Home Health & Hospice Week

Neglecting your business plan means you're risking your business.

If you put off crafting a sound business plan  until your agency is suffering,  it may be too late.

That's the fate the VNA of Western Pennsylvania nearly faced after the first year of the prospective payment system, recalled CEO Kristy Wright in an Oct. 17 presentation at the National Association for Home Care & Hospice's annual meeting in Baltimore.

The VNA did well under the interim payment system and expected to do so under PPS as well, Wright told attendees. "We thought we were ready." But the agency had neglected some important components of its business plan in preparing for the new payment system, and it ended up costing the VNA $1.5 million in 2000.

Here are the steps the VNA took to cut costs and put its bottom line back in the black:

1. Set objectives. They must be achievable. For example, don't expect to capture 100 percent of referrals from your referring hospital, advised Robert Simione with Simione Consultants in Hamden, CT. Simione helped the VNA get back on track after its disastrous first year of PPS. Goals also must be measurable so you can gauge whether you're achieving them.

You should expect to work on up to five objectives per year, which means you have to prioritize your goals, Simione counseled.

2. Set your assumptions. Collect data to support your objectives and set reasonable, achievable assumptions. The VNA aimed to get corporate overhead below 50 percent, productivity at 4 visits on its productivity scale, and quality measures at or above state and national benchmarks, Wright recounted. "Keep it realistic," Wright urged.

Work together: You'll need a thorough analysis of your agency's operational and financial data to set these, Simione advised. That means your financial and operational staff must collaborate.

3. Calculate return on investment. Quantify your assumptions, determine their financial impact and figure the cost and return, Simione instructed. Gauge financial benefits as well as non-financial ones like improved outcomes, staff retention and referral source satisfaction.

Example: Even though the VNA was strapped for cash in the second year of PPS, Wright convinced the board to invest $250,000 in telehealth equipment because of the return on investment it represented.

4. Implement the plan. Set tasks to accomplish the objectives you chose, Simione recommended. Assign responsibility for each task to one person and give her the resources to do it. And set a realistic deadline.

Tip: Even if multiple people will work on an objective, assign one person to be accountable for it so he can keep it on track, Wright advised.

5. Plan for contingencies. Monitor progress, identify barriers and remove them, and revise the plan accordingly, Simione said. That may mean setting new objectives, assumptions and implementation activities.

Plan ahead: "We didn't wait until the plan didn't go well" to do contingency planning, Wright related. Instead, VNA management planned next steps to address potential shortfalls.

6. Measure success. Monitor the plan in an ongoing manner, Simione counseled. Stay focused on progressing toward predetermined measurements and goals and identify roadblocks as they arise.