Whilst my headline refers specifically to US investors into the home care sector where the recent action has occurred, I plan to reflect on the ramifications, or lack of sense for such investment in England, which will undoubtedly have been in the number crunching during presentations.
Back in May'21 Birdie, a self proclaimed 'caretech' company, secured an $11.5m (£8.2m) investment led by Index Ventures and proclaimed that they were re-inventing care for older people. A bold statement suggesting that their technology platform and future innovations will go a long way to efficiently deliver more co-ordinated, personalised & preventative care for a market in which they indicate that 25% of UK homecare providers are on the verge of bankruptcy.
More recently Honor, a company established in 2014 and backed by $255m (£183.9m) of VC funding, were proud to announce their acquisition of Home Instead, a global market leader of homecare provision with around 200 franchised branches in the UK.
Their joint statement talked about transforming the care experience, implementing scalable workforce management and fundamentally changing the senior care space together with enhancing career opportunities for carers.
And, don't get me wrong, as an employee of a regulated care provider that has a 20 year track record of delivering homecare, I'm fully on board with the sentiment that its in everybody's interest to look at using technology in the sector... but this carte blanche miracle cure to the woes of the UK market is not the solution for providers, carers or service users alike.
The devil is in the detail
People who know me will say that I'm a stickler for detail, a well thought through argument and just simple common sense.
So, to all you venture capitalists, institutional investors and fund managers, here goes a little market research that you may well like to take note of before falling for the numbers on a business pitch likely to be made to you in the very near future.
I would stress that this is my opinion, my research, not the company that employs me and is based on some fundamental market research which will be broadly in line with the England care at home sector, obtained from readily available websites.
Regulated care in England:
The England health & social care sector is overseen and regulated by the Care Quality Commission (CQC).
I searched the regulators website for Home Instead under 'Services in your home' which returned 179 registered listings. Curious to know more about companies that I perceive to have some of the largest market share in England I had a look at Bluebird Care, 168 listings, and Caremark, 95 listings.
Then, looking at the bigger picture to understand what these numbers are as a percentage of the sector in England, a simple filtered search for Services in your home (broadly home care) returns c.12002 listings.
So by my simple reckoning Home Instead has a 1.5% market share in England of regulated care in people's homes by 'registered locations' and Bluebird Care and Caremark have 1.4% & 0.8% respectively.
The reader should also understand that the market in England is largely dominated by provision via Government, local authority funded health and social care. We are in a privileged position as a population to benefit from state funded healthcare, in the main, with only 24% of the UK care at home market (source:UKHCA 2019 market report) being self-funded. Which in itself makes me think about the likes of Home Instead & Bluebird Care who champion being providers to the private pay sector. Whilst they may be some of the largest care providers in England/UK, 76% of care providers actually run their businesses focussing on local authority funded care and are not of any scale, being independent operators and many, in the words of our US neighbours, being more mom-and-pop (small business).
And, by default these vast array of independent care providers are subject to a Local Authority's social care budget, framework agreements and general nuances of the public sector. Frankly, this part of the sector is under pressure from many directions! Oh, the UK health and social care sector is significantly underfunded with an estimated £4bn urgent adult social care funding need, so the ability to charge more for services isn't on the table any time soon.
Why did I mention the money thing? Because a significant number of Local Authorities are paying care providers below the minimum hourly rate that the UK Homecare Association have calculated to be a sustainable homecare provider... significantly less I might add.
Technology and the home care sector:
I think that one of the buzz words in the care sector is 'assistive technology' to give service users & their families support over and above face to face care. Others talk about 'real time data' to facilitate a more connected service and 'national data sets' to build a UK wide understanding of the homecare sector as a whole. Big aspirations in a highly disconnected, independently run, care provider space.
The fundamentals in play across all operators are ensuring the delivery of high quality, high touch, services to the elderly and vulnerable, being fully compliant with their legal and moral requirements under CQC and most importantly in the current climate to attract and retain care workers in order to be able to maintain and grow these much needed client services.
The bigger picture is simply not on the table for most operators but we must at least take a moment to try and understand the high tech argument in home care put forward by my 2 subject investors...
Turning my thoughts to Birdie for a moment and their investment press release where they state that they have partnered with 'almost 500 providers across the UK' since the company was started in 2017 (all a bit ambiguous), this only represents a total of 4% of all current 'Services in your home' providers if all the almost 500 are still their customers.
The Birdie proposition is that their software will give providers better visibility over care and support but its current intuitive based app is only the first step in their words: "building a uniquely intelligent and integrated technology that will connect all aspects of health and care for older adults".
Honor talks about being the "first company ever to bring scalable workforce management and technology expertise together with the high-touch, personalized care of local homegrown care agencies".
I'm still not sure I understand what exactly they are bringing to the table with the Home Instead acquisition as its hard to pick out the detail (and their website is a little thin on the specifics) but one press article mentions the company uses its technology infrastructure to take over billing, scheduling, staffing and other back-office functions for a negotiated share of its agency partners’ revenue. There must be more to it and if I was a Home Instead franchisee in the UK, remember these are independent business owners, I would be hoping that whatever the 'it' is, it is all included in my current Management/Royalty Charge!
To some I may seem to be knocking innovation that could help the sector via technology but my point is that things seem to be a bit 'in development' from a high tech solutions perspective to meet the grandiose claims currently being muted by these significant VC investments emanating from the US.
There are many smaller investments in technology firms that are providing niche solutions that some care providers may feel could benefit their businesses and their clients but these tech companies have a clear goal, a defined product offering & are not seeking global domination, just a solid business case all round.
The final bit...
The delivery of home care anywhere in the world is a high touch environment. The delivery of care services to people in their own home, largely by a huge number of independent business owners (who may do so via a franchised brand) has been evolving in the UK for the past 20 years or so.
It is a very local offering very reliant on the quality of leadership and Registered Managers who frankly do an amazing job across the sector. The mark of success is fundamentally based upon the quality and availability of their own care workers to deliver services to the vulnerable and elderly in local communities.
It goes without saying that the majority of these businesses are diligent and passionate about what the do, going the extra mile for their service users.
Technology may bring efficiencies at a cost which needs to be played off against the benefit to the end user, the needy person. That is the only true measure of value.
Within the UK market, with Local Authorities under immense financial pressures and 76% of all care provider business being paid for by them, often well below the UKHCA minimum recommended sustainable hourly rate, there is no flex in the operators margin to invest.
I would therefore suggest that as the vast majority of the 12002 regulated homecare providers on the CQC list in England are independently owned, any technology company attacking the UK market will struggle to win them over in large enough numbers to give investors the return they would be looking for.
You see, its easy to present the numbers and projections based on the market data, and everybody likes to think that technology is the solution to the world's problems... but when it comes down to delivering care in someone's home, in the UK, the market with the way its structured and the complexities of the nature of independent operator businesses , you, the investor may well come a cropper!