Social Adult Day Care

I’ve been spending the past couple of months learning about the elderly care industry and market. An exploration in retirement homes turned me onto Adult Day Care Centers, which are social spaces where people can go hang out and receive care during the day instead of having an aide come to their home. What I like about social adult daycare is that it is profitable, scalable, and easier to start up than a retirement home business. So I spent last week looking at adult day and I’ve shared below what I learned and why I’m not going to keep working on this idea.

The case for Social Adult Day Care

1. The market is growing. There are more than 4,600 adult day services centers across the U.S. — a 35% increase since 2002. More than 260,000 participants and family caregivers are serviced — an increase of over 100,000, or 63%, since 2002.
2. They reduce long term cost of care. There is a heightened focus on prevention and health maintenance — nearly 80% of centers offer physical activity programs to address cardiovascular disease and diabetes. You could partner with an insurance company and say, “let me reduce the cost of care of an expensive population.”
3. It’s less capital intensive to scale. It doesn’t require the same capex as a retirement home. Instead of having to buy, you can lease a storefront, buy some tables and games and make a center. You’re only open during business hours, and have a few staff available, versus coordinating many aides to go to peoples homes, or staffing nurses 247 at an assisted living home.

Defining Adult Day Care

Adult Day Care is defined as “a professional care setting in which older adults, adults living with dementia, or adults living with disabilities receive individualized therapeutic, social, and health services for some part of the day,” according to the National Adult Day Services Association.

Social Adult Day Care programs operate during normal business hours five days a week, and host breakfast and lunch, social activities, provide transportation, and personal care services.

Who goes to Adult Day Care?

• The average age of the adult day center care recipient is 72 and 66% of all recipients are women.
• 35 percent of the adult day center care recipients live with an adult child, 20% with a spouse, 18% in an institutional setting, 13% with parents or other relatives, while 11% live alone.
• Nearly half of all participants have some level of dementia and programing can delay nursing home placement. Approximately 90% of centers offer cognitive stimulation programs, almost 80% provide memory training programs, and more than 75% offer educational programs.
• Day centers give family caregivers a break. Over 80% of participants attend full days and 46% attend five days per week, enabling family caregivers to remain in the workforce. Most centers provide caregiver support programs, including educational programs (70%), caregiver support groups (58%), and individual counseling (40%).

What is the Adult Day Care Business Model?

• One of the big concerns for me is that 78 percent of adult day centers are operated on a nonprofit or public basis.
• According to public information from adult daycare businesses, I learned that the margins vary greatly, but at best is about 20% from what I’ve seen. Typically, the way that it works is that you have revenue less expenses, the majority of which are 1) staff 2) business insurance. They take what's left, and that’s what the owner has as discretionary income. These businesses typically trade at 2–3x the discretionary income.
• 70 percent of adult day centers are affiliated with larger organizations such as home care, skilled nursing facilities, medical centers, or multi-purpose senior organizations.
• Daily fees for adult day services vary depending upon the services provided. The national average rate for adult day centers is $61 per day (includes 8–10 hours on average) compared to an average rate for home health aides of $19 per hour.
• The average capacity of adult day centers is 40.
• The average adult day center care recipient to staff ratio is 6:1.

I’m Killing this Pursuit

Over the past week, I dove into the industry. I did the following:

• I invented my landing page for my own Day Care Center, Grand Club and created facebook ads to test messaging and demand.
• I visited the Department for Aging in NYC to learn about getting a daycare license and learned they don’t give you any advice at all, they only accept the paperwork.
• I visited existing daycare centers in downtown manhattan, pretending that I was looking for space for my grandma.
• I spoke with existing business owners and reviewed the growth of existing daycare centers.

I ultimately decided not to pursue this path. Here’s why:

1. I wasn’t able to convince myself of demand. I did some Facebook ads about my make-believe daycare, Grand Club with centers in Brooklyn and the UWS, and didn’t generate one lead. This, of course, could be my shitty ads, but its not a supporting point. However, I will try one more week of ads with different messaging.

1. The market isn’t that big. There are about 5,000 adult daycares across the USA. It’s not a hugely popular mode of care, although it is growing.
2. They are not-for-profits. 70% of adult daycares are not-for-profits. I’m not completely sure why. I think it is because they are accepting medicare for payment but this could be wrong. The great thing is it makes it super affordable for seniors. A center in Chinatown charged a few bucks a day to seniors.
3. In NYC, getting a license to create an adult center is highly regulated. In fact, they have put a hold on giving any new licenses until end of March.

If I did want to keep pursuing this path, the things I’d do this week are:

1. Create a popup adult day center. Rent a space for a week in a target area and test market demand. See what percentage of people who walk by come in.
2. Talk to existing adult day and learn how they acquire customers
3. Make better ads
4. Learn about why most centers are non-profits.

However, given the small market and high regulations in NY, I’m going to kill this. I’m moving on to explore homecare agencies further next week.

Source of facts and stats: https://www.nadsa.org/consumers/overview-and-facts/