. Long-term care encompasses a wide array of medical, social, personal, and supportive and specialized housing services needed by individuals who have lost some capacity for self-care because of a chronic illness or disabling condition”1 Individuals may require long-term home care if they suffer from a chronic condition or illness that limits their ability to carry out basic self-care tasks, called activities of daily living (ADLs), (bathing, dressing or eating), or instrumental activities of daily living (IADLs) (household chores, meal preparation, or managing money). Most home care is non-medical and is provided by paraprofessionals. Some aspects of home care can only be provided by licensed professionals and so franchises may employ licensed professionals in order to offer this medical care. For more detailed information on the services provided by home care franchises, please see “Types of Home care”.

History of the Home Care Industry Home care is a diverse and dynamic service industry that began in US in the 1880’s 2. In 1930 the leading cause of death was no longer infectious diseases but chronic degenerative diseases. Patients mainly sought care in hospitals and only a small margin of people wanted to be cared for at home. With the rising costs of hospital care and introduction of Medicare legislation, which was enacted to help provide benefits to home care patients, and Medicaid, the state medical assistance program for the poor that included provisions for home care, the popularity of home

2

care began to rise and has continued to rise as more people opt to “age in place” rather than leave their homes. Franchising in the home care industry only began in the last 20 years and it is over the past 10 years alone that the number of franchise brands has risen dramatically. In the home care industry a franchisee’s main source of business is providing non-medical care and companionship to seniors. This group constitutes the heaviest consumers of home care and the fastest growing segment of the entire population. Home Instead Senior Care was one of the first organizations to successfully apply the franchising business model to the home care industry and, thereby, contributed to the application of franchising principles to a new market sector. Home Instead Senior Care has since grown to over 800 units and is unquestionably one of the strongest home care brands in the market.

Size of the Home Care Industry According to the 2007 Economic Census3, there are 22,975 home health care service establishments in the U.S, employing nearly 1 million people and generating revenues of over 46 billion dollars. The companies that provide home care services are just beginning to discover franchising as a method for growth. Of the current businesses, only 17% are franchises. Since the year 2000, the number of franchise brands that are in this sector has quadrupled to over 3,000 franchised businesses4. According to FRANdata’s President and CEA, Darrell Johnson, the home care industry is highly fragmented. He says, “The 50 largest brands control less than a quarter of the market share. This is an important finding for investors because it means that any brand with the right leadership and resources put behind it can become the market leader.”

Who Receives Home Care? The main receivers of home care are seniors who require help with ADLs (activities of daily living) and IADLs (or instrumental activities of daily living) but they are not the only group that requires care and companionship. Home care may be provided to anyone with a terminal illness who wishes to die at home, to disabled or chronically sick adults or infants, and to adults who need assistance because they are disabled or recuperating from a hospital stay.

3

Demand for Home Care: The number of people using home care services is set to continue to grow as population statistics show that in 2008 nearly 39 million people in the U.S. were aged over 65, up from 35 million in 1998. As we can see in the table below, supplied by the Population Division of the U.S. Census Bureau, by the year 2020, nearly 62 million people will have reached retirement age. This is the largest group of retirees in the history of the U.S. and will create continuing demand for home care and health care services and facilities. Table 1: Projections of the Population by Selected Age Groups for the United States: 2010 to 2050

Age

2010 (in

2020 (in

2030 (in

2040 (in

2050 (in

thousands)

thousands)

thousands)

thousands)

thousands)

65 years and above

40,229

54,804

72,092

81,238

88,547

85 years and above

5,571

6,597

8,745

14,198

19,041

100 years and above

79

105

208

298

601

Total

46,059

61,536

81,045

95,734

108189

An increase in life expectancy and a decrease in fertility rates combined with past variations in birth and death rates are producing a significant shift in the aging of the population. An important variation in the U.S. birth rates occurred after World War II when there was an increase in the number of babies born. This generation of “baby boomers” is now passing the age of 60 and is one of the main cohorts responsible for the continually increasing demand for home care services. As we can see from Table 1, by 2030 there will be an increase of 44% in the number of people over 65. The increase in the demand for home care is not only the result of an aging population. It is also due to an increase in people’s desire to “age in place”. “Aging in place” is where people grow older without having to move from their home. Some 70% of U.S. seniors spend the rest of their lives in the place where they celebrated their 65 th birthday5. A recent study by the California Department of Aging estimates that 30% of women and 17% of men over the age of 75 need

4

some form of assistance with personal care6. The study went on to show that in the age group 6579 years, 17% need some form of assistance while 28% in the age group 75-84 years require assistance. Of the age group 85 years and older, 49% of people need some form of personal care assistance. According to the U.S. Department of Health and Human Services and the U.S. Department of Labor, by 2050 the number of individuals using paid long-term care services in any setting (e.g., at home, residential care such as assisted living or skilled nursing facilities) will likely double from the 13 million using home care services in 2000, to 27 million people7. This figure will continue to grow from year to year as the “graying of America” continues.

