Reorganization: From 'For Sale' to 'Successful' in one year

Clinical teams, multidisciplinary approach part of plan

(Editor's note: This is the first of a two-part article that looks at the successful reorganization of a failing home care agency. This month, we examine the process to identify areas that need improvement and steps taken to address cashflow problems. Next month, we look at tips and suggestions on how to handle staff morale and retention challenges during a transition period.)

Your agency staff are busy, productive, and highly skilled; but you are losing so much money each month, you might be closed down.

That is the situation in which the managers of Gaston Memorial Home Care in Gastonia, NC, found themselves as hospital administrators started asking the question, "Do we want to be in the home care business?"

Two years later, the hospital is not only still in the home health care business, but the agency is well positioned to compete with newcomers to the home health market.

"We were busy with a lot of patients, but we're losing a lot of money," says Kimber Walters, MBA, executive director of the agency. "While national reports show that home health can make money, our agency had a history of poor financial performance, and hospital administrators began questioning the wisdom of having a home health agency," she explains.

Walters and her management team started an in-depth review of the agency's operations to determine why they weren't making money and how they could restructure themselves to improve their performance.

"The first thing we did was look at our payers," she says. "We focused on our Medicare patients because they represent a significant portion of our income, but we also examined private payers and our state program." They looked at numbers of clients each payer represented, reimbursement, and cost per visit, Walters adds.

The agency participated in their state's waiver program and did receive patients from the program, she notes. "When we looked closely at the high administrative costs required to participate in the program and the level of reimbursement for each episode, we decided that we could not continue to participate," she says.

Withdrawal from the program did not affect a large number of patients but did help the agency by eliminating a service that always lost money, Walters adds.

Once the initial financial review was finished and the waiver program was identified as an obvious target for change, it was necessary to look more closely at operations to decide how to reorganize the agency's processes to improve collections and decrease the cost per visit, she says.

Because a majority of her agency's patients are on Medicare, Walters looked closely at the process for filing Medicare claims.

"We had an old process in place in which our utilization review staff reviewed all claims prior to sending them to our billing people," Walters explains. While the utilization review staff were able to make sure the claims were coded properly, the Request for Anticipated Payments (RAPs) already had been sent with the original coding within days of the patients' admission. The utilization review did not occur until two weeks after admission, she adds.

"This meant that our RAPs were filed late if we waited on the utilization review, or we had to submit RAP corrections if utilization review discovered incorrect codes on the claims," Walters continues. Both of these situations resulted in delayed payments, she adds.

"We now have our staff split into teams that report to a clinical manager who is an RN," Walters notes.

"Utilization review occurs on the back end of the process so the claims are not delayed, but we have made our clinical managers responsible for the initial review of the OASIS [Outcome and Assessment Information Set] and the coding," she explains.

Look internally to make real changes

One of the reasons that Gaston Memorial Home Care has been able to turn itself around is a willingness to change the organizational culture, says Ronald H. Clitherow, MPH, senior management and operations consultant at LarsonAllen Health Care Group in Charlotte, NC.

It is too easy to look externally for reasons that affect your business, but the only way to really change the direction of your organization is to look internally, he says. "Everyone needs to be ready to ask himself or herself if the organization is as good as it can be.

"There are questions that need to be asked within a multidisciplinary group," Clitherow adds. He recommends setting up working lunches at which representatives from different areas can ask each other the following questions:

  • "What is my department or group doing that makes your job harder?"
  • "What is my department or group not doing that could improve your ability to do your job?"

By paying attention to how one person's responsibilities affect the process upstream and downstream, it becomes easier to see what changes are most effective for the entire organization, Clitherow notes.

You have to focus on the work processes and how they interact, he suggests. "Map all of your workflow activities from marketing to intake to admissions to assessment to OASIS and beyond, then get the right people involved to save time and to be accurate in your assessment," Clitherow says.

The right people are not just top managers, he says. Involve the decision makers, but make sure the people who do the job each day are involved as well because they see the actual mistakes or omissions that create problems, Clitherow explains.

Once you've mapped all of the workflow activities, set up teams of employees who are responsible for those activities and have them talk through what information is needed for each step, he adds.

Although it may not feasible to include all employees in these teams, be sure to report findings and recommendations at staff meetings and encourage feedback from all employees, Clitherow suggests.

One advantage of involving a variety of people is that everyone begins to assume responsibility for how their actions affect the bottom line of the agency, Walters notes.

Rather than relying on the way things always have been done, nurses now look for ways to cut costs without cutting quality, she says. "Nurses suggest different dressings for wound care that don't require daily visits to change the dressing so we are able to cut the number of visits without reducing care," Walters says.

Hospital-based agencies have a special challenge when the hospital administration directs departments to cut costs, Clitherow points out.

"Too many times, the hospital expects cost cutting to include a reduction of FTEs [full-time equivalent positions]," he explains.

"Reducing FTEs in the hospital setting can be effective because patient volume is set by the number of beds, patient care services can be centralized, and overhead costs don't fluctuate based on location of patients," Clitherow notes.

"A home care agency cannot easily cut field nurses and still provide the same care to the same number of patients," he notes. "At the same time, a home care agency cannot conduct a marketing campaign to increase the number of patients without the flexibility of adding nurses to care for those patients."

An important part of the home care manager's job is to educate hospital administration on the necessity to increase some expenses to increase income, Clitherow says.

Knowing what your costs are and how an increase in patients affects expense and income is critical if you are going to educate others, he adds.

Two years after hospital administrators wondered if they should be in the home care business, the answer today is "yes," Walters says.

"Luckily, our hospital administrators realized that it took us a long time to reach our low point and that it will take time to complete our turnaround, so we were not given an unrealistic deadline such as six months," she explains.

The reorganization took one year, and they are in the second year of improving, Walters adds. "We are not losing money anymore, and we are seeing positive increases in our bottom line," she says.

The challenge is the number of new agencies that have entered their market, Walters admits.

While hospital-based agencies generally don't have the marketing dollars available to them that private agencies have, her agency is better positioned to handle competition as a result of the reorganization, she adds.

Previously, there was no interaction between departments, Walters says. "Now we are more creative in our approach to our jobs, and agency leaders challenge each other to review current practices and look for better ways to handle responsibilities," she says.

"The most positive part of the reorganization is that clinical and financial employees talk with other and collaborate on projects that benefit the agency and patients," Walters adds.

[For more information about reorganizing to improve performance, contact:

  • Kimber Walters, MBA, Executive Director, Gaston Memorial Home Care, CaroMont Health Services, P.O. Box 2568, 200 E. Second Ave., Gastonia, NC 28503. Phone: (704) 834-2025. E-mail:
  • Ronald H. Clitherow, MPH, Senior Manager, LarsonAllen Health Care Group, 101 N. Tryon St., Suite 1000, Charlotte, NC 28246. Phone: (336) 751-7297. E-mail:]