Episode 8: Pricing for Profit – Private Pay vs. Government Funding

Welcome *Huge thank you to all my viewers...Grateful!!

Having a full roster of clients means you are running a successful senior care business, right? Wrong. If your pricing strategy is flawed, you aren't running a profitable agency—you are just working for free. In Episode 8 of our "Starting Your Own Senior Care Business,", we are tackling the true "make or break" of your bank account: choosing between Private Pay and Government Funding.

Many new owners fall into the trap of accepting every client that calls, regardless of the payer source. Today, we are breaking down the harsh realities, hidden costs, and actual profit margins of both revenue streams so you can intentionally decide if you want to be a "premium" provider or a "volume" provider.

In this episode, we cover:

• The Private Pay Strategy: Why out-of-pocket clients are the gold standard for your margins, how fast you get paid, and what these families expect in return.
• The Medicaid Maze: The pros of high-volume government referrals versus the realities of razor-thin margins, slow payouts, and heavy state auditing.
• The "Cost of Care" Formula: The simple, non-negotiable math equation you must run before taking on a single client or hiring your first caregiver.
• The Hybrid Approach: Why you should master Private Pay to build stable cash flow before you even think about touching government contracts.

Busy does not equal profitable. Stop guessing your rates and start building a business that actually pays you what you are worth. Grab your calculator, hit play, and let's crunch the numbers!

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Transcript

SPEAKER_01 1:14

Hello, everyone. How are you? Charles Day from Day to Day Senior Care. And we're ready to rock here today in our starting our senior care business. I'm going to put on the screen share here. All right, everyone. Good morning, good morning, good morning. So we are ready to rock and roll here today, okay? We're gonna do uh episode eight on our continued series um starting your own senior care business. Um pricing for profit, episode eight today. Private pay versus government funding. All right, so right now everyone needs to know. Very important, um, revenue is your most important stream, and you've got to find out which works best for you, private pay or government funding. We're gonna talk about that, um, and we're gonna get right into it, okay, folks. So let's start the um let's start right here.

SPEAKER_00 2:23

Let's get going on the um price in for profit.

SPEAKER_01 2:33

Okay, the revenue fork in the road, two different worlds, folks. Um you have your private pay where you can do companionship uh senior companions. Um you can take private pay when you're in a home care agency. Um, this involves out-of-pocket and some long-term care insurances. Okay. So again, we're we're mainly focused on the um the uh assisted living, senior care, companionship, and home care agency. That's what we've been uh focusing on with this series. So now obviously, if um you were to open up your own adult home assisted living, you can certainly do private pay, and some long-term care insurances would also be accepted. Uh, like John Hancock. I remember uh when I was working in assisted living, um, when they were starting to roll out these long-term care insurance policies and a lot of our admissions into um our assisted living programs, uh families would start mentioning that in their um, you know, when it came to the time to talk about uh how we're gonna you know pay for for mom and dad. So it continued to uh become a um a bigger thing in in the uh senior care industry at that time in assisted living, because long-term care insurance would help offset some of those monthly costs that uh you know for room and board and for different levels of um services. Um and again, back at that time, mostly assist most of assisted livings in in New York State were just um no care at all. There were no special enhanced licenses. Let me have some coffee here. So um uh things a lot of things have changed over the years. Okay. Um, long-term care insurance is not as easily accepted now in the assisted livings as it was back then. A lot of those carriers uh saw that they weren't making as much money, they thought, you know, whatever they were thinking, but uh it wound up being very costly for them on their end. So now they're a lot stricter in their um their programs. And with private pay, if you go into uh home care, then you're looking at um at uh you know um you have your private pay residents, so those clients that um can pay out of pocket, certainly. Um also in home care, uh you'll have um some government, which we'll talk about in in a few minutes as well, your Medicaid, your Medicare, your VA benefits. So in in a New York State licensed home care agency, you can bill for third-party insurances as well as private pay. Okay. I know that there's two two separate, if you're certified for um for uh CMS, you know, uh centers of Medicare and Medicaid, um, they're only ex they only accept um, you know, you can only accept the Medicaid and those fundings. Okay. But if you're just licensed to do home care, you can keep within those uh private pay perimeters. Um and then uh if you went for your certification for the uh Medicaid Medicare services, then of course, you know, that's all um third-party funding.

unknown 6:15

Okay.

SPEAKER_00 6:18

So let's see next year. Okay.

