INDUSTRY SNAPSHOTS: Home Healthcare
Unlike some of our other focus industries (like restaurants or grocery stores), Home Health Care Services is not one that nearly all North Carolinians will interact with on a regular basis. But when we do use home health care services, they often play a critical role in caring for and supporting our loved ones at difficult and stressful times.
The home health care services industry employs nearly 40,000 NC workers or about 1% of the North Carolina workforce. Home health care is one of the fastest-growing health industries in the U.S. The number of home health care businesses in North Carolina nearly doubled from 675 in 2003 to a peak of 1,246 in 2011, and has declined slightly since then.
Key Drivers of Growth
The growth of the home health care industry depends on two major factors: the number of adults age 65 and older, and federal funding for Medicaid and Medicare.
Aging Population: The role of home health care has grown over the past decade as aging Baby Boomers are showing a preference for the independence of in-home care over institutional care. In 2013, North Carolina was home to an estimated 1.34 million residents age 65 and older, or about 13.8% of the state’s population, up from about 970,000 residents over age 65 in 2000 (12% of the state’s population). In addition to the “graying of America” that is happening across the country as the Baby Boomer generation enters retirement, North Carolina is also becoming a popular retirement destination, drawing new residents over age 65.
Medicare Payments: Although the home health care industry has experienced strong growth over the last decade, the Affordable Care Act has led to uncertainty about the future of insurance reimbursements, putting pressure on the industry to cut costs. Beginning in 2014, the Centers for Medicare and Medicaid services began an annual 3.5% reduction in to the Medicare base payment for home healthcare services. According to an industry report from IBISWorld, the National Association for Home Care and Hospice estimates that these changes could render up to 75% of current home health businesses unable to earn a profit by 2017. While many businesses have yet to feel the squeeze, they are planning ahead for this predicted sea change and have already begun to aggressively cut costs, including by shedding labor.
Drivers of Low Wages
Home health care services are subject to different regulations in different states. While home health care businesses in North Carolina must obtain a special license from the Department of Health and Human Services, there is no requirement that staff receive any training (although workers at Medicare-certified businesses must complete 75 hours of training and 16 hours of practical training). In other words, barriers to entry in this industry are low and while workers provide vital services that families depend on in times of need, they frequently lack the specialized training that can translate into higher wages for workers in other heath care occupations.
Additionally, the profit margins of home health care businesses depend heavily on federally regulated Medicare reimbursements. Since revenue is essentially out of companies’ control, many focus on cutting labor costs to improve their profitability.
One trend that may lead to an increase in wages in the home health care services industry is an increase in the provision of specialized services, like orthopedics. As the industry includes more skilled workers, averages wages are beginning to rise slightly. However, the addition of more skilled workers to the industry doesn’t mean that wages or working conditions will change for the industry’s low-wage workers.
 IBISWorld industry report