7% of Revenue: The Financial Toll of No-Call No-Shows
Ever heard of the "nuclear event in home care"?
We've recently heard this term applied to the no-call no-show; few incidents have a greater negative impact on client retention.
Canceled services, frustrated families, stressed care coordinators, and lost hours can all result from this "nuclear event."
And while any agency owner is familiar with the frustration of a caregiver failing to show up to a shift without giving any warning, few of them are aware of the full financial impact of this phenomenon on their business.
We've sunk weeks of research into quantifying this cost. Here's what you can expect from this article:
1. Overview of our findings
2. A hypothetical example
3. A potential solution to the problem
4. Math + methodology
The Financial Impact of No-Call No-Shows
Let's start off with a few key takeaways from our research:
- 1% of scheduled shifts will result in a no-call no-show
- There's an 18% chance that a no-call no-show will result in a client cancellation
- Statistically, every individual no-call no-show will cost the agency $1,643
- The average agency is losing an amount equal to 7% of its annual revenue due to the direct costs of no-call no-shows
All of our math and methodology is included at the end (including a spreadsheet to estimate these costs for yourself), but let's explore what it means for you first.
Let's walk through an example
Think in terms of an agency pulling approximately $10M in annual revenue through 200 clients, each at an industry average billing rate of $28.
At a 1% chance of the caregiver no-call no-showing and including the hours lost with each one, the agency stands to directly lose $1,624 each week in foregone billable hours.
Additionally, data from our Compensation Report puts the average likelihood of the client canceling at 18%. With the average client lifetime value at roughly $16,000 according to Home Care Pulse, and assuming that 50% of this lifetime value may have already been earned, they'll miss out on more than $10k each week in unrealized revenue due to client cancellations.
The final numbers are staggering: our hypothetical agency will miss out on $599,040 each year that they have already spent money on marketing and overhead for.
With annual revenue at just under $10M, this means the agency is missing out on amount equal to almost 7% of their annual revenue every year as a direct result of no-call no-shows.
Indirect, Hard-to-Quantify Costs
It's worth mentioning other financial impacts (potentially even greater) which we don't have solid data to quantify. These include:
- Negative online reviews about the impacted shift deterring potential new clients
- Negative word of mouth
- Lost admin staff time and focus
- Admin team morale and turnover
- Increased pressure on replacement caregivers, potentially impacting turnover
It's also important to recognize that in times when caregiver staffing is particularly difficult and agencies are forced to be less picky in their hires, all of these effects are magnified.
A potential solution
I've written before about the work the Careswitch team is doing to solve the challenge of no-call no-shows.
We're convinced that artificial intelligence can help solve this problem, and we're finalizing work on a virtual care coordinator embedded in home care software that anticipates and solves the problem before it results in lost hours or canceled clients.
The virtual care coordinator uses a set of heuristics to predict no-call no-shows with a scary degree of accuracy, facilitates communication to find a replacement at a speed no human coordinator can match, then submits the suggestions to a human to approve.
So far, the signs are incredibly promising. In our first demonstration of its capabilities, an agency owner responded simply "oh my God."
Our first cohort of agencies using these features launches in July.
Because of the team/cost logistics of implementing technology like this in our platform, we're starting with a select group of franchisors and large independent agencies (at least ~$5M in revenue) initially.
- If you're a large independent or franchisor wanting to level up the technology in your company, let's talk.
- If you're a franchisee, forward this to corporate or use this template email.
- If you're none of these, join our waitlist here. We're excited to be able to work with you as soon as we can make the logistical economics of it work on our side.
Our hope is that no-call no-shows are about to become a relic of the past.
Math + methodology
We gathered this information using data from three primary sources:
- The HCP Benchmark Report (formerly known as the Home Care Benchmarking Study by Home Care Pulse)
- The Home Care Compensation Report by Careswitch (as of this writing, total sample size of 526 agencies representing 80,167 clients)
- Independent interviews by our team with home care agencies (this was used to estimate no-show rate probability only)
There are two types of direct costs associated with no-call no-shows:
1. Billable hours immediately lost from the shift that is delayed or canceled
2. Foregone future revenue from clients who cancel because of it
To calculate the cost of the billable hours lost from the impacted shift itself, we multiplied the average number of billable hours lost from a no-showed shift by benchmark hourly billing rates.
To calculate the foregone revenue from clients who cancel, we used this formula:
Forecasted number of shifts
x Probability of a shift being a no-call no-show
x Likelihood of a client canceling due to a no-call no-show shift
x Benchmark lifetime value of a client in dollars
(The 50% is to account for the fact that a no-call may occur at any point in the lifetime of the client and to keep our numbers conservative)
According to our Compensation Report data, each no-call no-show has an 18% chance of causing the client to cancel and that an average of 7 billable hours will be lost each time this occurs. Independent research by our team with home care agencies puts the probably of any given shift no-showing at around 1%.
(This is an average number, accounting for the fact that the probability may be much lower with tenured caregiver/client pairings and much higher when a new caregiver is starting work with a client.)
In case you want to check our math or use your own inputs to estimate the cost to your agency, here's a spreadsheet you can download with our calculations built out.