It is the best of times and it is the worst of times in the home health and hospice industry. Let’s begin with the positives. Over the next 10 years, demand for services is going to skyrocket with the aging “baby boomers.” Medicare and private insurance companies see the high cost of facility care and are looking for ways to push care delivery into the home. There’s no question that in-home care is the way of the future.
Now onto the negatives. Medicare, just like private insurance companies, desire to work with fewer agencies. Every year they change participation requirements. This ends up costing agencies a significant amount of administrative time and money. Then throw in the risk and potential setback of Medicare audits and well, you get the picture.
Larger agencies can adjust to rules and regulation changes a lot easier than smaller ones. They also have a better chance of weathering Medicare audits that often run into the hundreds of thousands of dollars. But what about small to mid-size agencies? What can they do to not only ensure their survival, but also thrive in this space over the next 10 years? Let me tell you.
Vertical Integration and Partnerships
Home health and hospice agencies will find it harder and harder to survive unless they are vertically integrated. Most hospitals and skilled nursing facilities have entered the home health market to control costs and rehospitalizations. One way to survive as an independent agency is to partner with Accountable Care Organizations and Preferred Provider Networks. Another way is to emphasize the importance of patient choice to those facilities. Ask yourself the following question: how many referrals do I need to hunt for, as opposed to the referrals that come directly to my inbox? If you are heavy on the former you need to improve your vertical integration.
If vertical integration is not a significant part of your organization there are things you can do to join that party. Consider offering more of the post-acute continuum, including all three home care services: home health, homecare, and hospice. Obtaining licensing for these other business lines may not be as tough or expensive as you think.
Contracting with all Payors
We all love the margins and relatively fast payment that come with traditional Medicare patients, but the reality is that won’t last forever. Medicare Advantage plans are growing the market. Both sides of the aisle in Washington support them, the plans are administered by for-profit companies with strong marketing and sales arms. The reality is that these plans save the government money. For those of us that are in the hospice world, just know that Advantage plans covering the hospice benefit is a matter of when, not if.
Total Medicare Advantage enrollment is only 20% but since 2018 it is growing. The Congressional Budget Office projects that the share of beneficiaries enrolled in Medicare Advantage plans will rise to about 47 percent by 2029.
The number of insurances you take matters greatly to your referral sources. They are busy and don’t want to have to take time considering which insurances your agency accepts. They want to “press the easy button” by sending their patients to agencies that take most, if not all, of the insurance payors.
Access to insurance panels varies widely from market to market. If you are in a market with good access to panels, use that to your advantage and take the time needed to get a contract in hand. If your market is more competitive and the access to panels is more limited, be persistent and make it a part of your regular sales strategy and initiatives. Be sure to approach insurances from their point of view – they want quality and large geographic coverage. I once spoke to a representative at the largest MedAdvantage plan about getting a contract, she told me that they want to contract with “agencies that are at or above 4-star quality and cover every county in the state.” Getting these contracts will be critical going forward so make this a priority.
Improve Your Quality Rating
Quality is the pay-to-play in health care. If you don’t have it, insurances will not contract with you, and referral facilities will not send patients your way. Consider how quality is judged in skilled home health. Right or wrong, they are judging your quality by your publicly reported star rating. CMS only allows 20% of agencies to attain a 4+ star rating. The good news is that your star rating is pretty easy to improve, even for small agencies.
There are nine quality categories that make up your star rating – some are a lot more difficult to move than others. Improving your hospitalization rate takes a lot of work and planning. However, timely admission of care and medication review also impact your star rating, and they can drag you down quickly if you forget about them. Consider that in timely admission of care 100% is a five star, 97% is a three star and 94% is a two star. The moral of the story is to focus on the categories that are easiest to attain five stars and work your way up.
Geographic Breadth and Underserved Areas
Insurance companies are requiring a geographic breadth in order to contract with agencies, especially in their underserved areas. This can be difficult for smaller companies who don’t have the resources to cover a large area. However, consider covering just one or two areas or counties that are underserved. That way you can offer something they are in need of and your chances of landing a contract are greater.
Operational Efficiency and Proper Utilization
Reimbursement to home health and hospice companies is not going to improve. Medicare reimbursement doesn’t keep up with inflation. Private insurance usually reimburses less than Medicare and take their time paying. The average profit margin for home health agencies is 4.5%, however the bottom 25% of agencies are losing money and only the top 25% are making over 14%. In order to be in that top tier you must run a highly efficient business and you cannot overutilize (especially under PDGM).
Sales and Marketing Strategy – Cultivate a Consistent Flow
One reason vertical integration is key is because getting patients through community liasons is expensive! The Lighten Group data indicates that the patient acquisition cost through community liaisons is a whopping $987. Part of the reason that cost is high and increasing, is because it is becoming harder and harder to reach the right people. For example, in hospitals the reps used to be able to go into the case managers office, work with the case managers, and patients would start rolling in. However, over time most hospitals have taken the decision-making power out of the case managers’ hands. They are now required to use a list of pre-approved agencies. The same goes in skilled nursing facilities, and assisted living facilities.
Today’s liaisons must be capable of reaching the right decision makers and having a high-level conversation with them. The need to understand their referral source’s business and how to align their interests with those of your company. Help your community liaisons build referral partnerships rather than bringing in patients one at a time.
Culture is difficult to quantify but is critical to your long-term success. There is already a shortage of nurses and CNAs. The shortage is only going to get worse. Intentional recruiting and retention are key. I have learned along the way that money is not what matters most to employees – sincere appreciation and recognition is. Build deep employee loyalty and boost morale by doing things like agency parties and picnics. Expressing your appreciation by sending a personal thank you card or gift. At my agency, we did “Nurse Appreciation Packages” each month. These included car washes, house cleaning, and one GrubHub meal for the occasional “crazy” day. These little things go a long way to make employees feel appreciated. If you take good care of your people, they will do their best for you and the patients you serve.
In summary, the small and mid-sized agencies need to play their cards right to survive and thrive in the turbulent world of home health and hospice. Focus on the right areas. Good luck in your journey!
Trevor Lighten is the owner of The Lighten Group, a consulting firm dedicated to helping agencies profitably navigate the regulatory landscape of home health and hospice. He is the former administrator and owner of Lighten Home health and Hospice. Contact Trevor at firstname.lastname@example.org or (801) 687-1746 or visit www.thelightengroup.com. Home health and hospice agencies work with Trevor to determine proper utilization of care and maximize profits while maintaining quality.