Types of Home Care: There are many different types of care provided by franchisors.

•

Residential/Nursing home care– This type of facility provides care to residents requiring full time or short term care. A residential care home supplies help with ADLs (activities of daily living) and also nursing and medical care.

•

Assisted living community - This is an assisted living arrangement where people with special needs, especially seniors, live in a facility that provides help with ADLS. This form of facility bridges the gap between home care and residential/nursing homes.

•

Home care - non medical –This form of care allows an individual to remain in their own home while a caregiver comes to their house. The care giver provides companionship and help with ADLs and household tasks.

•

Home care - medical - A franchise may employ a trained nurse to offer medical care at home.

•

Many franchises also offer products that are aimed at aiding seniors such as personal and emergency response systems. ComForCare Senior Services has partnered with ADT, the worldwide leader of in-home electronic monitoring and communications systems, in an effort to provide their customers with around-the-clock access to help as needed. Home Helpers has also partnered with Direct link, a personal emergency response system (PERS), which enables the client to stay safely at home for longer.

5

Table 2: Specific assistance provided by franchises represented in this report:

Name of Franchise

Services Offered

Age Advantage Home Care

Non-medical home care and companionship

Services Always Best Care Senior

Non-medical home care and companionship, assisted living

Services

and residential care home.

AmeriCare

Non-medical home care and companionship.

Assisting Hands Home Care

Non-medical home care and companionship.

BrightStar Health Care

Medical and non-medical home care and companionship, medical staffing.

ComForcare Senior Services

Non-medical home care and companionship and safety technology solutions

Comfort Keepers

Non-medical home care and companionship.

Elect Home Care

Non-medical home care and companionship.

Home Helpers and Direct Link

Non-medical home care and companionship and personal emergency response systems.

Home Instead Senior Care

Non-medical home care and companionship.

Home Well Senior Care

Non-medical home care and companionship.

Homewatch Caregivers

Non-medical home care and companionship.

Interim Health Care

Medical and non-medical care, home care and companionship, medical staffing.

Right at Home

Non-medical home care and companionship

The Senior’s Choice

Non-medical home care and companionship.

Senior Helpers

Non-medical home care and companionship.

6

Synergy Home Care

Non-medical home care and companionship.

Visiting Angels, Living

Non-medical home care and companionship.

Assistance Services Graph 1: Depicts the growth of selected home care franchises in the U.S.A.

Regulatory environment The home care industry is highly regulated and approximately one-half of the states require licenses or otherwise regulate some aspect of home care businesses. A franchisee will need to be aware of laws and codes applicable to home care businesses. These include: federal, state and in most instances, city, county, parish, borough, municipality or other local laws.

1. General Laws Regulating the Home Care Industry: Many jurisdictions have senior home care laws which will affect a franchisee. These may encompass licensing, bonding and insurance, building code compliance, safety, fingerprinting, criminal background checks and other similar requirements when starting a home care franchise.

7

2. Federal: Federal laws cover similar items to general laws, such as occupational health and safety, equal employment opportunity and taxes. Under the current requirements of the Federal Fair Labor Standards Act and regulations issued by the United States Department of Labor, individuals providing companionship services to the aged or the infirm, and who are employed by a franchisee, are exempt from minimum wage and overtime requirements. If the state law, where the franchise is operated, varies from the minimum wage and overtime requirements of the Federal Fair Labor Standards Act, then state law will take precedence over federal law. A home care franchisee will need to be aware that Federal Health Insurance Portability and the Accountability Act apply to personal and home care providers.

3. State: State laws may cover the same areas as federal laws. Examples of other state laws affecting small businesses include environmental, occupational and health and safety laws and taxes.

4. Local: Local laws may cover the same areas as federal and state laws. Examples of other local laws affecting many small businesses include health and sanitation regulations, building codes, permits and waste disposal.

5. A franchisee may also need to obtain Medicare certification from the federal government. A franchisor may or may not provide assistance in determining the federal, state and local laws that affect the franchise. As there are often variations in licensure requirements and regulations from state to state, investigating, understanding and application of licensure regulations is the franchisee’s sole responsibly. For more information contact the National Association for Home Care and Hospice’s (NAHC) regulatory affairs division which is responsible for keeping abreast of current federal regulations and government policies that affect an agency's day to day operations as well as its long term business planning.

