Tracking Key Metrics Can Improve Financial Outcomes

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By Mark Sharp, CPA, partner at BKD LLP 

Business Intelligence for Home Health Agency You may have gotten into the home health and hospice business to help patients, but if your organization isn’t running at peak efficiency, you could face a troubled future.

Reimbursement rates for home health agencies are expected to decrease between now and 2017, and any increases hospice agencies may receive will never exceed 2%, according to projections.

Especially for home health agencies, Medicare margins have been a saving grace. Medicare margins are 13%, compared with 5% overall margins. Hospice margins are 6% for Medicare and 5% in general. But as the super committee formed as part of the federal debt ceiling negotiations looks for trillions in cuts, Medicare and Medicaid reimbursement rates definitely are on the table.

Savvy agencies are using evidence-based metrics to assist in managing their businesses. The use of spreadsheets will only get you so far because sophisticated technologies exist that can identify, extract and analyze evidence-based data to support decision-making in your business much better than a spreadsheet can.

Management dashboards of key metrics can be used to monitor the well-being of your agency. The particular metrics tracked will vary from agency to agency, but typical indicators include profit margins (Medicare-only or total), payments, expenses and quality indicators. Setting up a dashboard is straightforward, and the intelligence you receive can show you historical, current and predictive views of your business operations.

You also should be comparing your agency against industry standards, then drilling down on the areas where your agency comes up short. One area where many home health agencies fall behind standards, for example, is the OASIS evaluation. Outcomes should drive financial metrics, but clinicians have the tendency to underscore patients. Agencies with the best quality outcomes and customer satisfaction scores usually have higher OASIS evaluations.

But you won’t know how you stack up against competitors and the industry’s best agencies if you don’t make gathering intelligence about your business part of your weekly duties.

Better care decisions and improved margins await those who take the time to study the business and learn from others.

Mark Sharp and F. Edward Nicholas Jr., a CPA who is vice president and CFO at Visiting Nurse Services of Connecticut Inc., spoke on the topic, “Successfully Developing and Managing an Evidence-Based Approach to Agency Management Using Key Metrics” during the recent Home Care and Hospice Financial Managers Association conference and expo.


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