How to Maximize Private Duty Home Care Profits

Providers have a golden opportunity to boost their bottom lines thanks to the rising demand for private duty home care, but they need to be creative about their service offerings and pursue various payment streams to find success.

“There should be no reason you can’t make a profit in a private duty agency,” said Joshua Banach, CPA with FR&R Healthcare Consulting Inc., at the Illinois HomeCare & Hospice Council 2015 Annual Conference & Exposition on Thursday.

Unlike agencies that are providing nursing services and are reimbursed through Medicare, private duty agencies generally are paid directly by clients for help around the house and with basic daily living tasks, and they can set their own rates, Banach emphasized. While this distinction may seem elementary, private duty agencies do not always do a good job of monitoring the profitability of their services and adjusting prices or offerings accordingly.

“The agency should only offer products and services that are profitable,” Banach said. “You need to be able to change that services list spontaneously and instantly.”

Regulations are the only real constraint on the services that private duty agencies can provide, so they should be imaginative in what they offer, he advised. For example, they might include putting up holiday decorations as a special service.

Being specific about services offered — and at what prices — also is a best practice. Banach offered the example of pet care. Doing pet-related tasks indoors might be set at one price point, while outdoor clean-up for a pet that uses the yard might be set at another.

Determining pricing can be challenging in the private duty space, because cost reports are not publicly available. But Banach said some information might be available through trade associations. He also advised providers to analyze how much time particular services take and what related administrative costs are for them, to help determine whether they should be discarded.

Private duty, public payors

The growing demand for private duty home care might be driven in part by the mindset of aging Baby Boomers, who are more comfortable than prior generations in paying out-of-pocket for services they need or want, industry members surmised.

Still, there are some government payors that work with private duty agencies, and it could be profitable for providers to add these revenue streams.

The Department of Veterans Affairs (VA) and state agencies, such as Illinois’ Department on Aging, are among the government entities that have programs applicable to private duty home care agencies.

Providers should investigate the options in their area but keep in mind that they likely will have to meet certain requirements to participate in these types of programs, said Barb Byers, RN, MS, president and CEO of Western Illinois Home Health Care and Western Illinois Managed Home Services.

Some common requirements and considerations are:

  • Hiring rules, such as minimum education credentials for particular types of workers
  • Mandated pre-service, orientation and in-service training for employees
  • Regulatory issues and staff scheduling rules

Additionally, some government programs might require the use of the OASIS data collection system, electronic visit verification or similar tools that Medicare-certified providers already have implemented but private duty agencies might not be familiar with.

Private duty agencies also need to go in with their eyes open when working with government payors. Not every government program offers robust margins, and there can be instability in the reimbursements. For example, VA reimbursements currently are in flux, conference attendees noted. And the state of Illinois drastically slowed down payments to the Community Care program during the economic downturn, due to federal pressure to prioritize Medicaid payments, Byers said.

Yet, the timeliness of payments also can be an issue when working with clients who are paying out of pocket, Banach noted. He is seeing agencies in trouble because they are lax in their collection practices and have too many unpaid bills that have been outstanding for long periods of time.

But by tracking their oustanding accounts receivable and instituting sound collection policies, he said agencies should see good results — collecting 85% to 90% of payments in a timely manner.

Written by Tim Mullaney