Our Take: Honor Technologies acquires Home Instead with goal of scaling up high-quality senior home care
Aug 16, 2021
One of the most successful startups in the field of technology-enabled senior home care, San Francisco-based Honor Technology, has acquired Home Instead, a home care services provider based in Omaha, Neb., with 1,200 franchises in the U.S. and service locations in 14 other countries.
In their announcement of the acquisition, the companies said they are “uniquely positioned to empower the caregiving workforce and increase innovation to revolutionize care for the growing aging population.”
Seth Sternberg, who co-founded Honor in 2014 and is the company’s CEO, said in a statement that Honor’s mission is to “change the way we care for our parents and loved ones,” and the acquisition of Home Instead accelerates that change.
“Together, we combine high-tech with high-touch so we can deliver a better Care Pro employment experience, better care, and entirely new offerings at scale,” he said.
Although financial terms of the transaction were not disclosed, the companies noted that the resulting entity “represents more than $2.1 billion in home care services and affirms itself as the largest player in the projected $500 billion home care industry.” It will support more than 100,000 professional caregivers, 90,000 of which are Home Instead’s.
Home Instead’s network will continue to operate under the Home Instead name as an Honor subsidiary. Jeff Huber will continue in his role as CEO of Home Instead and will report to Sternberg, who will be CEO of the combined organization.
Marc Andreessen, who is a member of Honor’s board of directors and a co-founder and general partner of Andreessen Horowitz, a venture capital firm that counts itself among Honor’s investors, said, “Nobody has been able to figure out how we deliver high-quality care at scale, until now. This acquisition fundamentally transforms the senior care space, flipping it from analog to digital. Technology will drive operational efficiency and personalization at scale, which is the only way to meet the skyrocketing needs of the baby-boom generation.”
Our Take: We began our lead by referring to Honor as one of the most successful startups in technology-enabled senior care, but it may well be “the” most successful. It has raised more than $255 million in funding since 2014, including $140 million in Series D funding last October.
Though Home Instead wasn’t looking for a buyer, Huber told Home Health Care News that he believes Honor can help with two potential issues that might have kept the company from further growth — caregiver supply and operational complexities.
According to Sternberg, much of Honor’s technology is focused on creating better jobs for caregivers.
“If you create more attractive jobs, you are able to attract more care professionals,” he said.
Like other startups in this field, Honor had to pivot from its original business model, which was providing on-demand home care. Today, in addition to providing care services through the Honor Partner Network, the company uses its technology platform to assist at-home care agencies and other providers of senior services with billing, scheduling, staffing, and other support functions.
Hometeam and HomeHero are two other startups that launched around the same time as Honor, with the goal of disrupting the senior care industry. Both eventually had to pivot from their original business model, and both have gone through ownership and/or leadership changes.
Josh Bruno launched Hometeam in 2013 and served as the company’s CEO for five years. Hometeam raised more than $43 million in investment capital, including $5 million from Kaiser Permanente Ventures, and initially operated under a direct-to-consumer model, providing home care in New York and New Jersey.
In 2017, the company launched a second line of business that focused on seniors who were eligible for both Medicare and Medicaid. In early 2018, it shifted completely to a payer-reimbursement model, and Bruno acknowledged that Hometeam needed a leader with experience that more closely aligned with that business model. In May 2018, Randy Klein took the helm as CEO.
In late 2018, Hometeam’s technology assets changed hands and in January 2020 Hometeam Technologies, which had been doing business as HT Health, changed its name to Vesta Healthcare.
These days, Vesta partners with home care agencies, health plans, and providers to create value-based population health programs, according to the company’s website. It identifies the need for additional resources in the home and provides 24/7 telehealth support for caregivers and care recipients. Klein is still the CEO.
HomeHero had a bumpier road. Co-founded in 2013 by Kyle Hill and Mike Townsend in San Francisco, HomeHero had raised $23 million in funding by mid-2015, and more than 1,200 caregivers were working for the company as independent contractors.
HomeHero offered customers the opportunity to choose and book their caregiver online and then rate the service they received. The business model allowed HomeHero to offer care services at a price that was 30% to 40% less than the industry average and still pay caregivers 25% more than the industry average.
But then in 2015, the Department of Labor upheld a federal ruling stating that home care workers were subject to the Fair Labor Standards Act and thus were to be treated as W-2 employees. While the intent was to ensure that they were qualified for overtime pay and minimum wage protection, unintended consequences rippled throughout the industry.
Hill said HomeHero “lost its core identity when we were effectively forced to terminate our working relationships with 95% of our 1099 caregivers and required to adopt an inferior employment business model.”
Now that it had to raise its prices, the company tried to contract with hospitals and health systems rather than selling directly to users, figuring that hospitals could afford the higher rates as part of their value-based payment arrangements if the services could be shown to reduce readmissions. Although the company had several successful pilots with hospitals, it wasn’t able to turn them into longer-term contracts.