SPEAKER_01 6:26

Private pay, the gold standard, private pay strategy. Okay, you have your pros, you set the rates, which can usually be higher margins um when you're you know working with private pay, and you want the higher margins. I'll explain that in a min a bit. And then your fast payment, which is your weeklies and bi-weeklies, and I will uh share some of that in a minute. Also, the you know, so with the pros, now a lot of people, you know, they know the minimum um uh companions are minimum$20 an hour if they have a little experience. But the majority here in New York, the minimum they want is at least$25 an hour, if not more. Now, when you go to sign up a client, you need to uh factor in your um profit margins because you know, the higher the better, and the quicker you can grow your business. Now, you know, again, everyone knows me. That's why I'm I'm I'm sharing this. I'm in my second year with this business, uh, day-to-day senior care. So I've learned already that um the higher profit margins work much better in our favor. But I also have learned that it's very competitive out there and everyone's paying around the same in the market rate. So if you're doing$35,$40 an hour and you're paying your companion 35 to 40 or 25 and you're getting 35 from the client, so it all it all has to work out where the most important is you want to pay your companion the price that they are worthy for. You know, they've got experience, they know the market out there. If you want long-term companions to stay with you, you want to pay them, try and stay within the market range, if not a little higher, and you offer bonuses. Um, so again, you look at those. If you're in uh assisted living, obviously, you know, you get your monthly rents um and all that, all the uh margins are factored in as well on how much per month per cost for you know the employees and and the uh food services, you know, the owners have to wait. I remember when I was working in um nursing home administration, similar to assisted living, you know, you would look at all the expenditures each month and what their income was. And believe it or not, you can have 180 beds and have 100 beds full, and yet the owners are not happy with their profit margins because either they're below the red line, I mean below the green line, and they're showing red, um, for whatever reasons. Um, but you as a business owner need to know that you want to, you know, how to set your rates. Okay. Fast payment too. I've learned, folks, I've learned uh being in this in this business, and you know, we have over uh we've got uh many active clients right now, close to 20. So you know, you have to, you know, originally I was billing, you know, um invoices out for you know, do within 30 days. Um, you know, and then that there are situations where people don't pay right away. Um, but you have to remember you have to pay your companions um each week. So whether you're getting paid by the owner, I mean by the uh clients' uh families or not, or the client themselves, you have to, you know, account for the fact that they're going um to sometimes be late. Uh they may want to pay, you know, like you said, 30 days. So you want to get them into that weekly, bi-weekly invoicing. Okay, it's much easier that way. Um, and you don't have to lay out so much uh of your um you know, your business money, your capital, or whatever you set aside for payroll. Okay. Uh so there are some cons to this as well. It's harder to find clients. Marketing, you know, heavy uh is is the is the norm. Um but uh you also that there is a there is a method to uh you know finding new clients. We can discuss that in another um episode that'll be out eventually. Um and I need to check if there's any questions. Anyone has any questions? Hold on one second. If anyone has any questions, certainly um let me open up the chat. I always forget to open up the chat. I will say hello. We're on we're on Facebook, we're on YouTube live right now, and we are on LinkedIn. So anyone that wants to chime in, certainly leave us a chat. Um I mean leave us a message in the chat there, and we'll get back to you. All right, so let's move on to the next.

SPEAKER_00 11:45

Okay, government funding.

SPEAKER_01 11:47

The Medicaid maze, Medicaid and VA strategy. Okay. Um so with government funding, the pros they're massive, you know, you'll you'll you'll right now I'm doing companionship, non-medical. So once I get my operator's license to do a medical um portion of of home care, um, which is under the New York State Department of Health regulations, and they have to approve uh those who want to become um operators of of this program, um there is uh such a steady referral stream because unfortunately there's so many people that are on uh government insurance that are coming out of hospitals from rehab or going into nursing homes from rehab, coming out of rehab to go back home, but they still need some um medical care. They may need uh you know, dressings changed, wounds, uh, you know, so many different things. But it gets billed through the government, and then the government continues to send these uh revenue streams to your business, and that you, you know, divvy up into uh your you know payroll, expenses. There's a lot involved. Um yes, the cons are lower rates, you know, it's set by the state, but there's a strategy to this, and I and we'll get to this in a minute. Um, there's a strategy to this private versus um you know government, and then the cons, lower rates, again, like I said, heavy auditing and billing delays, folks. You're going from a LLC that you may have started for your senior care business or Inc. or uh an LLC partnership or a corp or however you're gonna go. I I highly recommend you start as LLC, um, just to get you know uh you know assimilated to um you know how the senior care program grows. Again, you're working with people. This is a service, you're working consistently with people day in and day out. All right. But um very important is to uh understand um where you want to go because everyone is different. I personally, I have experience in uh three decades of of senior care and health care and hospitals and nursing homes. So my choice is to go into uh medical agency eventually. I have the application, I've got everything ready to go, but my timing is different. I need to be more proactive in um building our non-medical company first, and then just continuing to grow it and grow it. And when I feel the time is right, and I feel the um uh Department of Health will see that we're, you know, we're we're successful in this business and caring for uh residents, and now we want to graduate to medical services in an agency, uh still under the same umbrella, but a separate division, uh run by an administrator I've already chosen. Um it's I think it's it's it's the better route for me. Yeah, some people want to jump in right away. Some people want to um, you know, they have the money, they want to go get the brick and mortar, they want to go, you know, brick and mortar building. They got, you know, be prepared because the state will require all your staff ahead of time, written down in the application. Yes, you have your administrator, that means you have to have your director of nursing, you've got to have your HR, you've got to have your uh some of your uh H H H A's, which are which are called home health aids, that can provide some medical and patient care aids and nursing staff. Um, so you have to have uh, you know, who's your billing person? They want to they want to know who everybody in your all your staff, okay? You have to have your payroll system up, system up. You have to register for your um Department of Labor, for tax withholdings, payroll system, um, workers' comp, um, additional insurances, because now you're going medical and you're under the um the auspices of the of the uh New York State Department of Health, and you better have all your policies and procedures. All right, you just can't go copy and paste something. It all has to be um uh perfected to your business. So if you're having a policy in HR, it's got to be specific to how you're running your HR. What's your HIPAA compliance um you know program, what's your uh chart audit program, what's your uh, you know, um payroll system control um is a lot involved. So for me, although I've ran companies for owners buildings from 280 to four to 300, 400 um beds, even as a manager um years ago, um, you still have to understand that um there is a lot involved. Um, and the better you you know, the better you start with something slow and steady, the more you'll you'll understand it as you grow. Okay.

