Which investments should you prioritize for your homecare business to succeed? You’ve likely heard about the benefits of caregiver retention software, caregiver wage increases, training vendors, scheduling software, office staff development, online marketing ads, caregiver recruitment platforms, and more. The reality is, we all have budgets to adhere to, and you can’t choose them all. It’s important to be judicious about your business investments and make data-driven decisions. Here we explore insights derived from the 2023 HCP Benchmarking Report, which surveyed hundreds of post-acute care organizations to uncover where agencies should consider spending their money to get the highest return on investment (ROI). 

Riding the Wave of Industry Growth 

The homecare industry has seen an impressive growth trajectory, with a median revenue increase of 6.7% over the past four years. Additionally, customer turnover is the lowest it’s been in the last five years. In 2022, the median customer turnover was at 50.2%. 

median customer turnover rate

This growth is a testament to the rising demand for quality caregiving services. 

Despite this impressive growth, weekly billable hours for live-in and hourly caregivers are the lowest they have been in five years. This does raise concerns and may signal to providers that it’s time to start diversifying their payer sources. 

1. Dissecting Payer Sources 

The top payer source is private pay which contributes a substantial 64.3% of homecare agency revenue. Long-term care insurance follows at 10.9%, while Medicaid Waiver programs and Veterans Administration programs each account for 7.1%. Direct billing to Medicaid rounds off the list at 2.6%, highlighting the diverse avenues through which revenue flows.  

There has been some diversification among these sources compared to last year, which might be an early indicator that providers are hoping to cushion any impact from rising bill rates. This could mean that it is time to explore Medicaid if you have always used private pay, or vice versa. 

2. Where Should You Spend Your Marketing Dollars? 

The HCP Benchmarking survey shed light on the most effective revenue-generating marketing sources. Among the top performers are the age-old strategy of word-of-mouth referrals which brought in an average of 26.9% of revenue. In second place, which may be surprising to some, was the modern powerhouse of search engine optimization (SEO) at 7.7% of revenue. At the bottom of the list were online corporate web leads like franchisor websites (3.1%), and healthcare professionals (2.9%). 

The wonderful thing about both top revenue-generating marketing sources is that they require little overhead. If you focus on improving the care you provide your customers, then you’ll get more word-of-mouth referrals. And while having a well-optimized Google My Business profile and optimized website might require you to hire someone to help you with your online presence, you will not need to regularly pay for ads. 

3. Unveiling the Revenue per Caregiver Equation 

The revenue generated per professional caregiver serves as a key indicator of an agency’s financial health. The benchmarking data revealed that the median revenue per caregiver is $13,900. However, this figure is not set in stone. There are factors that have been shown to affect this number. For instance, the type of training caregivers receive plays a significant role in revenue variations. 

Agencies that invested in in-person training from a vendor saw a higher median revenue of $15,370. Those using online training from a vendor also saw a higher median revenue of $14,480 per caregiver. Those who used online training with in-house materials saw the lowest revenue per caregiver at $13,835. Furthermore, the extent of orientation training hours directly affected revenue, with agencies offering eight or more hours experiencing higher revenue compared to those supplying fewer than three hours of training. 

If you are interested in calculating how much revenue you are bringing in per caregiver, you can use the following formula: 

revenue per caregiver

4. Scaling for Success: Location and Longevity 

Scaling operations is a strategic move that can significantly impact revenue. Agencies with multiple locations have higher revenue. Those with a single location boast an average revenue of $1.28 million, while those with two locations see this figure rise to $2.6 million. The trend continues with agencies managing three locations, averaging an impressive $3.9 million in revenue.  

Moreover, the age-old adage of ‘time is money’ rings true – agencies see a consistent revenue increase for each year they stay in business. What does this mean for agencies? Simply keeping a growth mindset, staying consistent, and taking advantage of expansion opportunities are some of the best ways to increase revenue. 

5. Caregiver Retention Issues Are Hurting Many Providers’ Bottom Lines 

81.5% of providers had to turn down clients due to a lack of care professionals in 2022. If you are one of the providers who is regularly turning down clients due to the caregiver shortage, then your revenue has surely taken a hit. With caregiver turnover sitting at 77%, it might be time to consider strategies for improving caregiver retention. Many agencies may want to focus on the recruitment and retention of hourly caregivers, which the benchmarking report found brings in 85.9% of all revenue. 

Try different strategies like providing caregivers with better technology, using a rewards platform, or increasing salaries (providers paying above the 75th percentile saw a 12.6% decrease in turnover). Experiment with these tactics and see which one is most effective. 

Graph showing agencies who have turned down customers due to lack of caregivers

Crafting Strategies for Sustainable Growth 

To achieve sustainable growth and maximize return on investment, homecare agencies should consider adopting a multifaceted approach: 

  • Business Longevity: A simple yet effective strategy, staying in business translates to increased revenue. 
  • Diversification: Broaden revenue streams by tapping into various sources, minimizing reliance on a single payer. 
  • Leverage Top Marketing Sources: Prioritize word-of-mouth referrals and SEO strategies for consistent revenue flow. 
  • Invest in Training: Supplying comprehensive training from an official vendor like HCP not only enhances caregiver performance but also positively impacts revenue.  
  • Focus on Caregiver Retention: Your caregivers, particularly your hourly caregivers, are the biggest revenue drivers. It’s critical you focus on keeping them onboard so you can meet the demands of clients. 

Use Data to Better Understand Your Business 

In today’s competitive environment, it is important that homecare agencies use data to inform their business decisions. Robust reports like HCP’s 2023 Benchmarking Report provide agencies with insights about what is working for other agencies, and industry trends. But, if you are looking for more individualized data insights about how your homecare agency is performing, and what strategies you need to employ to increase your revenue, consider using the HHAeXchange Business Intelligence Dashboard. This advanced analytics dashboard helps homecare providers quickly uncover real-time data insights that help them make smarter decisions that improve efficiency and grow their business.  

To learn more about how HCP and HHAeXchange can help your agency improve your ROI, contact us today.