Gross Margins

Anyone willing to offer their average Gross Margins running for 2016?

Regards,

David G. Hall

Comments

  • Hi David,

    We always shoot for 45-50% (or more in certain cases) for gross margin. Our
    company has been operating since the 1970's and this has always been a
    standard for us and has served us well.

    Note: In order to compare apples to apples, it is important to clarify just
    what all costs are being considered in "gross margin" calculation. For my
    agencies, we include the caregiver pay (not admin staff), worker's comp
    premium, any reimbursable mileage or c/g reimbursable costs.



    Regards,

    Lacey Morgan
    CareTeam | HealthBridge
    Wichita Falls, TX | Dallas, TX
    (940) 322-3777
  • Hi David. Lacey's definition for calculating the cost of care, and therefore Gross Margin is right on. The 2016 Home Care Benchmarking Study from Home Care Pulse shows the industry median Gross Margin at 38.6% for private pay. We encourage our mastermind group members and home care field trip attendees to look at 40%.

    Lacey, is 45 to 50 % the goal or the actual? Is that for personal care or skilled nursing? Is that for private pay, Medicaid, or other insurance?

    We work with hundreds of agencies across the US and Canada, and I only recall one with a GM over 45% and that was a unique situation.

    A quick reply from my iPad.

    Stephen Tweed
    CEO
    Leading Home Care ... A Tweed Jeffries company
    Www.leadinghomecare.com
    Www.homecareceo.com
    502-339-0653.
  • Hi Stephen,

    These are both our goal AND our actual.

    I have two offices right now, both in Texas. One is in a smaller city (pop. 100k) and one in Dallas. Our smaller office GM goal is 50%; this year-to-date we are at 56*%! Our Dallas GM goal is 45%; year to date we are at 47%.

    To answer some of your questions, and explain how we are able to maintain these margins:
    - We are currently non-medical, private-pay only. No Medicaid or Waiver programs.
    - Total hours in each office run about 700-900/week.
    - We routinely survey competitors' pay rates, and we are perfectly in line or higher than average.
    - *We have a handful of VA clients whose billing rates are higher than average. We bill the VA directly (as opposed to using a third party), so we benefit from the higher ABR. However, when I remove the VA clients from of the data, that office's year-to-date GM is 51%.
    - We strictly monitor and avoid overtime. Year-to-date we have had fewer than 100 hours of overtime.



    (P.S. - Stephen, I believe you know Ann Popejoy & Sherrie Childers. Ann is my grandmother, and I have purchased the Texas offices from them. We have worked hard to maintain our margins through the challenging 2016. I am willing to share with you an update and what we're doing anytime if you’d like to talk!)


    Regards,

    Lacey Morgan, President
    CareTeam | HealthBridge
    Office: (940) 322-3777
  • Hi Stephen and Lacey,

    First, Ann Popejoy was one of the first people I met when I got in this business, she is one of my homecare heroes. She answered many questions from a really green agency owner and was a tremendous encourager.

    Second, In Texas it is a bit easier to get higher margins because of the lack of Workers Comp, we are not obligated to subscribe. Some businesses do subscribe though. So, Lacey, do you have the extra cost of WC?


    Bill Archinal
    Franchise Business Consultant
    Caring Senior Service
    O 210.757.4650 ext. 103
    C 806.681.8942
  • We are official “Texas WC Non-Subscribers”! (You have to fill out a form if you want to legally unsubscribe in Texas ... many people don’t know that, and have left themselves open to potential legal challenges.) We do, however, have a WC substitute insurance plan. So yes – I do have a cost there, but it’s not as high as Worker’s Comp. My policy is about $12,000 a year for the whole company.



    Regards,

    Lacey Morgan
    Office: (940) 322-3777 | Cell: (940) 782-8252
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