Report: Advancing the Home Care Workforce

variability in fixed overhead costs (e.g., administrative expenses, equipment, training) versus variable cost differences (e.g., transportation, service provider wages). 58 The scope for reducing variable costs is limited since, for example, transportation is unavoidable to reach clients and there is little room to reduce workers’ already low wages. Therefore, the main determinant of whether an agency is more profitable is its ability to spread the fixed costs across multiple visits and clients, indicating that there are economies of scale in the sector. This is important because larger companies may be more able to invest in the workforce. Larger companies can “develop and disseminate best practices, standardize and differentiate job functions, develop industry-wide career ladders and lattices, and advocate for the industry to prevent backsliding in reimbursement structures.” 57 Our interview with franchise company leaders confirms that large conglomerates have economies of scale that make both training costs and increased wages for advanced roles more palatable. These larger conglomerates may also be more concerned about the value of their brand, which presumably would benefit from minimum training standards, low turnover, and career advancement pathways for their workers. Small mom and pop agencies, on the other hand, may be in more rural areas with higher transportation costs and, as a result, have fewer resources and less competitive pressure, resulting in lower workforce development investments. It is not entirely clear why more of these franchises have not emerged in the marketplace. This could be a result of the low payments under Medicaid. The Home Instead franchise is primarily private out of pocket, which may give them more leeway in tailoring a variety of packages for consumers. But the larger driver may simply be that there are so few barriers to entry in this industry and that this leads to the entry of sub-optimal firms. For example, there are no requirements for a background in health or medicine, and start-up agency costs are generally below $100,000. 57 Licensure and accreditation of entities providing non-medical home health care are heterogenous, and many states have no requirements. A final consideration regarding the industry and its incentives to invest in workforce development is that, even among larger firms, the return on investment for the creation of advanced roles with high pay is dependent on additional revenues generated by the payer. This lesson has not been lost on state planners, and most models have some additional payment for specialized roles. Even when some additional payment for advanced services has been negotiated with a state Medicaid agency as a result of advocacy efforts, however, the amount may not be sufficient to break through the inertia of a small firm with little background in healthcare or vision for an alternative industry dynamic. The New Jersey Nurse Delegation Pilot Program is a case in point. Implemented in 2008 and ending in 2011, the program involved additional payment to home care agencies for advanced

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