WEST COAST WRAP
AccentCare Plans Expansion, Likes East Coast Business Climate
By VITA REED
Irvine-based senior services company AccentCare Inc. says an East Coast expansion is in the works now that the company has wrapped up its buy of Torrance’s Just Right Home Care Inc.
“We’re basically done on the West Coast,” said Joe Davis, AccentCare’s president and co-founder. “Most of our efforts are going to be in the Northeast.”
AccentCare, which provides non-medical care and other services for senior citizens, bought Just Right earlier this month. The buy gives AccentCare access to some Southern California markets where it has been weak, including Long Beach, the South Bay and the San Fernando Valley. Terms of the deal were not disclosed.
Just Right counts revenue of about $18 million, according to Davis. The company is a joint venture of San Francisco-based Catholic Healthcare West and Little Company of Mary, which has a hospital in Torrance.
“AccentCare appeared to be a good fit; they have a highly developed (business) infrastructure and we felt they’d provide good continuity of patient care,” said Mark Klein, a Catholic Healthcare West spokesman.
AccentCare had been talking to the systems for about three years, according to Davis.
“It took a long time for it to get done,the non-profits, they tend to move sort of tactically, I guess,” Davis said.
AccentCare now employs 3,000 people after the acquisitions of Just Right and Comprehen-sive Home Care, a non-medical agency based in White Plains, N.Y. with about $5 million in revenue, which AccentCare bought in March.
AccentCare, which is privately held and venture-backed, is on target for revenue of about $50 million this fiscal year, according to Davis.
AccentCare recently inked a $10 million credit line with Comerica Bank. Last year it raised $25 million from venture backers.
“We still have a significant amount of cash,” Davis said. “We’re confident that capital will be sufficient to do something of scale in the Northeast.”
AccentCare is focusing on the tri-state area around New York because market characteristics are more favorable toward its business, according to Davis.
“In New York especially, you have tremendous urban density,you’ve got 10 million people between the city, island and Westchester.
“You’ve got great transportation,caregivers don’t need cars. Workers’ compensation rates are very reasonable. There’s a large care-giving population there. Wages are reasonable; reimbursement from Medicaid and other government payers is excellent,” he said.
By contrast, AccentCare has found that its core California and Arizona market, particularly California, is a “difficult” place to operate, Davis contended.
“One, workers’ compensation rates have more than doubled since we started the company three years ago. Unemployment (tax) rates have doubled,” he said. “Caregiver wages have increased significantly and it’s impossible to pass on all these costs to the consumer. So, what we’ve seen is that we’ve had huge, huge margin compression in our California-Arizona business although we still have a very nice business here.”
He also noted that AccentCare faces competition from companies that treat their caregivers as independent contractors, rather than workers, so they don’t have to pay workers’ compensation, unemployment tax or professional liability insurance.
Davis and Chief Executive Robert Prosek founded AccentCare after seeing a need to provide care and life-management services for frail senior citizens who prefer to live at home rather than go to assisted-living or nursing facilities. Services provided in-home by AccentCare include meal preparation, bathing, dressing and toileting.
About half of its business comes through referrals from institutions such as hospitals, social agencies, skilled-nursing facilities and aging agencies. Another 10% of its business comes through the phone book, with the balance coming from relationships with “large aggregators,” such as health maintenance organizations.
AccentCare’s services aren’t subject to the vagaries of health insurance in a number of cases,it receives about 60% of its revenue from clients or their adult children and about 40% from other sources, including long-term care insurance and some government programs.
The company received last year’s round of venture funds from a group led by Menlo Park-based Three Arch Partners and Boston-based Highland Capital Partners.
AccentCare is at least a couple of years away from reaching the size, scale and profitability to potentially look at the public markets, Davis said.
“It’s unclear, but it’s highly likely we’ll have to do some type of financing some time next year.”
