Co venture elderly_care

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At CoVenture, we invest in pre-seed startups led by founders with strong domain expertise.

1 | Elderly Care

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Industry at a Glance

Source: FranchiseHelp

!e 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%

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U.S. Elderly Population

Source: Wells Fargo Securities, Census Bureau

!e Industry

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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%

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16

18

20

22

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2013 2014 2015 2016 2017 2018 2019 2020 %

of T

otal

U.S

. Pop

ulat

ion

Med

icar

e Po

pula

tion

(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)

U.S. Average Life Expectancy

Source: United Nations World Project, 2009

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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

Ave

rage

Life

Exp

ecta

ncy

Elderly Population Concentration

Source: U.S. Census Bureau

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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

§  !ese 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%

Medicare Overview

Source: Medicare Website

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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+ §  !at 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)

A!ordable Care Act

Source: Medicare Website, National Committee to Preserve Social Security and Medicare

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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

A!ordable 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 §  A#ordable Care Act will attempt to fill in “donut hole” for prescription medication coverage §  Will also help lower Medicare B (Medical Insurance) premiums

Long-Term Care

Source: Congressional Budget O$ce

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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. !ere 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

Payment for Long-Term Care

Source: Congressional Budget O$ce, US Senate Commission on Long-Term Care

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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 a#ord 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

2 | Traditional Healthcare Providers

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Industry Key Players

Traditional Healthcare Providers

Life Insurance and Annuities

Retirement Facilities

Specialty Hospitals

In-Home Care

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Specialty Hospitals

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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


Source: IBISWorld

Life Insurance and Annuities

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Industry Overview

Customer Segmentation




Businesses 848


§  Improvements in bond and equity markets

§  Aging domestic population §  Increasing household a%uence 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

Retirement Facilities

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Industry Overview

Revenue Breakdown




Businesses 16,795


§  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

Home Health Care

Source: IBISWorld

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Industry Overview

Revenue Breakdown




Businesses 304,350


§  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

3 | Current Players

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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

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Insights !e 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.

Disruptive Technologies

Source: AngelList

Current Players

Financial Management In-Home Caregiver Platforms Durable Goods

Lack of many existing technologies in financial management so#ware provides

an excellent opportunity

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4 | Market Opportunities

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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 o#erings are encompassed by in-home care with the exception of money management and financial safety solutions –

major opportunities lie in these areas

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Traditional Sources of Information


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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 o&en 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

Major Opportunities in Elderly Care

Source: USNews


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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 so&ware 3.  Accessibility products

5 | Conclusion

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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

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Ali Hamed ali @ coventure.us | 818 307 7964 | @alibhamed

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Brian Harwitt | brian @ coventure.us

Clark Zhang | clark @ coventure.us

Co venture elderly_care

Business

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