Not All Home Health Referrals Are Created Equal

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Karen Utterback By Karen Utterback 
Former Vice President, Product Marketing and Strategy, McKesson (Retired)
Not All Home Health Referrals Are Created Equal

The key to survival for home care agencies is to grow top-line revenue through new home health referral sources and an expanded market share, says David Berman of Simione Healthcare Consultants.

But not all home health referral sources are created equal, and referrals must lead to admissions, Berman said during the 2014 McKesson Home Health & Hospice Executive Summit. “Referrals are great, but they don’t generate revenue,” Berman says. “I want to know where new referrals are coming from and the conversion rate from referrals to admissions.”

As an industry, home health agencies convert four out of five referrals, so Berman recommends considering that metric as a baseline.

Likewise, agencies should scrutinize closely the source of all referrals and the potential differences in reimbursement among them. In order to evaluate referrals properly, an agency must understand its cost structure, including the direct cost per visit. Agencies may face tough choices, including accepting some referrals that are not profitable as a way to keep other, profitable referrals flowing. Considerations will vary from agency to agency and from market to market, which is why agencies must understand their costs, Berman says.

Once you recognize your costs, you can negotiate with payers from a place of knowledge to help them understand what it actually costs to take care of patients, says Berman, who acknowledges that agencies that are part of a hospital system have more negotiating power.

And once you understand your agency’s costs, you can take steps to increase operational efficiency, which Berman stresses is not the same as cutting costs. Efficiency occurs by creating processes and then sticking to them. “When you create exceptions to your processes, you create inefficiency,” Berman says.

At an agency where he serves as an interim executive, Berman received pushback over a productivity standard of five clinician visits per day. During a time when that standard was not being met, the agency discussed changing the metric to match the current reality, which Berman says is the wrong move.

“You don’t massage the data (to fit perception),” Berman says. ‘You draw a line in the sand and if you aren’t hitting the standard, find out why and fix it. And if you’re doing better, find out the why of that, too.”

Next: Benchmarks a Critical Consideration

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