Eventually, Hill said, he and Townsend concluded that the company was “still going to be reliant on private pay for the foreseeable future. This gentle realization was the straw that broke the camel’s back.”
In February 2017, they announced that they were shutting down HomeHero. They transitioned the company’s clients to other home care agencies and used what capital was left to create a virtual integrative medicine venture called Harvey.
That company was an attempt to integrate complementary and alternative medicine, nutrition, and other nontraditional practices into more conventional approaches to treating chronic disease. The goal was to shift the country’s “sick care” culture to one that focused on prevention and “whole body” health and wellness. Harvey didn’t make it.
It’s a tough business, as these high-profile examples show. Maybe by integrating with (and learning from) a veteran home care provider like Home Instead, Honor Technologies can pull off what others could not.
What else you need to know
Moderna’s market cap took a hit last week, after soaring to levels that placed the 11-year-old biotech above much longer established drugmakers such as Merck, AstraZeneca, Amgen, Sanofi, and GSK. At the start of this year, Moderna’s stock price was around $110 per share. By June, it had doubled. On Aug. 10, it reached a high of $497 per share and closed at $457. A day later, it dropped as low as $372 and closed at $385 per share. The sudden drop appears to have been at least partially the result of a Bank of America analyst calling Moderna’s stock price “unjustifiable on a fundamental basis”; the analyst said a reasonable price would be around $115 per share.
Moderna’s market cap took a hit last week, after soaring to levels that placed the 11-year-old biotech above much longer established drugmakers such as Merck, AstraZeneca, Amgen, Sanofi, and GSK. At the start of this year, Moderna’s stock price was around $110 per share. By June, it had doubled. On Aug. 10, it reached a high of $497 per share and closed at $457. A day later, it dropped as low as $372 and closed at $385 per share. The sudden drop appears to have been at least partially the result of a Bank of America analyst calling Moderna’s stock price “unjustifiable on a fundamental basis”; the analyst said a reasonable price would be around $115 per share.
Results from an unpublished Mayo Clinic study demonstrating the Moderna vaccine’s superiority to Pfizer/BioNTech’s vaccine in defending against breakthrough infection with the SARS-CoV-2 delta variant may have fueled the sharp increase in Moderna’s stock price earlier in the week, before the drop-off. On Thursday, the FDA authorized a third shot of both mRNA vaccines to boost immunity against COVID-19 in those who are immunocompromised, and on Friday the Centers for Disease Control and Prevention officially recommended the third dose for the same population.
CVS Health’s Aetna launched a nationwide primary care telehealth service called Aetna Virtual Primary Care. Available to self-funded employers, the service gives eligible plan members access to health services remotely and in person, including at CVS MinuteClinics and HealthHUB locations. CVS said the solution “is powered by Teladoc Health’s longitudinal, physician-led care team model.” Aetna Virtual Primary Care offers members a continuous relationship with a primary care physician; access to a team of specialists, with no referral necessary for in-person visits with providers in the CVS Health-Aetna network; and no copay for virtual primary care visits and certain in-person services once deductibles have been met.
Providence and Kaiser Permanente plan to spend up to $1 billion to build a new medical center in Victorville, Calif., Bakersfield.com reported. The new facility is intended to replace St. Mary Medical Center, a Providence-owned hospital in nearby Apple Valley that is closing, and is expected to be “fully functional” by 2028, according to the report. Although the state needs to approve the plan before it can proceed, the two health systems hope to sign a definitive agreement by year-end, the report noted. St. Mary Medical Center would need expensive upgrades under the state’s earthquake mandates that “would cost close to the same amount as building the new hospital,” Erik Wexler, president of Providence South, said in the report. Providence is to provide 70% of the capital and Kaiser the remaining 30%. The health systems announced their plans for the new hospital in early June.
Ron Rittenmeyer will step down as Tenet Healthcare’s CEO, effective Sept. 1, and Dr. Saum Sutaria will take on the role. Rittenmeyer, who has been CEO since late 2017, will continue to serve as executive chairman through 2022, according to the announcement. Dr. Sutaria has been Tenet’s president and chief operating officer since 2019. Before that, he was with consulting firm McKinsey & Co. for 18 years.
What we’re reading
Private Equity and Health Care Delivery: Value-Based Payment as a Guardrail? JAMA Viewpoint, 8.11.21
Private Equity and Health Care Delivery: Value-Based Payment as a Guardrail? JAMA Viewpoint, 8.11.21
The Risk Of Repeal: Examining The Use Of State-Action Immunity For Hospital Mergers. Health Affairs, 8.10 21 The role of personalization in the care journey: An example of patient engagement to reduce readmissions
What else we’re reading
When: The Scientific Secrets of Perfect Timing, by Daniel Pink
When: The Scientific Secrets of Perfect Timing, by Daniel Pink
