Co venture elderly_care

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An overview of the elderly care industry

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Co venture elderly_care

  1. 1. 1
  2. 2. 2 At CoVenture, we invest in pre-seed startups led by founders with strong domain expertise.
  3. 3. 1 | Elderly Care 3
  4. 4. Industry at a Glance Source: FranchiseHelp The Industry Industry Overview Description Elderly care is the business of fulfilling living needs and requirements to living citizens Market Size (2013) $57.6 billion to $261.5 billion Services §  Assisted living §  Nursing homes and facilities §  Hospice care §  Pharmaceuticals §  In-home care Revenue Breakdown Medicare, 37% Private Insurance, 22% Medicaid, 19% Local Governme nts, 20% Other, 2% 4
  5. 5. U.S. Elderly Population Source: Wells Fargo Securities, Census Bureau The Industry 5 16.4 17.0 17.6 18.3 18.9 19.6 20.3 21.0 19.5 19.8 20.2 20.6 21.1 21.9 22.5 23.2 5.8% 6.0% 6.2% 6.4% 6.6% 6.8% 7.0% 7.2% 14 16 18 20 22 24 2013 2014 2015 2016 2017 2018 2019 2020 %ofTotalU.S.Population MedicarePopulation(m) Women 75+ 75+ Population % of Total Pop Observations and Analysis §  75+ population in the U.S. projected to increase by 3.7m total (19%), with women increasing 4.6m (28%) §  Percentage of total U.S. population projected to increase at a CAGR of 1.6% between 2013 to 2020 §  As elderly population rises, so too will demand for elderly care services (especially for women)
  6. 6. U.S. Average Life Expectancy Source: United Nations World Project, 2009 The Industry 6 Observations and Analysis §  Average life expectancy to increase by 2.8 years by 2045 §  Mean years spent as a senior (65+) increases to 18.3 years, representing an 18% increase §  Increasing life expectancy will lead to longer-term relationships between elders and service providers §  Financial management issues will become more prominent as people live longer 80.5 83.3 70 72 74 76 78 80 82 84 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 AverageLifeExpectancy
  7. 7. Elderly Population Concentration Source: U.S. Census Bureau The Industry 7 Implications §  States such as Montana, Florida, West Virginia, and Maine have the highest concentration of elderly people §  California, Texas, New York, Florida, and Illinois have the highest absolute elderly population §  These regions will provide highest demand for elderly care services, and provide the most opportunity for expansion FL 19.5% MT 17.6% ME 18.0% WV 18.1% >17.5% 15.1% - 17.5% 12.5% - 15.0% <12.5%
  8. 8. Medicare Overview Source: Medicare Website The Industry 8 Increasing prevalence of Medicare will give rise to higher spending on elderly care §  Guarantees health insurance for Americans aged 65 and older who have worked and paid into the system, as well as people younger than 65 with disabilities §  In 2010, Medicare provided health insurance to 48 million Americans, 40 million of which were 65+ §  That number is expected to increase to 80 million by 2030 §  Spending is expected to increase from $560 billion in 2010 to $1 trillion by 2022 Parts Part A) Hospital Insurance Part B) Medical Insurance Part C) Medical Advantage Plans Part D) Prescription Drug Plans Program of All- Inclusive Care for the Elderly Covers short term (up to 60 days), in hospitals and skilled nursing homes Includes medical equipment such as canes and wheelchairs; 80% covered by Medicare HMO or non-HMO plans for a monthly premium; use by 28% of recipients (supplemental) Provides coverage for most prescribed drugs (supplemental) Services provided by adult day health centers and in-home services to individuals frail enough to need nursing care (supplemental)
  9. 9. Affordable Care Act Source: Medicare Website, National Committee to Preserve Social Security and Medicare 9 Prescription Medication Coverage 0% 75% $- $1,050 $2,100 $3,150 $4,200 $5250+ Under $2,800: 75% Coverage $2,800 - $4,550: No Coverage $4,550+: 95% Coverage Affordable Care Act Coverage for $2,800 to $4,550 Brand-Name Drugs Generic Drugs 2014 53% 28% 2015 55% 35% 2016 55% 42% 2017 60% 49% 2018 65% 56% 2019 70% 63% 2020 75% 75% Insights §  Prescription medication coverage gap currently exists in $2,800 to $4,550 range §  Affordable Care Act will attempt to fill in “donut hole” for prescription medication coverage §  Will also help lower Medicare B (Medical Insurance) premiums
