Home Health & Hospice Week

Managed care penetration continues to grow, but your business shouldn't suffer as a result.

Your success under managed care will depend on how well you know your business and whether you can implement savvy contracting practices, said speakers in an Oct. 13 session at the National Association for Home Care & Hospice's annual meeting in Ft. Lauderdale, Fla.

Follow these tips from the experts to determine whether a managed care contract is right for you and to negotiate more favorable payment terms:

1. Start with your cost report. The key to negotiating good managed care contracts is knowing your own costs first, said Ken McNulty, vice president for finance with the Visiting Nurse Associa-tion of Boston, in the session. For most agencies, cost accounting will mean starting with the data in your Medicare cost report.

Turn to "our old friend," McNulty told attendees. "The Medicare cost report is the place to begin." Take your expenses from the report to begin calculating your true cost.

2. Add expenses not on the report. To get an accurate idea of what payment rate you can accept and still cover your costs, you need to add in some costs not traditionally on cost reports, Mc-Nulty counseled. You need to include items like marketing expenses, bad debt, and interest expense in the calculation.

"Make sure all of your expenses are included," he urged.

3. Break it down. Most managed care organizations pay by the visit, so you should calculate your costs accordingly to evaluate rates, McNulty advised. But realize "a visit is not a visit is not a visit," he warned. Visits for some payers are of different lengths and involve different duties, he noted. So figure out how much you are spending per visit, per payer.

How to do it: Take your total cost per discipline from the cost report and divide by the number of hours of service to get your hourly visit cost. Next, keep track of visit times and calculate the length of visit for each payer. Finally, multiply the average length of visit by the hourly cost to arrive at the payer's unique per visit cost.

"This was a big eye-opener," McNulty said of calculating the costs by payer. This calculation led the VNA to say "yes" to some contracts it would previously have considered too low-paying, and "no" to other contracts that paid more but were time- and resource-intensive.

Not perfect: The time calculation won't catch everything. For example, VNAB didn't include documentation and travel time because it was too difficult to collect, McNulty pointed out.

4. Know the plan. When you have a good handle on your own vital information, it's time to focus on the payer. The first step is to figure out what kind of plan you're dealing with, suggested Walt Borginis, CFO of The Visiting Nurse Asso-ciation of Greater Philadelphia.

Just by finding out if it's a traditional, Medicare Advantage or Medicaid plan, you'll have a better idea of what's required. For example, MA plans usually don't use contracts and don't require authorizations, he noted in the session.

Also find out stats like how many patients are enrolled, whether the plan is accepted by your major referral sources, and whether the plan intends to expand in your area, Borginis recommended. You can use that information to evaluate whether the plan is worth contracting with.

5. Evaluate the plan. In addition to demographics like size and coverage area, you need to find out how a plan works, Borginis advised. For instance, whether the authorization process is automated through a Web system can make a big difference in how much work it is for you to secure authorizations.

Authorizations, billing, and contract re-quirements like accreditation and start of service timeliness should all go into the evaluation.

Beware: Plans that require paper billing are probably the most work-intensive, Borginis warned. "Paper billing is the most inefficient," he said.

6. Evaluate payment rates. One of the trickiest parts of managed care negotiating is setting payment rates. Use your costs you found to decide whether what the plan is offering will keep you from losing money.

Start with presenting the plan with your full per visit costs based on your cost report and other pertinent data. "They're going to laugh at you," McNulty warned, because they know you'll take less. But it makes a good starting point.

Don't be tempted to fudge the numbers for negotiating purposes, McNulty advised. Thanks to FOIA requests, plans that VNAB deal with already have accessed their cost reports.

Tip: Using Medicare's low utilization payment adjustment (LUPA) rates can help in your negotiations when you're dealing with a plan that is trying to lowball you, Borginis offered. "It's good because it's split by specialty," he noted.

Don't forget: Be sure to include annual rate updates in your contracts or you'll have to cancel them and renegotiate all over again, Borginis added.

7. Don't be afraid to say "no." With your accurate cost data in mind, you should feel free to say "no" to contracts that will lead to losses, McNul-ty stressed.

"Let someone else take those losses," Borginis advised. Home health agencies taking lowball rates will be forced out of business, then the market will stabilize, he maintained.

8. Offer creative solutions. If you're trying to win new payment terms from a plan, try to think of ways to encourage the change.

For example: Many plans are reluctant to pay for home health in episodic payments because they say it's too complicated, Borginis noted. You can offer to do a pilot project for episodic payments to show them how episodic payments streamline their administrative obligations.