Building international homecare businesses
Domiciliary homecare is regarded with much scepticism by private equity and many large nursing home groups. How do you build quality? How do you compete with mom’n’pops? But some groups are definitely building scale internationally.
The principal example here is US operator Home Instead which has expanded via national franchises into seven European countries, as well as Japan, Australia, China and Canada. In the UK (where the US parent bought out the master franchise a few years back) Home Instead claims to be delivering 6m hours a year, which would put its annual revenue at around £125m and claims to be the largest player in the country. It also appears to have scale in Australia, Netherlands and Germany where it has around 110 offices, suggesting sales of around €100m.
Kathy Daniel, Director of International Business Development at Home Instead claims that the US parent is 2-3 times larger than the next few competitors.
Daniel says the approach works best in what she terms “consumer directed homecare” systems. By this she means countries where consumers can select their provider of choice which is then paid for by the state/insurer, possibly with the consumer having the option of topping up payments if necessary. She argues that markets where the state payor fixes the price and suppliers then fight over outsourced contracts are more problematic. She claims that policymakers are beginning to see the benefits of the consumer-led approach. “Almost every consumer is willing and able to pay for quality.”
In the UK, it currently operates only in the private pay market, but, in Germany and Australia, public payors are now allowing individuals to spend their money with Home Instead, rather than on public or not-for profit alternatives.
Daniel is keen to expand in most West European countries and is eying up Poland and other CEE countries. So far, Home Instead has expanded by finding an entrepreneur to set up a master franchisor who then sets up a network of smaller franchised offices. But she says she is happy to talk about partnering with nursing home and other elderly care groups
The sector is often dismissed by operators in residential care principally because of fears that quality can not be guaranteed. At the HBI 2018 conference, a Brazilian homecare operator was lamenting the quality and management issues he faced, and asked the CEOs of Ambea in Sweden and Esperi Care in Finland what they did about it. The answer was simple – they both quit the sector!
The other big fear is that big homecare operators face massive competition from mom’n’pop outfits, in particular in southern Europe where many families recruit their own live-in Ukrainian directly. That applies particularly to Italy – Daniel says that Italy has proved tough but says that the local franchisor is now achieving lift-off.
The secret appears to be a focus on quality. Daniel says that Home Instead is always focused on the client, not the task. “We are not there to change the sheets or do the washing, we are there for the customer.” This, plus very selective recruitment and strong training, seems to be the secret. It seems to work. In the USA, Home Instead was listed as number one overall for franchisee satisfaction in the Franchise Business Review in five of the last eight years.
Our Analysis: The only other player we have seen build a successful domiciliary care model internationally is Promedica, the Polish group which sells live-in workers from Poland and Romania to Germany and UK households. Daniel’s point about “consumer-directed homecare” is well made. The reason why many large players have struggled in the UK is because they work for local authorities who squeeze tariffs to the extent that it is impossible to deliver a decent service.
Actually, we came across Home Instead because NHS workers recommended it to my wife’s in-laws as the service most likely to meet their needs and wants. Four hours a week at around £95 looked pricey until Becca’s mum pointed out that they had been spending £14,000 a year on travel until recently! Actually finding homecare of any sort (good or bad) proved immensely challenging and the bar was set low.
We would welcome your thoughts on this story. Email your views to David Farbrother or call 0207 183 3779.