Home Health Profitability, Part II: Control RNs
From the editors of SUCCESS In Home Care magazine Apr 29,
Last week you discovered the main drivers of home health profitability. This
week, dig deeper into the data collected by Fazzi Associates, Northampton,
Mass. and analyzed by SHC.
For maximum profitability, the most important area to exert tighter controls
is RN visits -- profitable agencies provide a median of 9 RN visits per
episode while unprofitable agencies provide 13.
Home health consultant Bobby Dusek, Dusek CPA Inc., Amarillo, Texas, says
his most profitable clients have definitely put the pressure on utilization.
"Labor costs are the primary part of my revenue and expenses -- if I can
control that, I can be profitable," he notes.
You should run monthly efficiency reports that show how each nurse is doing
compared to your visit quotas and other clinical/financial benchmarks, says
clinical and operations consultant for American Express Tax and Business
Associates, Timonium, Md. Note average length of visits, caseload changes
and other factors that affect productivity, Sevast adds. Also, perform team
conferences to help nurses move toward utilization goals.
Consultant Pat Laff, Laff Associates Inc., says his top-performing client
HHAs hold bi-weekly case conferences on all patients -- helping them
maintain an average of 17 to 21 visits per episode. Case managers review
and challenge any findings that significantly deviate from the
agency's standard of care.
Just be careful to back-up clinically your decisions to trim visits or
change the clinician you're sending, Sevast adds. Her clients use clinical
pathways and disease management programs to streamline visit patterns and
Profitable agencies carefully manage not only how many visits they make, but
also exactly how much it costs them to make each visit. Profitable HHAs
spend a median of $106 on each nursing visit compared to $112 per nursing
visit spent by unprofitable agencies.
Of course, that finding butts up against the reality of the home health
nursing shortage. But our experts say you don't have to cut salaries to
reduce your cost per visit. You can try pushing for improved productivity --
even if it's only a half-visit per day on average, Sevast notes.
One particular profitability drain on the nursing front is paperwork.
Fazzi's study shows that nurses at the most profitable agencies ($300 or
more per episode), spent only 25 minutes per visit on paperwork. Nurses at
unprofitable agencies, on the other hand, spent an average of 33 minutes on
the same task. The solution may be specialized assessment nurses,
point-of-care automation or better training for your clinicians -- all of
which have worked for Boyd's top-performing clients.
But if you're among the 22% of HHAs who aren't profitable now -- or you
discover your profits are shrinking in the future -- you may have to
re-evaluate your nursing staff, Dusek notes. One of his now-profitable
clients faced this tough choice a few months ago. After six months of a 4%
net loss each month, the agency performed a top-to-bottom review of
personnel needs, requiring every supervisor to justify every position. It
ended up getting rid of one office (a branch office that employed 9 RNs to
care for 12 patients), cut a few clerical workers and a few supervisors, and
nearly doubled the number of patient cases managed by each nurse. "Over the
years, the ratio had crept down to 14 [patients per nurse]," Dusek admits.
Now the agency requires nurses to carry a 25-patient load, and it's back in
the black with a few percentage-point profit.
Other ways to reduce visit costs: Consider telemedicine. One major study
funded by the Dept. of Commerce and run by the VNA of Philadelphia found
that telemedicine saved $697 per episode on treatment of diabetic patients.
Or you can try a more low-tech approach -- move to geographic teams to help
nurses travel less. Profitable agency nurses go an average of 11.8 miles and
are on the road about 19 minutes for each visit. Nurses at unprofitable
agencies travel an average of 12.4 miles and spend nearly 24 minutes to get
to each visit, according to Fazzi data.
The story is much the same on the supply side. Profitable agencies spend
only $37 per episode on patient supplies, while unprofitable agencies spend
more than $39 -- a $2 per episode difference that adds up.
And don't forget your administrative overhead, say our experts. In Fazzi's
data, profitable agencies only need an average of 3.5 administrative workers
to handle every 100 patients (see box, p. 10). Unprofitable agencies, on the
other hand, have higher admin costs, with 4.4 administrative staffers for
every 100 patients on their census.
One solution for administrative staffing woes: Automation. Alacare Inc.,
Birmingham, Ala., has managed to reduce its data entry and support staff by
several positions by implementing an electronic patient record, says CEO
John Beard. Now billers just download charts and don't need extra help
chasing down notes, forms, etc.
Editor's note: Look for more on how assessments can affect your profits,