Home Health & Hospice Week

Knowing your costs is half the battle

Home health agencies are bracing for a tougher year ahead, thanks to the relatively flat Med-icare reimbursement rates announced for 2009.

The Centers for Medicare & Medicaid Services is increasing HHA rates by a tiny 0.15 percent next year, due to the case mix creep cut virtually wiping out the inflation update (see Eli's HCW, Vol. XVII, No. 39, p. 306). Agencies that are clients of reimbursement consultant Bobby Dusek in Abilene, Texas will see their gross profits decrease about 5 to 6 percent in 2009, he estimates.

"Once again many HHAs will have to find means to cut costs," warns consultant Tom Boyd with Rohnert Park, Calif.-based Boyd & Nicholas. Use this advice from financial experts to survive and thrive in the slimmer reimbursement climate ahead:

1. Employee compensation. Worker compensation is most agencies' largest direct cost. Changing employee benefit packages may be one opportunity for reducing expenses, suggests financial consultant Mark Sharp with BKD in Spring-field, Mo.

It's not just the compensation amount you should be worried about, adds consultant Pat Laff with Hilton Head Island, S.C.-based Laff Associ-ates. Look carefully at the method of compensation and what it encourages your staff to do.

Make sure the financial incentives for clinical personnel as well as supervisors are in line with the payment realities, Laff advises. For example, offering hourly or salaried pay with no bonuses for certain milestones will not encourage staff to change  their ways when it comes to practices that are hurting your bottom line without helping patients.

2. Transportation reimbursement. Lower gas prices, if they continue, will help offset some of the rate cut, Dusek notes. But mileage costs are still a major commitment.

How you pay for transportation is another opportunity to reduce costs, Sharp advises.

Using geographic scheduling and other tools can help control mileage costs, Laff adds.

3. Staffing and productivity. Unfortun-ately, cutting staff is going to be one way providers have to deal with reduced reimbursement, predicts Bob Wardwell with the Visiting Nurse Associa-tions of America.

"Many of our members already have to turn away patients for lack of staff, which really troubles a mission-based organization," says Wardwell, a former top CMS official. "This freeze means more of that."

Staff who are retained will have to contribute to the agency's financial health to the best of their ability. Take a hard look at case capacity for clinical personnel, Laff counsels. That will include using productivity standards.

4. Service areas. Along with staff reductions will come service area reductions, Wardwell predicts. Rural agencies, especially non-profits and provider-based ones, will wrestle most with this issue, Boyd expects.

5. Care management. Agencies that have not done so already should adopt more effective care management practices, Sharp recommends.

"Such practices should look to appropriately reduce utilization of services within patient episodes, while still achieving the desired clinical outcomes," Sharp tells Eli. Telehealth may help agencies achieve this goal.

Ongoing supervisor oversight and case conferencing is necessary for effective management, Laff believes. The team must ensure it's achieving patient goals while not under-providing or over-providing services.

6. Financial indicators. As part of care management, you should be monitoring the cost of the care you're providing as compared to the reimbursement you're receiving for the patient, Laff counsels. To do this, you need to know your costs per unit of service -- generally per visit.

Another important figure is your gross profit by discipline, he advises. Knowing this number for all your patients will help you with your managed care business as well, since it can assist in determining whether plan rates offered will cover your costs.

Make sure your financial statement is giving you these vital indicators as well as other important information, Laff urges. "The financial statement should be the ECG of your business," he says. Use it as an essential management tool.

7. Therapy. Avoid the temptation to cherry-pick profitable services under current PPS. For example, boosting therapy visit numbers will increase your revenue, but is a major fraud and abuse trap, Laff warns.

"Therapy is already a target," Laff observes. Don't bring medical reviewers and investigators to your doorstep by unnecessarily increasing its use.

8. Future planning. The industry is working hard to get the case mix creep cut reduced or adjusted. The National Association for Home Care & Hospice has filed a lawsuit against CMS over the matter, and providers are reaching out to their  elected representatives on the issue.

But "don't wait to get that money back," Dusek warns. With the floundering economy and rising Medicare costs, reversing the cut or avoiding future cuts is far from a sure thing.

The rate freeze is going to force HHAs to work leaner overall, experts say. "What this means to VNAs is doing everything they can to work even smarter and more efficiently to preserve dollars for their community mission," Wardwell observes.

Note: The rate notice is at http://wwwedocket.access.gpo.gov/2008/pdf/E8-26142.pdf.