Reshaping the Economics of Home Care: Where Do We Go from Here?
The economics of running a home care agency are undergoing rapid change. Projected to create around 1.2 million jobs by 2028, the home care industry has become one of the fastest-growing sectors. But what feels like a stable, service-driven business model is now being reshaped by labor shortages, rising costs, and an urgent need to rethink how agencies operate.
At the center of this shift is a structural imbalance: demand for care is surging, while the supply of caregivers remains constrained. This supply-demand gap has shifted the labor market in favor of caregivers. According to the 2022 HCP Benchmarking Report, caregivers now have more negotiating power than ever, with 55% planning to seek new employment primarily for higher pay and improved benefits.
As a result, agencies are investing more in recruiting, training, and retaining talent, a necessary move given the essential role caregivers play in supporting clients and families. However, this shift is placing increasing pressure on agency margins.
But this shift is also putting serious pressure on agency margins.
Caregiver wages, the core component of cost of goods sold in home care, are rising faster than many agencies can adjust their pricing models. While some have raised rates for clients, the increases often fall short of fully offsetting higher labor expenses, creating a growing strain on operating budgets.
Compounding this challenge is the significant cost tied to internal operations. Scheduling, compliance, payroll, hiring, and after-hours support require substantial office staff, roles that often scale linearly as the agency grows.
In response, some agency owners are already turning to offshore talent, particularly for administrative support. It is a smart move, but could they do more?
To address these pressures, some agency owners are already turning to offshore administrative support. It's a smart and strategic step, but is it enough?
The answer may lie in artificial intelligence. In a rapidly evolving digital landscape, technology and software have proven to be key differentiators for growing home care agencies.
According to the 2023 HCP Benchmarking Report, the top three ways automation can support home care agencies are:
Automating intake and scheduling
Streamlining billing and revenue cycle
Managing documentation and record-keeping
AI-powered automation reduces overhead by minimizing manual workloads, preventing costly errors, and handling routine tasks without the need for human intervention. Most importantly, AI can scale without a proportional increase in cost, a critical factor in today’s labor-constrained environment.
At Vali Health, we believe AI is not just a tool for efficiency. It is a strategic advantage in a labor-constrained market. As caregiver wages continue to climb and operational complexity grows, agencies will need to find new ways to protect margins while improving the quality of care.
AI is one of the few levers that makes both possible.