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The home care industry is one of the fastest-growing segments of health care as it saves patients and providers billions of dollars every year. home care industry revenue rebounded from the 2021 decline by posting a 4.1% increase¹ for 2022, allowing the industry to breathe a collective sigh of relief.

More consumers choose in-home services over traditional health care models for convenience and affordability. As more medical professionals join the telehealth and in-home services bandwagon, the industry can expect a Capitalized Annual Growth Rate (CAGR) of 7.49% through 2030². This rate is close to double the growth rate of 2022, signaling that the home care industry is moving in the right direction.

Consumer and medical acceptance of home care services are not the only reasons for this unparalleled growth and demand. An aging population is fueling growth, too.

Each day, another 10,000 baby boomers reach their 65th birthday and become eligible for Medicare benefits, which accounted for over 40% of home care expenditures in 2021. Due to the Affordable Care Act (ACA) changes in 2017, many seniors retire without recent health insurance coverage and a list of untreated conditions and chronic pain/illness. 

Industry consolidation has increased specialized services available to patients, including on-demand companionship, physician-led house calls, remote patient monitoring, transportation assistance, and nutritional support. As a result, industry employment is predicted to grow at an annualized rate of 5.5% to 2.6 million employees over the next five years¹.

These additional services translate into more job opportunities available in the industry and will eventually lead to an expanded labor pool for employers. As companies continue expanding their services and service areas, the growing demand for qualified home care staff will increase wages for nurses, physical therapists, and caregivers over the next five years—a win-win for all involved.

Health care reform legislation has provided numerous benefits and drawbacks for the home care industry. While the original version of the Affordable Care Act  (ACA) required everyone to maintain a current, active health insurance policy, the 2017 ACA update made health insurance optional.  The industry must strive to serve younger,lower-income patients who cannot afford insurance even at discounted rates under the act⁷. 

Home care providers who can leverage these trends to meet the changing needs of their customers can expect to see their market share, revenue, and profits increase moving forward.

Before we jump into emerging home care trends, let's review where the home care industry is today. The sector uses three distinct service models that provide different services based on the decision-makers' input and the payers' requirements.

Home care

• Provides long-term continuous care
• Aids with daily living activities
• Provides care for people with chronic conditions

The home care decision-makers include the individual and the individual's family members. There is no requirement to be homebound or doctor's orders required to receive home care services.

Home health

• Brief and intermittent care for episodic health issues
• Medical care provided in the patient's home, such as nursing, therapy, and wound care

The home health decision-makers are the health care and medical professionals. The patient must be homebound, with a physician's order and a treatment care plan in place to qualify for home health services.

Hospice

• End-of-life care
• Palliative care

Again, the hospice decision makers are the health care and medical professionals, and the patient must have a prognosis of six months or less to meet hospice service requirements.

Home care industry revenue¹

As hospitalization costs have skyrocketed and more aging consumers get comfortable with the home health care trend, consumer demand for home care services continues to rise. As a result, the revenue growth through 2028 will be nearly double the rate experienced over the previous five-year timeframe. At the same time, profit margin growth will slow slightly to compensate for higher wages to retain or hire key staff and supervisory positions.

The number of home care companies across the country will increase by 25,000 through 2028. However, many of these new companies will be non-employers, following a well-established industry trend where nine out of ten companies have no payroll expense because they operate as sole proprietorships¹. Even though these make up the majority of home care companies, they only generate about one-tenth of the industry's total revenue. 

Over the next five years, the industry can expect to add another 110,000 employees to its ranks, almost doubling the employment growth rate of the last five years. By 2028, home care industry employees will number over 2.6 million¹. Many of these will work in the home care sector, providing daily activity support and companionship duties, the fastest growing service segment for the home care industry.

Wages make up the most significant expense for the industry, with over 50% of all revenue spent on salaries¹. Many of the services offered rely on in-person support to provide their customers with home care, home health, and hospice services. As the number of employees increases, higher wages (and a slight dip in profit margins) will be the short-term normal.

Using the data below, you can see how your home care business compares to the national averages for the industry from 2017-22 data through to 2028 industry projections.

Major players in the home care industry¹

The home care industry remains highly fragmented, with the industry leaders generating less than $11 billion of the total industry revenue. Profit margins vary as widely as the services/products offered by each provider. 

Industry consolidation remains low since no single company controls a double-digit market share. In addition, because 90% of industry providers are sole proprietorships, they only service a localized geographic region such as a city, county, or state. Due to low start-up costs for localized operations, nearly 35,000 new companies entered the industry over the previous five years.

Home care industry products/services segmentation¹

Demand for companion, personal, and therapy services will increase as more medical professionals refer their clients to the convenience of home care alternatives.

However, traditional RNs are critical for providing most hospice and home health care services. According to the UCSF Nursing School³, of the 4.3 million registered nurses working today, nearly 500,000 are expected to retire by year's end. Therefore, to avoid a short-term nursing shortage, 1.1 million new RNs must be on the job by the end of 2023.

Further complicating a potential nursing shortage is the RN turnover rate, which can reach 37%, depending on specialty and geographic location.

Market segmentation¹

Over 75% of home care expenses are paid for by either Medicare (age/disability-based) or Medicaid (income-based) insurance programs. Unfortunately, despite increased federal funding during the pandemic, reimbursements to home care agencies decreased during this time frame.

