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The Thrive/Honor VC investment -- has the home care market heated up?

Is the home care franchising world doomed by tech-enabled home care? First clue: Google’s $46.6 million investment in June in Care.com (child, elder and pet care to housekeeping). Then the Honor jaw-dropping investment of $42 million in Series B. The home health industry is a "fragmented" system that Honor aims to fix, according to its new investor and the Business Insider article: There are an estimated 2.5 million home care workers out there, and about 12,400 home health agencies managing them all.  According to "Thrive VC Kareem Zaki, he told Business Insider that it was important that Honor owns the whole system." And per Seth’s vision for the platform, he said: “It'll be like a car: There's a lot of complex technology going on behind the scenes, but driving the car is easy enough for anyone to do."

The startup gets the chance to 'up-level.' A bit more could be found from the Bloomberg article – and included this quote from early investor Marc Andreesen: "It’s the kind of work that just hasn’t been respected culturally and that’s wrong," he said, adding that Honor aims to 'up-level' the experience for caregivers and customers." And it is adding algorithms that "transcend the simplicity of matching a worker with dementia experience with a person who has dementia." Home care agency office managers everywhere must be intrigued: "Honor is overhauling the back-office functions so it doesn’t require employees, said Kareem Zaki, who invested on behalf of Thrive Capital and will join Honor’s board." And as for employees, time in job matters – 83% of Honor’s employees have been with the firm 3 months or longer. Whew, 3 months -- that’s a relief.

But maybe home care is like an expensive car.  The article includes assertions that must make a few folk sit up: "Hiring a professional for 40 hours a week at $25 hour runs $52,000 a year. Add weekends and the costs increase to $72,800 a year." Let's imagine paying that, for a moment, and remember when the company launched it was actually charging $30/hour in San Francisco -- paying $15/hour there, though rents averaging more than $3000/month make it impossible for workers to live in or near the city. Ditto for LA.  Pause there and remember that with a median wage of $20K/year, home companion care is one of the lowest paying jobs in the US, and its turnover rate has been noted at 60% annually or higher, so three months on the job is good for this industry. Typically a home care franchise charges $20/hour and the aide gets $10/hour. it. So Honor wants to charge more for its services. And it will pay more – so that’s good, right? But the job still requires hands-on (and possible heavy lifting) work that other non-degree $50K/year jobs don’t. Why should workers stay if better jobs can be found? And what will the market be outside of SF and LA -- for example, Dallas, where median income has stagnated?  But maybe by cherry-picking the wealthiest clientele, Honor's cost and their pay scale will add up there as well. 

Terminology is tossed around -- but what does it mean? More questions than answers. Moving a bit further into the murky articles and the actual in-home care landscape (take a quick look at a link about Medicare and California), there is a notable difference between home health care and home care.  Honor tiptoes in with medication reminders and medical appointments (as have other Google-like healthcare initiatives at Lyft and various Uber). The actual company name referenced in the Bloomberg article is Honor Technology, Inc.  Okay, that is a clue – in the future, will the firm be the front end for other home care companies willing to use its app? Will the firm hire home health aides and nurses, moving it into potential reimbursement territory?  Will it contract out to home health agencies that may be getting lower reimbursements – and searching for lost revenue through diversification? And finally, given the likelihood of a problem finding workers, why would a technology company saddle itself with an employee recruit-hire-fire burden in the time of worsening caregiver support ratios -- a problem now and eventually across all geographies.

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Why not take a look at the work the Cantata Foundation (Chicago) is doing with technology. There, rather than the tech world driving an industry like home care about which they know nothing, the long term care providers are making technology work for them to deliver more cost-effective in-home care. By clustering providers, and giving older consumers the option to purchase just a few hours of care versus a full-day or half-day, and using technology to support this model, they are showing good results and making in-home care actually affordable to middle and lower income older people. Why can't tech providers ask how they might better support models like this one? Well we know the answer to that one....


I believe they will stay out of the Medicaid market, hard to make money with that overhead. Many paid caregivers sign up with multiple on-demand (and trad) service providers, and Honor et. al. remove the friction of hiring a paid caregiver (craigslist ads, background checks, etc) and make it easier than Caring.com. Significant expansion opps in adjacent markets, and use of technology to communicate with people the way they like to communicate today (text, phone alerts).

It will be interesting to see how this price structure will co-exist with Medicaid compensation for CHHA services (~$16 per hour)

The home health industry, whatever that is, was never integrated so it isn’t fragmented. Honor appears to be solving the problem of finding and hiring domestic servants.  There is no escaping the fact that in-home caregivers spend lots of time doing menial unnecessary tasks or nothing at all because AIP consumers do not generally require the continuous service of an auxiliary human.  Up to this point Honor seems to be buying market share and disrupting by simply paying more for labor.  Don’t mistake growth in market share for productivity improvement.

Honor can probably use automated labor management to improve administrative efficiency, and may drive some exploitation waste out of the market but in the end, the car might be Bentley.  If they are just a matchmaker/labor management company they could easily be stuck at the top of the market. At this point I wouldn’t give them another dime unless they show the ability an intent to transform themselves into broader spectrum AIP service system integrator/platform.

Honor has to get enough critical mass to have enough localized service density to support minimum engagements down to I hour, and the logistical tools to balance scheduled service and on-demand response services while also keeping their employees at near capacity with minimal site to site travel time, and they have to add more services, and they need to be quick about it.

Digital consumer technology development is not at a standstill.  Remote assistive systems are developing quickly. The majority of the 12,400 other companies are not run by unmotivated idiots without computers. There are more and more innovators addressing AIP service system integration all the time. A zero sum disruptive labor control shift just buys the opportunity to figure out how to really make money. Is there a plan for that?  What productivity gains has Honor made?  What is the plan to make more?

Technological Advancements such as emergence of tele-health, smartphones, wearable gadgets are propelling the gobal home healthcare market, which according to research report, is expected to reach $300.7 billion by 2022 with a CAGR of 7.5% over the period of 2016 to 2022.