Expert shows small agencies how to succeed
Keep up quality under many constraints
Home care agencies that handle between 200 and 1,000 episodes a year may have a variety of quality issues that arise because of tight financial constraints. Coping with these concerns can be challenging.
This is particularly true in the southwestern part of the United States where the majority of home health agencies are small, says Vern Peterschmidt, president of Peterschmidt and Associates in Albu-querque, NM. Last September, Peterschmidt discussed the financial challenges of managing a small home care agency at the 19th Annual Meeting & HOMECARExpo, sponsored by the Washington, DC-based National Association for Home Care, which was held in New Orleans.
"The majority of home health agencies in the Southwest are very small in nature, with fewer than 1,000 episodes per year," Peterschmidt says.
Small agencies often are located in rural areas, and in the Southwest, these agencies may be isolated geographically from other health care organizations, which may present staffing and other challenges.
"You don’t have people to bounce off your ideas," Peterschmidt explains. "It may be that few people in your agency understand the prospective payment system [PPS] as well as it should be understood."
Also, nurses in small agencies have to care for a broad range of patients, and that can cause PPS reimbursement problems because if they don’t understand PPS adequately, then they may not understand how they are being paid for each of these patients, he adds.
Another common problem is that quality assurance standards in smaller agencies might be less stringent than with larger organizations, Peterschmidt says.
"We’re concerned about documentation problems that a small agency might have," Peterschmidt says. "They might not be using clinical pathways; they might have a problem obtaining specialists, like wound care specialists."
Smaller agencies also often have more difficulty with maintaining adequate staffing, and clients may perceive them to be less stable than a larger agency, he adds.
Peterschmidt offers these strategies for a smaller agency to better handle their financial and other concerns:
1. Learn about outsourcing.
"Smaller agencies might not know about the opportunities provided by outsourcing," Peterschmidt says. "They need someone at the director’s level to bounce ideas off."
So it’s important to consider outsourcing as an option when it’s difficult to find full-time staff. Also, smaller home care agencies could improve their knowledge base by hiring consultants. Agency directors might look for nursing specialists and consulting RNs who could fill in staffing gaps and educate the agency’s management and staff.
"You’ll pay the price to bring these people in, but I think the reward you’ll receive and the satisfaction of having things done correctly is worth the price," Peterschmidt says.
Smaller agencies obviously may outsource and contract with other companies to provide therapy services.
Outsourcing also might help a smaller agency even in administrative areas, such as payroll, budgeting, and accounting. "All of those things could be assisted by having some of those tasks outsourced, or by hiring consultants or part-time people," Peterschmidt says. "It’s not appropriate any longer to have full-time positions if they’re not necessary because you have to control your costs."
The bottom line is that smaller agencies have to operate as efficiently as larger agencies, although they may not have the personnel in order to do the necessary functions of budgeting and revenue projections, he adds.
2. Stress staff education.
With PPS guiding many decisions home care agencies make, it’s very important to have a well-educated staff, which means ensuring employees understand the reimbursement standards and the importance of precise and accurate documentation, Peterschmidt says.
"Everyone needs to understand this new system and understand about how the payment side of the business works," he explains.
Since it’s difficult for smaller agencies to take staff time for inservices or to hire educators, they could supplement in-house education by using educational opportunities, which often are inexpensive, provided by state and national home care associations.
"I find that a lot of small agencies say, I cannot afford to belong to the state association or the national association,’ and I say, You can’t afford not to belong, because they give you educational opportunities at reasonable price levels.’"
Also, through home care associations, administrators of small agencies will learn from their peers about what is happening and changing in their industry.
3. Fully monitor all activities.
Every agency, whether large or small, needs to monitor all clinical activities through reporting mechanisms that include the monitoring of utilization levels, outcomes, documentation, and how these are tied to billing.
Agencies also need to have a billing system that provides clinical reports and financial reports so that someone reviewing billing can easily see what type of patients are being served, how many visits are incurred in various diagnostic categories, and what the outcomes are, Peterschmidt says.
"One good thing is that most billing systems will fit any size of agency," Peterschmidt says. "Many billing systems have great reporting systems connected with them, but agencies do not understand the management reports that come out of that, so they don’t use them."
4. Know your medical supply costs.
Another problem area for smaller agencies involves monitoring medical supplies. Since medical supplies are now part of the Medicare reimbursement, agencies need to know their medical supply costs per episode.
This requires agencies to monitor their medical supply items and the costs of those items used by Medicare reimbursement. They’ll also need to monitor the utilization of medical supplies, track the costs individually, and distinguish between routine and nonroutine medical supplies.
Smaller agencies could reduce supply costs by belonging to an association that has group-purchasing agreements with various vendors, and this information could be obtained from a state home care association.
"If you have wound care patients, they incur a lot of wound care supply costs, and those could be at such a level that they cause an agency to have major financial losses," Peterschmidt offers as an example. "So you may not be able to afford to serve all kinds of patients, and it’s OK to not serve all types of patients; because if you cannot afford to give certain patients the care they need, then you cannot afford to serve them, and it’d be appropriate to take those patients on."
Treat agency as small business
5. Make quality improvement cost-effective.
Look for products that will assist a quality manager in establishing standards for patient care, Peterschmidt advises.
Smaller agencies might not have enough patient volume to establish their own clinical pathways, so they should try to find programs that will assist them in establishing quality standards.
"A larger agency might use its own utilization experience to establish standards," Peterschmidt explains. "But a smaller agency can use clinical pathways because it’s a guide to achieving their outcomes."
6. Market your business.
"I have a concern that small home care agencies do not look at themselves as a small business, although small agencies can make a profit," Peterschmidt says. "That involves protecting your referral source and expanding your referral source, and the only way you can do that is to market your services."
Marketing will help an agency keep its physician referrals and it will help an agency expand and grow.
Small agencies, again, may need to hire a consultant to assist them with marketing strategies.
7. Develop good cash-flow projections.
Cash-flow problems can be particularly drastic in small agencies because they can live or die by the next payroll, Peterschmidt notes. "So they need to have good cash-flow projections and have a good lending source."
After the interim payment system (IPS) was implemented, many small agencies closed because they didn’t understand the concept of IPS and how that was different from a cost-based system, Peterschmidt says.
"I really felt like if they had the knowledge, they would have stayed open and would have planned for the changes," he adds. "The cost-based system encourages agencies not to manage their own business, but PPS is the final step in saying, Now, we’re here, and you have to operate as a small business.’"
• Vern Peterschmidt, President, Peterschmidt and Associates, 6220 San Mateo Blvd. N.E., Suite 200, Albuquerque, NM 87109. Telephone: (505) 858-0708.
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