Experts offer 10 tips for successful private duty expansion

Plan carefully: Diversification comes with operational challenges

Market pressures, including deep cuts in the Medicare home health benefit, has some hospital-affiliated providers adding private duty services, experts say. But while such diversification can be sound strategy in the face of Medicare's Interim Payment System (IPS) and the looming Prospective Payment System (PPS), an expansion of services requires careful planning and management.

Hospital Home Health contacted several private duty experts who caution that although private duty expansion is a viable option, hospital-affiliated agencies should consider the many legal, regulatory, financial, and operational issues involved before jumping on the private duty bandwagon.

Our experts offer the following 10 tips for successful private duty expansion:

1. Investigate state certificate of need and licensure requirements.

State certificate of need and licensure laws minimally influence the corporate structure under which a home health agency provides private duty. In some states, home health moratoriums may prohibit private duty expansion altogether, cautions Jay Brecker, CPA with Jay T. Brecker and Associates in Owings Mill, MD.

2. Analyze financial impact.

A home health agency should consider its relative Medicare financial position to determine whether to provide private duty and Medicare-certified services within the same corporate structure, Brecker says. This decision will impact future Medicare reimbursement, he adds.

For example, an agency currently operating under both its cost and per beneficiary limits that adds private duty within the same entity will spread administrative and general expenses over more visits, Brecker says. This will further reduce its already low per-visit and beneficiary limits, lower Medicare reimbursement, and potentially throw the agency's bottom line into the loss column. Under such circumstances, the agency may fare better if it provides private duty services under a separate corporate structure, Brecker notes.

Providers currently operating over their per-visit and beneficiary limits that add private duty services within the same structure will spread administrative expenses to the private duty functions. This will bring Medicare costs closer to the agency's cost limits, Brecker says. In such a scenario, the provider "may show a loss on private duty, but on whole do better."

For providers that operate private duty in a separate corporation, services "really have to be separate," says John Gilliland, an attorney in Crestview Hills, KY, who specializes in home care. "That means offices, management, telephones, Yellow Pages listings, and employment procedures," he adds. Otherwise, the Health Care Financing Administration (HCFA) in Washington, DC, may determine that the programs are not "completely disassociated" and require the operation in the same entity, he says.

Consider `like-kind' designation

Home health agencies with sophisticated accounting systems that can easily segregate Medicare-certified and private duty-related expenses should consider requesting "like-kind" service designation from HCFA, Brecker advises. This allows the agency to perform both functions in the same corporate structure but directly assign administrative and general expenses, creating the same effect as divided organizations. However, such agencies may face a slightly higher chance of HCFA declaring the services not completely disassociated, Brecker warns.

Operating Medicare-certified and private duty services in separate corporations may create some operational inefficiencies, he notes. For example, certain administrative expenses such as payroll taxes may be higher than they would be if the services were in one corporation. And neither Medicare-certified nor private duty administrative staff can assist their counterparts as their respective workloads fluctuate, he adds.

Agency organizational structure also "depends on the purpose you set it up for," says Mir Miller Hays, MS, MBA, RN, CNAA, director of planning and network development for Rush Home Care Network in Chicago. The network was formed via collaboration with an already established private duty company. The Rush Home Care Network private duty arm, which provides only paraprofessional care, is a separate corporation governed by a committee of representatives from both Rush and its partner. "We didn't want to stumble through start-up [in a very competitive market]," so Rush opted for a strategic partnership and separate private duty operations, Hays adds.

In addition to legal, financial, and organizational issues, home health agencies should also carefully consider private duty operational requirements, which can vary significantly from those of home health agencies, sources say.

3. Hire the right manager.

Finding the best person to head your private duty service may be one of the most important steps home health agencies take, says Gina Dodson, BSN, RN, administrator of Vanderbilt Home Care Services in Nashville, TN. "Those who do well in private duty usually don't work as well [on the intermittent side]," she adds.

Vanderbilt's private duty, a division within its separately incorporated freestanding home health agency, provides a range of services from skilled and paraprofessional hourly care to supplemental staffing. Seven clinical and administrative FTEs manage 150 to 250 per diem employees. "That structure alone dictates how you manage, [and the type of management talent required]," Dodson says.

4. Establish appropriate pay structure and administration.

Home health agencies should have flexibility in setting private duty wage rates and operating payroll functions, says Dodson. "Private duty is a very competitive market. Someone may leave for a nickel [higher pay from a competitor]. So you have to be very attuned to the market and stay on top of it."

Private duty agencies often have weekly, as opposed to the biweekly pay schedules seen in Medicare-certified agencies. Some companies even pay caregivers daily, Dodson reports. And private duty workers often receive differentials and overtime pay. All of this translates into a different set of payroll demands that home health agencies should be prepared to meet before implementing private duty, Dodson adds. "You should look at all the system supports - payroll, [human resources], accounting," she advises.

5. Emphasize staff recruiting.

Whether your private duty service will involve professional or paraprofessional workers, expect to spend resources on staff recruitment, sources say. "Private duty recruitment is much more difficult," Hays says. "Private duty is primarily temporary staff with up-and-down work flows. You can't guarantee hours, and you [therefore] have to spend lots of energy to staff," Dodson advises.

6. Educate staff.

Private duty staff education requirements, particularly for paraprofessionals, are substantial, sources say. "You must invest heavily in intense training," Hays says.

7. Advertise and promote differently.

"We make no assumptions that business will come from the hospital," says Hays. "It's a target, but [not a major referral source]." Rush markets more to end users than to physicians and discharge planners, who more commonly refer to home health agencies.

8. Provide extensive clinical management.

Private duty patients are the most and least sick of all home care clients, says Dodson. Their care needs range from the very complicated, such as mechanical ventilation and blood transfusions, to custodial care and comfort.

As a result, "finding the right clinical skills and expertise to provide case management from the office becomes critical," says Dodson. "You have to know how to work with physicians and families and ensure that nurses have the necessary skills," she adds.

9. Expect different patient-caregiver relationships.

Private duty providers, particularly those offering paraprofessional care that clients pay for themselves, can expect clients to view their services differently than home health care, sources say. "When a person mostly pays out-of-pocket, the relationship with the home care company can be different, [and you] should expect more billing questions," says Hays. "The person has different expectations about control" than home health agencies might otherwise see, she adds.

Dodson concurs. The longer shift, as opposed to visit-oriented care that may extend for longer periods of time - months and even years - also creates different home environment dynamics. It generates greater opportunities for caregiver involvement with families, she says. To combat these tendencies, providers must offer intense management and customer service, sources advise.

10. Address safety issues.

In addition to sometimes promoting out-of-balance client/caregiver relationships, private duty can also place both client and staff at an increased safety risk, Dodson notes.

Caregivers who spend long hours in a client's home may see the full range of family dynamics played out before their eyes. For this reason, and because private duty staff frequently work evenings and nights, they face higher workplace and environmental safety issues, says Dodson. Private duty providers must promote worker safety with extensive training and management intervention, she advises.

On the other hand, clients may also be at risk from unscrupulous home care workers. "It is really important to screen and supervise staff," says Dodson.

With so many operational challenges to meet, home health agencies may question going into private duty at all, but the move has its advantages, experts say. What's more, many agencies on the brink of disaster after IPS, may not have a choice. "Strictly Medicare agencies will not fare well," says Brecker.

"Don't be intimidated," Dodson says. "Private duty is one of our best program opportunities."