Home Health & Hospice Week

Knowing your costs is the vital first step. 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, [...]