Opening your own shop: Key elements for a successful agency
Opening your own shop: Key elements for a successful agency
What you need to know — and do — in private duty/private pay
"The foundation needed to begin private duty services must include choosing the right attorney to set up the legal structure for your business — one who understands everything he or she needs to know for home care," says Kathleen Bailey, president of Private Duty Solutions, a Lancaster, PA-based consulting firm. She stresses that your tax accountant, family law specialist, or a general law practitioner probably doesn’t have the necessary background and may not even be aware of the legal pitfalls a private duty agency faces.
Bailey, who prefers to describe private duty home care as private pay because many people still think of nursing services when they hear the phrase private duty, says the three key items your attorney must be very knowledgeable about are:
1. The laws in your state that relate to a business.
2. The laws in your state that relate to health: Medicare and hospice regulations.
3. The Stark law regulations that outline conflicts of interest and govern self-referral, so that you don’t get into a position in which you are referring to yourself. A hospital that opens a private duty agency cannot automatically refer all of its private duty patients to its own agency. By law, hospital patients must be given private duty agency options to choose from.
Bailey founded and ran her own successful private duty/private pay agency for nearly 14 years before selling it in 1996. She is now a consultant for private duty/private pay agencies and gives workshops instructing those who want to start one.
Chief among her cost-saving strategies is using your people as multiple resources during the start-up phase. "If you have an RN as director, you don’t necessarily need a nursing director in initial stages. The agency coordinator can also be the marketing personnel," she says.
In other words, the more nascent the enterprise, the more hats the same person may wear. "You wear as many hats as you have to in the beginning," Bailey says. "When your agency is up and running profitably and you can afford to pay more salaries, you can hire other people to wear them. Each individual job takes more time as you get bigger. As you acquire more clients and get busier, you don’t personally have time to do all the things you did when you started out."
Time for humans
Bailey finds this is especially true in human resources, which requires extensive record keeping and orientations. "If you’re spending most of your day scheduling and part of your day marketing, you don’t have time for human resources."
Bailey points out that there is no one best way to structure an agency offering private pay services. Which is right for a particular ownership is going to be determined by what the owners are bringing to the table and what they want. What is the board of directors comfortable with? Which way does it want to go? Do you want your business to be a cost center within a certified Medicare agency? Then you have to run it according to all the Health Care Financing Administration regulations. When the services provided that are covered by Medicare end, a Medicare-certified home health aide can remain and perform the non-Medicare covered services that are then billed as private pay. The records have to be kept totally separate, and home health aides must meet Medicare certification requirements. Are you planning a joint venture with a hospital as partner or a stand-alone business? The answers determine the type of legal structure you will need to put in place.
After determining the kind of agency you want and doing your legal setup work comes deciding which services you want your agency to offer. "The program a private pay agency offers is totally dependent on the needs of the community it will serve," says Bailey, "and this in turn depends on the information you get from your market research." She points out that market research doesn’t necessarily have to include a lengthy analysis of demographics.
"Demographics are always important, of course," Bailey says. "But your research can be done much more effectively than by and analyzing a lot of statistics." She suggests sending out surveys to everyone who could possibly be a source of business referrals for private pay as an excellent way of quickly researching the private pay market in your community. Respondents should include hospital discharge planners, health maintenance organization case managers, bank trust officers, estate planners, physicians, clergy, senior citizens groups, assisted living facilities, and long-term care facilities.
Bailey advises asking survey recipients if they perceive a need for additional care for people. "Ask if they come in contact with people who need home health aide- and homemaker-level help. Then, ask them how they recognize that someone needs this kind of care, what tells them that people need private care."
She points out that the answers to your market research questions will determine what you do in your marketing later on. For example, if you ask, "Do you ever refer anyone for home health care?" and a respondent’s answer is, "No," then that person will be a low priority for a personal marketing visit later on.
Determine what your market needs
You also need to determine the most commonly needed services. "I started my business in 1983, when private duty/private pay was not something many people knew about," Bailey recalls, who was working in a doctor’s office at the time. "We had a very neat, clean elderly couple as patients who came in every three months for their blood pressure check-ups. The wife died, and the next time the husband came in, he was disheveled and his shirt was dirty. He was totally unkempt, and I realized he needed somebody to help him. It was so obvious his laundry wasn’t getting done, and I thought he probably wasn’t eating right either. He and his wife were married for more than half a century. She had done everything for him, and when she died he didn’t have a clue how to proceed. I started thinking about the need for a business that could do these things. There wasn’t any reason this man couldn’t stay in his own home with a little help." Bailey adds that this is the kind of potential client private pay agencies are seeking. "You should definitely find out how many people your respondents refer for home care in the course of a year. That will vary greatly from, say, hospital discharge planners to bank trust officers or estate planners. And ask if your respondents think these services are readily accessible in the community."
