Hospice Agencies Need Their Own Formulas

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Karen Utterback By Karen Utterback 
Former Vice President, Product Marketing and Strategy, McKesson (Retired)

Hospice Agency MetricsYour hospice agency should be collecting data on the same four metrics that home health agencies do, says David J. Berman, CPA, CVA, principal at Simione Healthcare Consultants LLC. However, the specific data tracked under the four broad headings (revenue, margins [gross and net] cash flow and efficiencies) will differ somewhat.

Berman says that for hospice, revenue measures should include days, average daily census and length of stay. For agencies with inpatient units, separate measurements should be taken for inpatient and outpatient operations.

According to Berman, calculations for gross margins (revenue minus direct expenses) and net margins (gross margin minus fixed expenses) follow the same formula as for homecare agencies. Cash flow also is the same; however, “for routine room and board, ask for that up front because it’s nearly impossible to chase after the patient passes,” says Berman, who serves as interim chief financial officer at Neighborhood Health Agencies, Chester, Pa. Berman and Andrea L. Devoti, president and CEO at Neighborhood Health, were featured speakers during the McKesson Homecare Executive Summit.

Data collected in the efficiencies category can make the difference between profit and loss, Berman says. By looking carefully at its ancillary costs per day for in-home services, the agency was able to reduce its costs from $28 per day over the length of stay to just $18 per day.

Agencies with inpatient units must look at their FTEs closely because daily census counts can vary widely, Berman notes. Neighborhood Health Agencies employs several part-time nurses who can be called in during peak times. Devoti adds that the agency leverages its more than 120 hospice volunteers to sit with patients instead of using employed aides in many cases.

“The goal is simplistic data, in concise form, that tells your story,” Berman says.

Next: Managing by leveraging your agency’s data.

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