Home Health & Hospice Week

Rebasing reduction may make or break agencies in 2014.


Rebasing the home health prospective payment system will take a big chunk out of your operating budget over the next four years, with a proposed 14 percent reduction. To survive — and thrive — you’ll need to take decisive steps to cut the fat from your home health agency’s spending.

In its PPS proposed rule published in the July 3 Federal Register, the Centers for Medicare & Medicaid Services floats a 3.5 percent cut per year for the next four years (see Eli’s HCW, Vol. XXII, No. 24). "This is just year one," notes financial expert Dave Macke with VonLehman in Ft. Mitch-ell, Ky. You’ll have to find budget cutting strategies to help you deal with this cut for three more years — plus sequestration, at least in the near future.

Due to the inflation update, the rates for 2014 will fall about 1.5 percent before sequestration, if the proposed rule is finalized as-is. But in future years, the cut could be more drastic depending on the inflation factor.

Consider these expert tips for paring your agency’s budget:

• Know yourself. To figure out where to cut and where to spend more to gain, you need to know your agency inside and out. Focus on timely reports with vital statistics so you can manage your costs proactively.
• Create efficiencies. It’s time to get even leaner. You can’t cut into infrastructure, advises financial expert Pat Laff with Laff Associates in Hilton Head Island, S.C. You need to find places to create efficiencies.
• Solutions may range from tapping the potential of technology — including telehealth, to exploring car leasing options to redesigning your supplies system.
• Increase productivity. Are your staff duplicating efforts or wasting time on activities that don’t benefit patients or your organization? Now’s the time to examine job processes and figure out how to increase staff productivity without compromising care quality, Laff says. Don’t let employees hang onto inefficient practices just because "that’s the way we’ve always done it," experts urge.

Incentive-based compensation may be your path to achieving the productivity goals you desire, Laff said in a presentation at the National Asso-ciation for Home Care & Hospice’s 2011 annual meeting.

• Reduce direct costs. The majority of an HHA’s costs are employee compensation, Laff noted in the presentation. You can also look to travel reimbursement and supplies costs for savings.
• Increase volume. To reduce cost per visit, you’ll have to increase your volume of visits, Laff notes. But increasing volume is very challenging in many areas’ crowded markets, Macke allows.
• Cut luxuries. Have you been hanging onto items or practices by justifying that they don’t add that much cost? You may be surprised how quickly it adds up. "Luxuries will go away" under reduced PPS rates, Laff predicts.
• Act now. "Agencies can’t sit back and wait until November or December to see how it impacts them," Macke says of the 2014 final rule and cuts it contains. CMS is unlikely to make any significant changes to the proposed rule regarding reimbursement rates.

Industry representatives such as NAHC and the Visiting Nurse Associations of America are lobbying Congress to block the rebasing cuts, but you can’t assume that effort will be successful — especially with the constant refrain from the Medicare Payment Advisory Commission and the HHS Office of Inspector General that the industry is overly profitable and riddled with fraud and abuse. Make necessary changes now so that you aren’t struggling — or worse, failing — when the new payment rates hit.

Note: The proposed rule is at www.gpo.gov/fdsys/pkg/FR-2013-07-03/pdf/2013-15766.pdf. See many more cost-cutting ideas in the Laff Associates presentation at www.laffassociates.com/home.cfm/ page/Articles_Presentations.html — scroll down to the "Want To Improve Your Financial Outcomes - Manage Smarter!" presentation link.