BusinessTN

Brentwood-based Guardian Home Care Holdings CEO Judy Bishop knows all about wanting to stay at home.

Professionally speaking, the home health care company she leads is built on the premise that elderly and chronically ill consumers have a strong desire to stay in their homes as long as possible in lieu of going to a nursing home.

Personally speaking, Bishop has for the last six years commuted from Nashville to Silsbee, Texas, (about two hours outside of Houston) to run the now $170 million company.

“I relied on Southwest and a company plane,” Bishop says. “From a personal standpoint, it was obviously quite taxing and challenging.” That all changed in October when Bishop’s company became one of the most recent to relocate its corporate headquarters to the Volunteer State. Guardian made the move to the Nashville area mainly to improve its ability to attract senior health care executive talent. (More than a dozen other home health care companies are already located in Music City.) With 9,000 employees and 14,000 clients in Texas, Tennessee and Georgia, the move also made geographic sense. Bishop, a nearly 30-year health care veteran with an already impressive Nashville health care background, once again gets to live in the same town where she works.

“I’m ecstatic,” she says. “My office is five minutes from my house.”

BIGGER MOUSETRAP

Given industry trends, and Guardian’s bold acquisition plans, Bishop might soon need a bigger office. Medicare primarily governs funding for home health. Up until 2000, providers were reimbursed on a cost-plus basis, meaning they were reimbursed for their costs along with an administrative fee. Providers—mostly mom-and-pop operations—scratched out a living under that system. But home health care certainly wasn’t an industry that investors were clamoring to join. Then in 2000, the reimbursement method changed, based instead on 60-day episodes of care, similar to hospitals, where a provider is reimbursed depending on the patients’ level of care needs based on an assessment. Suddenly providers could make a profit being efficient or through general economies of scale. And that’s precisely what’s happening. (Medicare is also moving toward a pay-for-performance model where home health companies are rated in terms of patient outcomes—those providers demonstrating outcomes in the top 10% nationally are rewarded with additional increases in rates.) In that new landscape where profits are possible, Bishop is busily buying up smaller companies to add to her growing Guardian fold. In May, her company, then called Texas Home Health, purchased Chattanooga-based Guardian (and summarily changed the name of its holding company to better represent its regional growth). This August, Guardian purchased the not-for-profit Mid-Cumberland Home Health, expanding its presence in Middle Tennessee to 13 counties. “We have access to capital,” Bishop says. “And we’re aggressively looking at acquisitions.” (According to a recent report in the Nashville City Paper, which described the home health sector as a “sleeping giant,” the three largest firms in the fragmented home health care sector nationally generate just 5% of the business.)

THE CATBIRD’S SEAT

Bishop can certainly impress potential investors with her résumé. She started her career in Canada, holding down various senior executive positions in home health care for many years. Then in 1982, Bishop started her own home health care company, grew it into one of Canada’s most successful, merged it with an assisted living business and went public.

It was while looking for U.S. acquisitions that Bishop discovered a home health care company in Nashville—Partners Home Health. Bishop ended up acquiring the company but was then recruited by institutional investors to move to Nashville to try and turn the money-losing company around. She did, eventually selling it in 1994 to Integrated Health Services, a publicly traded, sub-acute nursing home company wishing to enter the home health care business. With Bishop on board, the company, called Symphony, proceeded to do about 20 home health care acquisitions, rolling them up in Nashville and eventually becoming an over $200 million revenue company. When Integrated moved its corporate offices for home health to Baltimore, Bishop didn’t want to go.

Instead she began doing consulting work for private equity companies and banks. Still prior to the change in the reimbursement system from cost base to prospective payment, it wasn’t a good time for home health care. Many companies were in trouble. Many went bankrupt. Bishop spent three or four years working with lenders and bankers trying to fix companies. Then she got a call to join the board of Texas Home Health, a company originally founded by a husband and wife team in 1969 in Silsbee, Texas. Bishop saw it as a challenge to take a company that had been primarily in Medicaid and leverage that client base to get back into Medicare. Then last year, the Texas Home Health board sold the company to private equity firm Friedman Fleischer & Lowe, which manages more than $2 billion in funds. Bishop was named company CEO. The company, which has tripled revenue since 2000, is now in the midst of an aggressive expansion plan to grow its business in the Southeast.

THE UNWELCOME MAT

How receptive will Guardian’s new home state be? Bishop freely admits that for a state so recognized as a leader and innovator in health care, Tennessee’s track record on home health is “not great.” That fact is largely attributable to the powerful nursing home lobby in Tennessee and on Capitol Hill.

“In Tennessee, there’s been a very strong lobby for nursing homes,” Bishop says. “It’s not the fault of nursing homes; it’s the fault of the home care providers who have not been known as lobbyists.” Bishop argues that since historically most home care companies were mom-and-pop in nature, or nurse-owned, they didn’t have the finances to lobby.

“It’s only been in the last few years they’ve even had any income from their companies to re-invest, to go out and do political lobbying or start promoting the business,” Bishop says. “One of the things I’d really like to see is Tennessee wake up and start looking at the use of home care appropriately.”

More generally, Bishop blames a lack of public awareness and a faulty institutional mindset for the failure of the home health sector to grow larger faster.

“The onus has to be on providers to provide that education to the community and physicians about what coverage is available and what is an appropriate Medicare referral,” Bishop says. “But also, form follows funding. There was funding available for long-term care, and families thought their only option was to put mom and dad in a nursing home. People are now waking up and realizing, wait a minute, I don’t have to go to a nursing home, I can stay at home.”

Specifically, America’s nearly 80 million baby boomers are coming to that realization.

“A lot of people have disposable income. They have assets, and they’re willing to supplement what the government is paying to stay at home,” Bishop says. “So we’re seeing an increase in private pay, out of pocket.”

NURSE CALL

One piece of the educational puzzle that could help elevate home health as a sector is the sector’s potential success in blunting the effects of the nursing shortage in America.

Bishop says her company has had a lot of success reaching nurses who are looking to reenter the work force a couple of days a week without interfering with their family life. Bishop’s son, who along with Bishop’s husband owns a health care-focused marketing company in Franklin, came up with a variable data-recruiting program enabling Guardian to contact all licensed nurses in a given area. Provided access to a personalized Web site, nurses can supply information about what it would take (hours, days, additional new training) to get them back in to the nursing workforce. (Bishop also hired two full-time recruiters who had worked at HCA and other health care systems to augment the push.)

“There’s this fallacy that we have this shortage, and there are no nurses,” Bishop says. “But there are, and we’re proving it. There are nurses who are available to work but can’t fit their life and schedules around a hospital. We have to work diligently to try to get our clients’ needs and scheduling to fit the availability of our nurses. But I think the future is matching the labor force with the needs that are out there.”

Nashville, the epicenter of the health care industry, has welcomed Bishop back into the circle of Nashville-based health care entrepreneurs and innovators. Newly installed in old stomping grounds, she might be just the person to assist in consolidating the $30 billion field of home health care and drive nursing services and attendant care into the mainstream.