Home Health & Hospice Week

Potential impact:  A 9 percent bite off your bottom line.

Travel costs could continue to drag down your bottom line--in spite of lower prices at the pump this fall. That's thanks to the feds' latest take on the cost of business travel.

On Nov. 1, the Internal Revenue Service issued its 2007 rates of reimbursement, increasing the per-mile cost of business travel to 48.5 cents, up from the 2006 rate of 44.5 cents.

The 4-cent per mile increase is "huge," says Peter Cobb with the Vermont Assembly of Home Health Agencies. "That's a 9 percent increase," he reminds.

Background: Each year, the IRS issues its optional standard mileage rates as a guideline to help employers and others calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

The new rate of 48.5 cents, effective Jan. 1, 2007, is the standard mileage rate for the use of a motor vehicle, including vans, pickups or panel trucks, for business miles driven.

Plan For Travel Cost Increases

Not all home health agencies use the IRS figure for their travel allowance, but the increase will put pressure on agencies to increase what they already pay, suggests Regina McNamara of Kelsco Consulting in Cheshire, CT.

The agency upped the rate for reimbursement at a time when gas prices have fallen. But agencies should remember that gas prices have been on a veritable roller coaster ride lately, suggesting that prices could escalate again soon.

Sign of the times: As recently as August, gas prices hovered near $3 per gallon on average in the U.S., according to www.gasbuddy.com, a Web site that tracks average gasoline prices in the U.S. and Canada (see Eli's HCW, Vol. XV, No. 17).

"We're in an energy crisis," says McNamara. "Agencies have to take control of their travel costs."

Giving more thought to scheduling and geographic locations of visits can make a difference.

When visits are scheduled geographically, for example, agencies can employ staff carpooling to patients' homes, notes Karen Hinkle with the Kentucky Home Health Association. The extra effort could shave considerable costs, especially in rural areas, Hinkle says--even if the reduction is a small percentage point over the yearly average.

Collectively, agencies in Kentucky travel about 22 million miles every year, she estimates.

Encourage Gas Conservation

Agencies can also take the lead by encouraging staffers to make "responsible choices" in the kind of vehicle they choose to drive, reminds McNamara. "If you're out there driving a Hyundai that gets more than 40 miles per gallon, you could actually end up making money on the reimbursement rate," she says.
 
Tip: Agencies can also help educate staffers about tax breaks they can take for mileage that's not reimbursed. Employees can itemize car expenses on their tax returns and claim any costs in excess of the employer reimbursement, offers Tom Boyd with Roh-nert Park, CA-based Boyd & Nicholas. 

Note: To see the IRS' announcement, go to www.irs.gov/newsroom/index.html.