SPEAKER_00 17:48

Any questions? Okay, let's go on to the next.

SPEAKER_01 17:59

All right, the cost of care calculator. Can you survive this math? Okay, everyone, let me get back to this. I keep my eye on the chat. Okay. All right, so we've got two sides here. We got the Medicaid reimbursement and we got the part private pay rate. So again, just to give you, you know, a visual here. Um, with the Medicaid, you got your caregiver pay at$20 an hour. We're just using examples here, okay? Your taxes, um, insurance, five dollars an hour. So your total cost there,$25 an hour. Your Medicaid reimbursement, they'll compensate, you know, they'll give you$28 an hour, okay? So your profit is three dollars.

SPEAKER_00 18:50

That's it. Three dollars per client.

SPEAKER_01 18:55

All right. So as a business owner, you have to look at that and say, if I'm gonna jump into home care, okay, this is not a franchise. I'm not buying a franchise. Um, if you are looking to do a franchise, then you have to work with the owners um and work out um, you know, those profit margins and costs and all that stuff. Um, but if you're doing this on your own and you're setting up your business like I'm doing, then you need to you know weigh in all these these uh considerations. Now, if you look at the private pay rate, caregiver gets paid$20 an hour, taxes insurance five dollars an hour,$25 for the cost. Okay, but a private pay rate, you could basically, you know, you could you know make your own out, you know, your own uh per hour. Uh, but honestly, the way I look at it is just stay within the competition, don't go too high, and certainly don't go too low. All right. If you have confidence in your business, you have confidence in your companions that you've uh hired and brought on, then demand your rate, you know, and understand that, you know, when you when you talk with the c with the clients, family, you know, the reason for the$40 an hour, Mrs. Jones, is that you know, we're covering the cost of of our um employee and our companion, and we're also, you know, we're you know, some of the cost goes into training, some of the cost goes into um background screenings, which could be$160 per background check. All right. Um, and then there's other costs that you know, expenses in in the business. So again, you need to take a certain amount per um client. Okay, and then the rest goes to the companion who's doing all the work. Okay. Me as an owner, I started one client, two, three, four. I I took my income the first year before I started having newer clients and giving companions over to them. I started with my own income. Oh, sure, the first few months were I was in the negative. So, folks, some people will be in the negative for six months, eight months, the first year. The reason I came out profitable after the first year was because again, I didn't let go of my 30, 40 hours. I didn't care. I was multitasking, I was learning to grow the business, I was, you know, doing a lot of different uh, you know, wearing a lot of different hats, even HR, and before my sister uh got better and better at it. Um so before I ended the year, uh again, first client was in April of last year. So technically it wasn't even a full year. So now I I had April, May, June, July, and I still wasn't back in the positive. I was in the negative by thousands, folks. So when I finally hit like October or November, because I acquired new clients, and we were over 10, 11, 12, we were 12 by the end of the year for my first year. So we were able to get back all those expenses in the first four months. And because I stayed diligent with my own clients as a companion and an owner, how many people are prepared to do that? Well, if you're not going to jump into a franchise, and even with a franchise, they're still going to wish you good luck in your territory. They're not just going to hand you over uh, you know, a whole ton of companions and clients. All right. Unless someone who already did that work decides to leave, and that territory is still, you know, still open to grow, and you've got some solid, uh, solid foundation to walk in on. But that's not, that's the rare rarity. Okay. Um, so anyway, uh, yeah, so then what you do is and then when I come into my second year, then we exploded. Yeah, we exploded. We got 24-hour care, we've got assisted livings. I know people in the business, and it's all working beautifully. You know, I I got my former peers, my family's working with me, and then um everyone that I've known in the business have been so helpful and I'm so grateful. So yeah, we're growing fast. Now we're with we are in the profit. Our first quarter was beautiful. Um, but again, I am not going to switch into uh getting the Medicare and all that other home care stuff yet until I can get a solid few years of of um our foundation. So you got to look at that, folks. Okay, again, I offer private consultations. I'm gonna be doing um some trainings where you can come in live. Uh there'll be like webinars that we'll hold