Solution to financial challenges requires attack on different fronts

Retention, information systems, and productivity all related

(Editor's note: This is the first of a two-part series that will look at the financial challenges to home health agencies. This month, we look at an overview of some of the issues. Next month, we will discuss managed care contracting and tips for handling the process successfully.)

When asked about financial issues that affect their agencies, many home health managers might talk about billing, rejected claims, or collection of past due bills. In reality, the key financial issues faced by home health agencies are not always related to the dollar amount tied to specific patients, episodes, or visits, according to experts interviewed by Hospital Home Health.

Retention and recruitment of staff, competition in the marketplace, productivity, and information systems are all issues that affect the financial success of any agency, says Steve Telles, CPA, home health financial consultant with Management Consulting Services in Albuquerque, NM. Home health agencies also are dealing with decreasing margins due to increased costs, which include increasing salaries, at the same time they face decreasing reimbursement, he adds.

A new issue that many agencies are now facing is managed care contracting, says Telles. "We are seeing increased penetration of managed care in states that have not always been high managed care markets," he says. "California has always had a high managed care penetration, but in Albuquerque one year ago, managed care represented 30% of the market," he points out.

The tough part of improving an agency's financial performance is that you can't point to just one issue and say, "If I improve in this area, we'll be successful," Telles says. "All of the issues affect each other, so it is important to recognize how they are connected."

One of the first ways to identify areas you can improve is to create reports showing how you are performing in different categories, says Telles. Productivity reports can help you evaluate staffing, scheduling, costs, and employee performance, he says.

Not only will good reports help you address areas that need improvement but before you can approach managed care companies with contracts, you must have a good understanding of your costs to provide services, points out Sherl Brand, RN, BSN, CCM, president and CEO of the Home Care Association of New Jersey. "You must know the costs of your services in order to evaluate the fees first offered by the managed care company," she says. "You also need to be able to explain your costs for all services, including disease management programs and special populations."

While there are many information technology systems that provide the reports a home health managers needs, Telles says that one of the biggest mistakes home health managers make is to change systems when it is not necessary. "Don't buy a new system because it seems to have more bells and whistles than the program you now have," he says. "Often, the software you have can produce the reports you need," he points out. Before looking at a new system, check with your vendor to make sure that you are using all of the capabilities of your system, he suggests. "Invest in training for your staff and find a user group that can help you find out how to produce the reports you want."

If you do decide that you need to upgrade your information systems, be sure you define your expectations and needs before you begin shopping, recommends Telles. "Know what you want to accomplish so that you can make sure the system you purchase can meet your needs," he says.

One thing to keep in mind as you become more active with managed care contracting is the need to maintain updated information on a wide range of contracts, Brand points out. Your information system should be able to define parameters of coverage as well as special stipulations in each contract, such as an agreement to see the patient within a certain numbers of hours after the referral, she says. Make sure that your current information system, or any new system, can handle these requirements, she adds.

Remember that a good information system will also improve productivity by providing administrative support to staff members, says Telles. If you can free nurses' time by reducing the time it takes to complete OASIS and other forms, then they can spend more time on patient visits, he points out.

Private duty services may also provide an agency with another revenue source, says Telles. "The challenge with private duty is finding the staff to handle the patient care," he says. You can use productivity reports to identify staff members who may not perform well in a more regulated Medicare service but is quite capable of providing private duty services, he suggests. "Good productivity information will help you manage your staff schedules effectively and keep employees by placing them in appropriate positions," he adds.

Another challenge for home health agencies are the changes in state Medicaid programs that focus on lower costs that may require use of nonclinical personnel to provide care typically provided by clinical personnel, says Telles. "It is essential that home health agency managers be involved in efforts to lobby state agencies," he says. "Do not rely only on your state associations, be involved in their efforts because your funding is affected by the outcome of those efforts," he says.

While there are many pessimists who talk about the financial picture for home health, Telles is more optimistic. He says, "Agencies need to focus on outcomes and invest in their staff with excellent training. There are challenges but they can be overcome."


For more information about financial issues affecting home health, contact:

  • Steve Telles, CPA, Management Consulting Services, 7007 Wyoming Boulevard NE, Suite D-5, Albuquerque, NM 87109. Phone: (505) 888-5439. E-mail:
  • Sherl Brand, RN, BSN, CCM, president and CEO, Home Care Association of New Jersey, 14 Washington Road, Suite 211, Princeton Junction, NJ 08550. Phone: (609) 275-6100. Fax: (609) 936-9349. E-mail: