HHA managers face difficult decisions in financial crises
Closing or changing services may be best move to stay in business
It's a tough time to be a home health manager. For years, you've implemented new processes and new services designed to strengthen your agency, but it's hard to fight an economic environment that is forcing all industries to reevaluate how they conduct business.
Even when a home health agency's management has taken steps throughout the years to position the agency for financial health, changes in the marketplace, in reimbursement levels, and in the cost of doing business, are forcing home health managers and boards of directors to make tough decisions.
"We are definitely seeing changes in the home health market," says Terry Cichon, CPA, director of homecare operations for FR&R Healthcare Consulting in Deerfield, IL. "In Illinois, we have had an influx of new home health agencies over the past several years," she says. The majority of the new agencies were smaller, for-profit organizations that depended on therapy visits to make their profit, she explains. "This strategy worked well when the reimbursement was $2,500 per episode for 10 therapy visits," she says. When the therapy threshold changed, and agencies had to submit 19 therapy visits for the same level of reimbursement, these agencies struggled and some have closed, she says.
Many of these agencies were set up to focus on therapy, and the owners did not have the experience, systems, or knowledge to develop an agency that could grow without a dependence on therapy income, explains Cichon. "Smaller agencies are struggling with some basic business needs, such as getting cost reports prepared," she says.
Sometimes the decisions affecting the home health agency come from another entity, points out Cichon. "We have hospitals in the Chicago area that are selling their home health businesses," she says. "Unfortunately, a home health agency is a small piece of the hospital's business, so even if the home health agency is not making money, the rest of the facility's business can underwrite the home health agency," she says. If, however, financial pressures are affecting the hospital overall, home health becomes a logical choice for a service that can be discontinued, she adds.
Another tough decision for a home health agency is the closing of a branch office. "It was not an easy decision, and it was not made over a six-month time period," says Linda Leone, RN, president of Prairieland Home Care in Fargo, ND. "The branch office had not been making money for years," she points out. Increasing economic and staffing pressures initiated the process to evaluate the closing, she adds.
"The office was in a sparsely populated area of North Dakota and served a 50-mile radius," explains Leone. This meant that driving from one side of the area served to the other side meant a 100-mile trip, and patients were spread out throughout the area, she says. "Unfortunately, the office was also located in North Dakota which receives the lowest level of Medicare reimbursement, a case-mix of .76," she explains.
Staffing was also an issue. "It was hard to find nurses who were willing to drive the distance required to the office and pay for their gasoline if they did not see a patient on the way into the office," says Leone. "If they did see a patient on the way to the office, we paid for the commute, which increased our costs," she adds.
Steps taken to reduce the driving time of the nurses included placing a fax machine in the nurses' homes so schedules and patient information could be faxed to the home. "We also had some nurses with computers, so they could access the office computer for schedules and to scan their forms," she says.
Even with these cost-savings measures, the board of directors agreed that the fiscally sound decision for the agency was to close the office. The 11 employees at the office served 300 patients annually, and part of the difficulty of the decision was the knowledge that these patients didn't have another home health option, Leone says. Agency management focused on quick, honest communications with patients, referral sources, and staff members to notify everyone of the closing and explain what would happen in the three months between the decision to close the branch and the date of the closing, she says.
Patients were discharged on schedule during the three months, and the agency offered assistance to find other providers for patients who required service after the closing date, says Leone. It was not possible for employees to be offered positions at other branch offices, because they were several hours from other offices, but agency management made sure that employees got information they needed to prepare for their personal financial situation as soon as the decision to close was made, she adds.
Private duty service discontinued
The good news for employees in the private duty home care division of Riverside Home Health in Kankankee, IL, was the opportunity to accept other positions in the Medicare-certified home health agency when the private duty service was discontinued. "Our agency offered private duty service since 1984, but in October of 2007 we decided that it was not possible to continue," explains Mary Newberry, RN, BSN, director of home health and outpatient services at the agency. Private duty home health relies upon the presence of a few long-term care patients who require a lot of hours each week to provide the stability you need to maintain staff and income, she points out. "We began losing two long-term care patients at one time and only adding one to replace the two patients," she says. The agency reached the point that there were not enough long-term patients to sustain staff to provide services to all patients, she says. "You cannot keep your caregivers on staff if you can't keep them busy," she adds.
"Simultaneously, we found that we were pricing ourselves out of the market, because we insisted on paying our private duty employees the same pay rates and benefits that employees in the Medicare-certified agency and the rest of the hospital received," says Newberry. "We knew that this would make our rates higher, but we did not think it was right to pay some employees less than other employees who were doing the same jobs, just in a different department," she points out.
Communicating the closing to patients was difficult for everyone, admits Newberry. "We had patients who had been with us for years and had received care from the same caregiver," she says. "It was not just a business relationship; it was a friendship," she points out. Nurses and managers spent time with the patients, explaining options, identifying other community resources, and listening to their concerns, she says.
While established agencies may have to evaluate closing a branch office or a service when financial pressures arise, some agencies are having difficulty getting off the ground, says Cichon. "The ability for new agencies to generate referrals is especially difficult in Illinois, Florida, California, and Texas, where there are a large number of established agencies," she says. "I've had some clients take months to get enough referrals to apply for Medicare certification," she explains.
Because competition for referrals is increasing, Cichon suggests that agencies make sure they have a good marketing staff. "There is more emphasis on marketing for all agencies, but especially for agencies that offer hospice and private duty service," she says.
Successful agencies that can survive tough financial times are agencies that are data-driven, points out Cichon. "Their staff members understand how OASIS (Outcome and Assessment Information Set) affects reimbursements, and they make sure that OASIS is accurate," she says. She adds that agency managers also need to make sure they are constantly monitoring income, expenses, productivity, and all other agency activities on a regular basis, so that they have a chance to make tough decisions to ensure the future of the agency, rather than close the doors.
Sources
For more information about tough decisions in home health, contact:
- Terry Cichon, CPA, director of Homecare Operations, FR&R Healthcare Consulting, 111 Pfingston Road, Suite 300, Deerfield, IL 60015. Telephone: (847) 236-1111, ext. 333. Fax: (847) 236-1155. E-mail: [email protected].
- Linda Leone, RN, President, Prairieland Home Care, 1202 Page Drive SW, P.O. Box 10007, Fargo, ND 58106. Telephone: 701-235-5750. E-mail: [email protected]
- Mary Newberry, RN, BSN, Director of Home Health and Outpatient Services, Riverside Home Health Care, 400 N Wall Street, Kankakee, IL 60901. Telephone: (815) 935-3272. E-mail: [email protected].
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