monthly down the road. Um and I will teach you how to uh to uh start a business. I'm in the middle of it. I'm I'm gonna be by the time I'm done with my second year, I'll have more great information to share. Guys, real stuff too. Not just uh, you know, you get you know, you start looking for a business, you know, and your algorithm goes wild on your uh on your uh social media, and next thing you know, everyone wants to uh share how they started, you know, a senior care business and how you could be rich within three months, guys, folks, ladies, no. It all comes down to you. You're the owner, you're the leader, and the only way you're gonna be successful, okay, you can have a ton of money and just get everything you need. But like most people and myself, you leave a lucrative position after three decades of a of a weekly salary, and I start from the bottom, and that's how I did it, folks. All right. Uh let's see, we're at the two got five more minutes left. I am definitely way off script today. That does happen with me. But I'm sure what happened to my mouse here? Oh, there we go. Okay, uh, back to hybrid versus specialized, the strategy. Just like I spoke, folks, just like I mentioned, you've you want to start with private pay. That's my recommendation. Again, if you go into a franchise like uh, you know, that that has all the all the you know bells and whistles and all the all the uh shirts and logos, and you're all good to go. Just realize private pay, that's where you want to start. Okay, you build your cash flow, you build your stability. Once you have all of that in place, you'll know. You'll be talking with your advisory committee, like I do, and you'll you'll and they'll be like, go for it, go for it, Mr. Day. We're ready, we're ready, we're ready to jump into uh you know medical care, home care. And I'll be I'll be so happy because so many, there's many uh people that we we wouldn't weren't able to take that we could have taken, but we didn't have the license yet. So I'd have to share those with um my peeps, my peers, former peers I know in in the industry, and and new newer uh relationships that uh companies that do do the uh home care. So I passed my companions and clients on as a referral base. I hope they'll do the same for me if they get a companion they don't want, you know, they can't uh take care of. We'll certainly uh review and see if we can. It's all about uh connections and relationships, too, folks. Been doing it for three decades, building relationships, not burning bridges. So go to uh then after if you follow the arrow, you see the green going down to build the cash flow and the stability. You shoot over to the right with the arrow there, and you got your continue your private pay, never give it up, never ever, ever give it up. And then you've got your you add your government contracts, get them going first, okay? Get them going first before you take on any Medicaid or any of those, okay. I mean what I mean by government contracts. Um I'm sorry, I made a mistake there. When you go to take on your government contracts, you take them on as wisely as possible. And just remember that you know, licensing from New York State is separate from certification from CMS, the Centers for Medicaid and Medicare. Okay. So I would start with the Medicare before the Medicaid. That's just my personal preference, and then maximize your revenue. All right, like the hybrid model. Maximize your revenue.

SPEAKER_00 28:25

All righty. Okay.

SPEAKER_01 28:33

So next steps would be to research your local Medicaid waiver rates. Find out what they are if you're gonna go straight into uh government uh reimbursement. Um you know, again, uh my first year when I was researching um private pay, you know, I certainly found out what the competition's paying. I did my due diligence. I'm the type of person that just researches. I follow everyone, I watch every, I always watch and want to be surrounded by other successful businesses. Okay, same thing in the nursing homes. I always looked up to the to the titans in the uh you know, the nursing home industry, the the nursing home administrators, um, the one that uh trained me, Vince. Um, I always to this day um very grateful to be under his wing because of all of his decades of experience as a nursing home administrator, and to be under his leadership, and he trained me to become to sit for the nursing uh state and national exam first. And then when I passed, just uh, you know, all the information he gave me certainly helped, certainly helped pass that exam. Um, and you know, he was the one that also got me go out there and do this, go out and be working that department. He had me work in all the departments. Um so okay. All right, oh, we're at the 30 mark. So everyone, have a great uh weekend. It's Easter this weekend. Enjoy Passover, enjoy. Um, next week we'll go into the caregiver crisis. Recruiting secrets, folks. Recruiting secrets. All right, everyone have a uh great uh holidays. We'll talk soon. Thank you.