One facet of the lower reimbursement rate is access to insurance. Many recent health care reform measures aimed to increase access for much of the population. But many states elected not to expand access to federal health care programs.

To help offset lower profits, many providers have chosen to consolidate services with other operators to negotiate better supplies and equipment pricing. In addition, some providers are shifting their focus to chronic disease management. This model focuses on patient self-care, combined with coordinated interventions and treatments and regular communication with other treatment team members.

Now that we've checked out all the vital signs and determined that the home care industry is not only alive but incredibly healthy, it's time to examine the trends shaping the future health of the industry.

The baby boomer boom⁴
Seniors (65+) are the fastest-growing segment of the population because the baby boomers (born 1946-64) are ready to retire. In 2018, the number of seniors totaled 52 million, or 16% of the population. Projections through 2060 show that number nearly doubling to 95 million, or 23% of the population.

Over the baby boomers' lifetimes, the life expectancy increased from 68 years in 1950 to 78.6 years. And they're working longer, too. By 2026, seniors in the workforce will total 26% of the men and 18% of the women employed in the country. The downside is that currently, 5.8 million have Alzheimer's disease, which could reach almost 14 million by 2050, driving demand for elder care services to new levels.

Industry consolidation and innovation¹
Industry consolidation and improved technology have increased the number of treatment services available from the comfort of the patient's home. Some industry providers have consolidated to help lower operating costs, while others team up to provide complementary and adjacent services that benefit the patient's overall physical or mental health.

Telehealth is nothing new; it started back in the days of the telegraph. But thanks to the work-from-home movement and the “great resignation,” everyone is familiar with the video-conferencing platform that moves fast. The biggest technology challenge for most providers involves maintaining the Health Insurance Portability and Accounting Act of 1996 (HIPAA) standards regarding patient confidentiality and privacy while using the internet.

Technology from other industries is at work in the home care industry, resulting in more portable testing, monitoring, and exercise equipment, further expanding the range of home care service offerings to their patients. In addition, smartphones now play a crucial role in the telehealth, self-health, and home care industries.

Despite their compact size, a smartphone is essentially a handheld computer, and developers have already created a wide range of apps and plug-in accessories. There are over 256 mobile apps⁵ or devices with FDA (Food and Drug Administration) or CE approval (European Union) for use by doctors, specialists, care providers, and even consumers. Activity sensors are used with dementia/Alzheimer's patients to detect changes in their movement, vital signs, or behavior and then notify staff or family members. Glucose monitors are popular with diabetics, as they eliminate finger-pricks and provide instant results. 

Higher wages for nurses and therapists
These skilled and licensed roles are critical to the home care industry, generating more than 50% of the industry’s revenue, which includes the following:

• Providing homemaker and companion services
• Administering in-home physical therapy
• Providing in-home hospice care
• Providing 24-hour home care
• Administering in-home occupational and vocational therapy
• Providing in-home dietary and nutritional services
• Administering speech therapy
• Providing in-home medical care

Almost every activity, except homemaker and companion services, requires a nurse or therapist. With a nurse shortage looming on the horizon and increased consumer demand, wages for nurses and physical therapists will continue to rise.

Kaufman Hall⁶ recently reported that contract nurses negotiated substantially higher wages from hospitals as demand for nursing services increased during the pandemic. As a result, the median hourly nursing wage rates increased slightly during the pandemic's first year, from $64 in 2019 to $71 in 2020. In 2021, wages jumped to $103 per hour and again in 2022 to $132 per hour.

Confusing health care reforms
Health care reform legislation has changed dramatically over the years. For example, health insurance has gone from optional (2009) to a mandatory requirement (2010) and back to an option again in 2017. Yet, despite the name of the Affordable Care Act, many employees still can't afford health insurance premiums for themselves or their family members.

And while Medicare is 100% federally funded, Medicaid uses federal and state funds to pay for services. Each state sets its guidelines for covered services, deductibles, and billing requirements, and the state and federal guidelines rarely match each other. This common scenario leaves consumers and providers at risk of not receiving their services or reimbursements.

The Home Care Association of America⁷ (HCAOA) recently suggested several steps in their state of the home care industry report that the federal and state governments should take to minimize confusion and eliminate coverage gaps.

• Establish a national standard of care to eliminate coverage gaps
• Collect, evaluate, and utilize data to validate home care value in the medical and mental health treatment models
• Embed home care into the health care ecosystem across state and federal systems
• Support caregivers with recruitment, training, and career paths to increase longevity and diminish burnout
• Finance care in an era of rising longevity, so everyone has access to coverage and services, no matter their age

With 10,000 potential new customers daily and rising demand for home care services, the industry can expect steady growth and higher revenue through 2028. 

Resources:

1. IBIS Industry report #62161 (US home care industry)

2.https://www.grandviewresearch.com/industry-analysis/us-home-healthcare-market-report

3.https://nursing.ucsf.edu/news/nursing-shortage-national-problem-how-we-can-solve-it

4. https://www.prb.org/resources/fact-sheet-aging-in-the-united-states/

5. https://www.healthskouts.com/certified-apps/

6.https://www.kaufmanhall.com/sites/default/files/2022-04/April-2022-National-Hospital-Flash-Report-2.pdf

7. https://policyadvice.net/insurance/insights/affordable-care-act-statistics/