Health IT, Startups

HomeHero has ceased operations for caregiver service. CEO explains what happened.

One conclusion CEO and cofounder Kyle Hill made in a blog post was that the company underestimated the timing, effects, and intensity of state and federal regulatory changes in home care.

Hands holding one another on a table in prayer

Despite the growth of companies seeking to provide a caretaker on demand service in response to demand for lower cost options to delay seniors entering assisted living facilities and nursing homes, HomeHero has decided to call it quits.

Kyle Hill, HomeHero CEO and cofounder, explained the decision in a blog post on Medium. He blamed a Department of Labor decision in October, 2015, which upheld a federal ruling stating that more than 2 million home care workers would qualify for the Fair Labor Standards Act — and in particular qualify for overtime  benefits. He also noted that California legislators agreed to boost minimum wage to $15 by 2022, which would also force the company to increase its rates.

In a Q&A with HomeHero COO and cofounder Mike Townsend last year, Townsend explained the employee status shift this way.

Up until this point, we have operated under a domestic referral agency safe harbor that exists in California and many other states, but not all states. Given we have an aggressive business model that requires national expansion, the switch to W2 helps us ensure a consistent client experience in all geographic areas.

But Hill’s blog post shows that what was happening at the company behind the scenes at the time was a lot more dramatic.

Almost exactly one year ago, HomeHero lost its core identity when we were effectively forced to terminate our working relationships with 95 percent of our 1099 caregivers and required to adopt an inferior employment business model. In the process, HomeHero also lost a majority of its competitive differentiators in price, speed and scalability that allowed us to be so disruptive in 2014 and 2015, and it had nothing to do with competition.

Hill added:

HomeHero, for the better half of the last year, has been caught in one of the toughest dilemmas a startup can be in: to A) keep building an “evolutionary business”, or B) hit the reset button and use the remaining capital to take a swing at building the “revolutionary business”.

Hill concluded that the HomeHero overestimated the ability for health systems and insurance companies to pay for non medical home care, underestimated the ability for home care agencies to adopt new technology and perhaps most important, underestimated the timing, effects and intensity of state and federal regulatory changes in home care.

Hill also blamed another factor that will be familiar to many healthcare startups: pilot fatigue. Because the company decided to work with health systems, such as Kaiser Healthcare, Cedars-Sinai Medical Center, Stanford, Dignity Health, University of California, San Francisco Medical Center, Providence Health, Hill noted that “it became evident that most of our pilots were being constructed solely for case studies and had slim chances of turning into sustainable contracts.”

“Simply put, despite serving thousands of patients since 2013, we do not believe a technology-enabled W-2 home care agency is our most attractive business opportunity going forward. Rather than continuing to push the boulder up the hill and risk a spectacular failure, we will attempt to leverage our talented team, unique experience and technology IP to build a more sustainable healthcare business outside of home care.

Photo: Getty Images

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