  10. 10. Long-Term Care Source: Congressional Budget Office 10 Informal Care, 55% Institutional Care, 31% Community -Based Care, 14% Estimated Economic Value of Formal and Informal Long-Term Services, 2011 What is Long-Term Care? Long-term care is support provided to people who cannot live independently. There are three main types of LTC: 1) Informal Care, which consists of in-home caregivers and support from family members 2) Institutional Care, which consists of nursing homes and assisted living centers and 3) Community Based Care, which consists of day time care for elderly people in community centers and transportation services. Currently Long-term care account for 1.3% of the US GDP and that number is expected to grow to 3% by 2050. Estimated Market Size $426B
  11. 11. Payment for Long-Term Care Source: Congressional Budget Office, US Senate Commission on Long-Term Care 11 58% 24% 14% 31% 29% 36% 14% 30% 52% Nursing Home Assisted Living Facility Part-Time Home Healthcare Aid Survey Data for Cost of Long-Term Care Under Estimate Correct Estimate Over Estimate Medicaid, $131.40 , 62% Out of Pocket, $45.50 , 21% Other Private, $24.40 , 12% Other Public, $9.70 , 5% LTSS Expenditures by Source, 2011 (USD Billions) Insights §  Medicaid pays for the largest portion of long-term care, as people who exhaust private insurance policies or simply cannot afford their care, rely on Medicaid. Out of Pocket is (private pay) for long-term care has been growing and makes up over 20% of overall expenditures on LTC §  Other alternatives are long-term care insurance which currently have high premiums, but as more people have a need for the insurance, more people will sign up, and the premiums will likely drop §  Many people underestimate the costs of long-term care, especially the cost of nursing homes
  12. 12. 2 | Traditional Healthcare Providers 12
  13. 13. Industry Key Players Traditional Healthcare Providers Life Insurance and Annuities Retirement Facilities Specialty Hospitals In-Home Care 13
  14. 14. Specialty Hospitals 14 Industry Overview Market Size (2013) $42.3 billion Businesses 571 Key Performance Drivers §  Labor intensity §  Consolidation of smaller companies §  Aging US population Revenue Breakdown Long-­‐term   Acute  Care,   39.0%   Inpa8ent   Rehabilita8on ,  29.5%   Children's   Specialty,   13.5%   Orthopedic   Facili8es,   6.0%   Cardiat   Facili8es,   5.0%   Women's   Facili8es,   3.0%   Other,  4.0%   Revenue and Growth, 2005-2019 (USD Billions) CAGR = 6.2% 0% 2% 4% 6% 8% 10% $0 $20 $40 $60 $80 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E Revenue % Growth Traditional Healthcare Providers Source: IBISWorld
  15. 15. Life Insurance and Annuities 15 Industry Overview Customer Segmentation Revenue and Growth, 2005-2019 (USD Billions) Traditional Healthcare Providers Market Size (2013) $883.7 billion Businesses 848 Key Performance Drivers §  Improvements in bond and equity markets §  Aging domestic population §  Increasing household affluence and retirement planning 65 and Older, 20.2% 45 to 54, 23.5% 35 to 44, 22.2% 34 and Younger, 17.4% 55 to 64, 16.7% CAGR = 2.9% -30% -20% -10% 0% 10% 20% $0 $200 $400 $600 $800 $1,000 $1,200 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E Revenue % Growth Source: IBISWorld
  16. 16. Retirement Facilities 16 Industry Overview Revenue Breakdown Revenue and Growth, 2005-2019 (USD Billions) Traditional Healthcare Providers Market Size (2013) $60.2 billion Businesses 16,795 Key Performance Drivers §  Aging population and life expectancy §  Increasing housing price index §  Improving retirement facility living conditions Assisted Living Facilities, 41% Independent Living Facilities, 37% Continuing Care, 22% CAGR = 4.8% 0% 2% 4% 6% 8% 10% $0 $20 $40 $60 $80 $100 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E Revenue % Growth Source: IBISWorld
  17. 17. Home Health Care Source: IBISWorld 17 Industry Overview Revenue Breakdown Revenue and Growth, 2005-2019 (USD Billions) Traditional Healthcare Providers Market Size (2013) $74.5 billion Businesses 304,350 Key Performance Drivers §  Rising costs of institutional care §  Medicare spending and regulation changes Home Nursing Care, 12% Homemaker and Personal Services, 50% Home Hospice, 22% Other Services, 16% CAGR = -0.2% -2% 0% 2% 4% 6% 8% $0 $20 $40 $60 $80 $100 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E Revenue % Growth
  18. 18. 3 | Current Players 18
  19. 19. Current Elderly Care Companies Note: Companies are primarily established players in elderly care spanning in-home care products and services, retirement communities, and insurers Current Players Services Products Institutions 19 Insights The Elderly Care industry is a low-technology, segmented, and high-growth industry, which makes it prime for consolidation. Currently there are thousands of small players with nominal market share, yet this is likely to change.