Bailey says it is absolutely critical to find out what kind of criteria those surveyed use in referring people to a private pay home care agency. To the discharge planner, those may be one set of items, but another respondent may think something else. Accreditation by an outside organization is important to some people, others couldn’t care less," Bailey says. How important is price? Availability of personnel? The reputation of the agency? She adds that the survey should be very simple for respondents to do, and needs to include a self-addressed, stamped envelope. "Making it as easy for people to give you the information you need is very important. The answers obtained through market research will chart the course in developing your business plan."
Private pay vs. Medicare
Bailey sums up the differences between private pay and Medicare agencies this way:
• Medicare services are always based on a medical need and tend to be short term. The patient is admitted to the home health agency, the care is provided and the patient is discharged. Private duty agencies provide services to private pay patients who — with the exclusion of short-term care needs following surgery — will largely require maintenance-type services, sometimes for many years.
• Medicare services are restricted to patients who are homebound. Private pay clients may need to be driven on errands, to appointments, or just want to go out for lunch. The goal of home services is to help clients remain as independent as possible by giving them a little help.
• Medicare determines the amount of reimbursement paid for Medicare cases. Private pay agencies charge based on the market, the competition, and rates contracted with insurance companies and other private payers. "Determining price in private pay is just like any other service business," says Bailey. "If there’s no competition, an agency is going to charge more. Or, if there is competition and one agency does a far superior job, they are able to charge more. Or a small agency that can do just as good a job as a much larger one, but doesn’t have a high overhead can afford to charge less."
• Primary caregivers for Medicare cases must be licensed while those for private pay are mostly nonlicensed homemakers or home health aides. "Many private pay agencies don’t offer nursing services, which require licensing by the state. How you keep your records, reimburse your employees, the amount of supervision you do, what you offer your employees as benefits is completely individual. That’s why it’s especially important to develop high standards within your own agency."
• While client care given under Medicare is physician-directed, and begins with the physician’s plan of care, in private pay, the client and the agency determine what care will be given. You may, however, get a physician’s orders or give a physician notification of the services your agency is providing. Bailey sees the latter as especially important, because the physician is notified of the medications patients are taking.
"Sometimes, older people don’t seem to hear when a doctor tells them to stop taking a medication," she says. "A physician notification gives the physician a chance to review what’s going on. That’s why I think it’s crucial every agency has some kind of a form that the physician can sign-off on for appropriate medications and care. Also, that form tells a physician that his or her patient is receiving care in the home, something they might not otherwise know. And what they talk about during the patient’s next visit may be different because they know there’s someone helping in the home."
For-profit demands more than cutting costs
"A stand-alone entrepreneur is in this to make some money, but also to provide very good service," Bailey says. "The entrepreneurs I’ve worked with stress quality. If they don’t give good quality service, they’re not going to be in business very long. But they have to have a philosophy of how can we contain our costs and still give that good quality service?’ That’s not the same thing as knowing you’re going to have a certain amount of money coming in and only giving service up to that amount of money."
Bailey believes that private pay agencies need a strong for-profit philosophy. "There are some agencies, run by churches, for example, that operate as nonprofits. There are corporate reasons to operate as a nonprofit," she says, adding that most private pay home care is for profit business, even when the profit is used to help offset financial losses for other services an organization provides.
Study your competition
Bailey stresses the importance of creating a profit. In private duty, you must have accurate knowledge about your competition — the services they offer, what they charge. You need to know as much about them as possible in order to compete effectively compete with them. "They may have carved out a niche, or have completely eliminated a service that allows you to carve out a niche for yourself."
Private pay agencies can set all their own policies, always following the labor laws and regulations, and can find many market niches to fill.
Many agencies Bailey has consulted with other handyman-type services as part of a private duty/private pay package simply because they often have employees in the home when things go wrong with the physical structure of the house.
"Say something goes wrong with the furnace, or a water pipe breaks," she explains. "If the client doesn’t know whom to call and the private pay agency has someone they can get to fix the problem, they can do that. There are no laws that prohibit it. In fact, it makes good sense. Private pay clients are having trouble maintaining themselves, so why expect them to be able to maintain their homes? Whatever you can do to make it possible for clients to remain in their homes is providing service. Often, just walking a client’s dog — which is definitely not Medicare reimbursable — can be a very big help."
Next month: The three most important documents your agency will need to have.
• Kathleen Bailey, President, Private Duty Solutions Inc., 313 W. Liberty St., Suite 126, Lancaster, PA 17603. Telephone: (717) 509-4452. Fax: (717) 509-7397. E-mail: kbailey@ privateduty.com.
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