8

Franchise Information The table below provides an overview of the estimated initial investment required to open a single unit of 18 home care franchises. It also contains a detailed profile of each franchise which presents these costs in more detail. The profiles are extracted from the Franchise Disclosure Documents (FDD) of the 18 franchisors. Table 3: Franchise Fees

Name of franchise

Age Advantage

Initial franchise fee

Estimated

Estimated

Initial

Initial

Investment

Investment

– Low -

– High -

$24,900

$36,500

$67,150

Always Best Care

$34,500

$41,900

$63,200

AmeriCare

$30,000

$69,838

$102,988

$35,000

$44,950

$102,000

BrightStar

$35,000

$10,7600

$180,200

ComForCare

$35,000

$69,500

$89,500

Comfort Keepers

$32,500

$59,600

$89,150

Elect Home Care

$18,500

$67,000

$87,000

Elite Senior Care

$12,500

$25,000

$45,000

Home

$37,900

$42,150

$57,400

Home Care

Alliance Assisting Hands Home Care

Franchising Inc.

9

Helpers/direct link Home Instead

$32,500

$44,050

$57,050

Home Well Senior

$24,495

$35,895

$46,795

$30,000

$90,500

$110,000

$15,000

$130,650

$407,250

Right at Home

$32,500

$45,900

$77,150

Senior Choice

$25,000

$34,000

$51,000

Senior Helpers

$36,000

$60,800

$81,800

Synergy

$35,000

$49,240

$99,540

$21,950 -up to 100K population

$42,285

$69,535

Care Homewatch International Interim Health Care

Homecare Visiting Angels

$27,950 up to 200K population $38,950, 325K population (Additional protected territory greater than 200K population and less than 325K population may be purchased for an additional $1,400.00 for each additional 10,000 population). Table 4: Average Ongoing Franchise Fees:

Royalty

Average

National Advertisement

1.65%

Local Advertisement

2.18%

Additional funds for 3 months – low

$12,825

10

Additional funds for 3 months – high

$31,887

Renewal

$5058

Length of the Franchise Agreement: The majority of home care franchises studies for this report offer a 10 year franchise agreement. However some franchises offer shorter term franchises.

Average Rates The 2009 national hourly rate for home health aides increased by 5%, from $20 in 2008 to $21 in 2009. The national average hourly rate for non medical care and companionship increased by 5.6%, from $18 in 2008 to $19 in 2009. 8 The below table shows the different rates across the Industry. Table 5: Average rates for 2008 – 9 for Nursing Homes, Assisted Living, and Home Care.

Nursing

Assisted

Home

Homes

Living

Care

Home Care

Adult Day

Communitie

Services

s Semi

Private

Home

Non medical home

Private

Room

health

care and

aide

companionship

Room Rate Type

Daily

Daily

Monthly

Hourly

Hourly

Daily

2009

$198

$219

$3,131

$21

$19

$67

Average Rate

11

2008

$191

$212

$3,031

$20

$18

$64

+$7

+$7

+$100

+$1

+$1

+$3

+3.7%

+3.3%

+3.3%

+5%

+5.6%

+4.7%

Average Rate $ Change from 2008 % Change from 2008 The above figures are purely an indication of the rates for home care services in the U.S. Each franchise has their own rates and will advise a franchisee of such on signing the franchise agreement.

12

Outlook The outlook for the home care industry is very positive. The general trend is towards continued expansion and growth. This expansion will be due to the aging population and in particular, the “baby boomer” generation reaching their twilight years. This combined with an increase in the number of people who want to “age in place” and several factors that make home care the most practical, cost effective and desirable option will create a growing demand for home care. Home care also appeals to a wider demographic than just seniors. It is for anyone recovering from or dealing with a debilitating illness or injury. Home care is a strong industry for any prospective franchisee wanting to take advantage of a proven business model while also gaining job and personal satisfaction. By aiding seniors and the infirm, a franchisee will truly be making a difference in peoples’ lives.

13

Sources 1

Special Committee on Aging, Developments in Aging: 1997 and 1998, Volume 1, Report 106-

229. Washington, DC: United States Senate, 2000. 2

The National Association for Home Care & Hospice, Basic Statistics about Home Care,

www.nahc.org. 3

Health Care and Social Assistance: Industry Series: Preliminary Summary Statistics for the

United States: 2007 4

FranData Home Care report: “Home Health Care Sector Booming Growth: Franchises Serving

the Growing Home Health Care

Need”, FranData.com

5

http://seniorresource.com/ageinpl.htm

6

http://www.companionconnectionseniorcare.com/docs/Senior-Statistics.pdf

7

U.S. Department of Health and Human Services and U.S. Department of Labor,” The future

supply of long-term care workers in relation to the aging baby boom generation” Report to Congress. Washington, DC: Office of the Assistant Secretary for Planning and Evaluation, (2003). (20 Jan 2005) 8

The 2009 MetLife Market Survey of Nursing Home, Assisted Living, Adult Day Services, and

Home Care Costs, Market Survey of Long-Term Care Costs, October 2009.

14