  20. 20. Disruptive Technologies Source: AngelList Current Players Financial Management In-Home Caregiver Platforms Durable Goods Lack of many existing technologies in financial management software provides an excellent opportunity 20
  21. 21. 4 | Market Opportunities 21
  22. 22. In-Demand Products and Services Source: National Institute on Aging Market Opportunities Type of Care Examples Personal Care Bathing, washing hair, getting dressed Homemaking Chores, housework, yard work, groceries, laundry Meals Organizing meals with other senior citizens and meal delivery service Money Management Paying bills, financial planning Accessibility Driving assistance, scooters, electric chairs Activities Organized events and gatherings for seniors Safety Protection from physical harms and financial scams Insights §  Elderly customers seek a wide variety of products and services §  Most offerings are encompassed by in-home care with the exception of money management and financial safety solutions – major opportunities lie in these areas 22
  23. 23. Traditional Sources of Information Market Opportunities 23 Federal Govern- ment Friends and Family Community and Local Government Resources Geriatric Care Managers Trained specialists can help form a long-term care plan and help find the services that seniors require People that seniors know are often the most immediate source of care and services Local healthcare providers and social providers may provide quick solutions Information on long- term care planning and help locating is readily available online in a variety of government- sponsored sources Understanding how people are finding out about services is important for marketing products and creating a distribution strategy
  24. 24. Major Opportunities in Elderly Care Source: USNews Market Opportunities 24 Alternative Retirement Assets In-Home Care Major opportunity exists in solutions for leveraging assets to increase income §  As life expectancy increases, seniors will need to find ways to enhance their retirement fund and social security, to avoid running out of money §  Most common method would be leveraging assets to increase income §  Ways of leveraging assets: 1.  Reverse mortgages 2.  Refinancing home 3.  Home equity loan or line of credit 4.  Annuities In-home care provides a cheaper alternative to independent retirement §  Increasing demand for retirement care facilities (due to the aging baby boomer population) will increase prices for living in retirement homes §  In-home care presents a cheaper alternative, with associated benefits of independent living and freedom §  Major expected areas of opportunity: 1.  Skilled nursing services and matchmaking platforms 2.  Communication and safety software 3.  Accessibility products
  25. 25. 5 | Conclusion 25
  26. 26. Summary and Conclusions Conclusion 1 Elderly  care  industry  is  projected  to  grow  and  presents  an  excellent  investment  opportunity   3 Elderly  care  space  is  currently  segmented,  with  consolida8on  to  occur  soon  and  a  dominant  player   likely  to  emerge   Medicare  and  the  Affordable  Care  Act  are  going  to  help  relieve  senior  expenditures  on  prescrip8on   drugs  and  insurance,  freeing  up  money  to  spend  on  alterna8ve  healthcare  solu8ons  2 4 Majority  of  current  elderly  care  start-­‐ups  focus  on  in-­‐home  care  plaTorms  and  durable  goods   5 Increasing  life  expectancy  will  create  demand  for  financial  management  and  planning  products  and   altera8ve  ways  to  increase  re8rement  income   26
  27. 27. Ali Hamed ali @ coventure.us | 818 307 7964 | @alibhamed 2 7   Brian Harwitt | brian @ coventure.us Clark Zhang | clark @ coventure.us

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