Home Health & Hospice Week

Toughen up your rate negotiation tactics.

With Medicare profit margins sinking lower and lower over the next four years, smart home health agencies will diversify their business lines beyond Medicare. But not every payer is a good payer.

"Diversification is still a good thing, but you have to be careful," noted Val Halamandaris in a recent National Association for Home Care & Hospice teleconference on the 2014 PPS Final Rule. With rate cuts of 14 percent and higher on tap for the next four years, agencies don’t want to take on more liabilities with payers that lowball home care services.

"Get out of the Medicare box and look at other payers," urged Robert Simione of Simione Healthcare Consultants in the NAHC teleconference. That usually means Medicaid and managed care.

The problem: Agencies usually lose money on managed care patients, Simione maintains. They don’t know how much managed care patient visits are costing them, and the rates aren’t high enough to cover those costs.

The solution: First, determine your costs for providing services to managed care patients, Simione advised. Then negotiate rates to cover those costs and a profit margin. "We have to be harder negotiators," he exhorted.

Many agencies have been accepting of too-low Medicare Advantage and other managed care rates because they could make up losses with Medicare gains, Simione explained. But now that Medicare rates are decreasing and the ratio of managed care patients is on the rise in many areas, that’s no longer a viable option.

To win higher rates from managed care payers, you’ll need to demonstrate the value you bring to the payer, Simione counseled. That means you need to quantify that value with hard numbers.

Enter Private Pay, Hospice Markets With Eyes Wide Open

HHAs also may consider getting into private pay care. That can be prosperous, but only in the right setting, Simione cautioned.

Pro: The need for private duty home care will only continue to grow as the nation’s senior population ages.

Con: People in your location must be able to pay out of pocket for those services.

Another option to diversify your service line, if not your payers, is hospice care. If you don’t already operate a hospice program, you have a lot of the infrastructure in place to do so.

Watch out: But you should note that Medicare profit margins for hospices are significantly below those for HHAs — 8.7 percent for hospices in 2011 vs. 14.4 percent for HHAs in 2012, according to the latest figures from the Medicare Payment Advisory Commission (see Eli’s HCW, Vol. XXIII, No. 1). MedPAC projects 2014 margins to be 7.8 percent for hospices and 12.6 percent for HHAs.

And hospices are just starting to undergo the scrutiny and potential rate cutting that HHAs have endured for years. MedPAC is poised to recommend a rate freeze for the providers in 2015, for example.

"Home care is being hit now, but I think hospice is probably next on line," Simione predicted in the conference.