Payment Incentives for Home Health Care Workers Pay Off

Home health agencies that offer an incentive payment appear more likely to be profitable. That’s according to the fourth biannual National State of the Industry (SOI) Report for Home Health and Hospice by Fazzi Associates, a Massachusetts-based home care consulting firm.

The 2016-2017 report surveyed 751 home health agencies on operations and best practices and revealed some of the recent changes in home health operations.

An incentive for offering incentives


There is some debate across the industry on whether providers should offer incentives to clinical staff. Less than half (38%) of the surveyed home health agencies offered payment incentives for clinical staff, but those that did saw some benefits, according to the report.

Namely, more than half of respondents that incentivized for productivity were in the top quartiles for Medicare margins and quality measures.

“Incentive payments appear to be related to profitability as more than 60 percent of respondents with incentive payments are in the top two Medicare margin quartiles,” the report reads.


Of providers that did incentivize, 61% did so for productivity; 39.3% incentivized quality; nearly 41% incentivized patient satisfaction; and 15.5% said they incentivized in other wayssuch as wound care, distance from office, travel, friendliness, timeliness of clinical documentation, on-call, overtime, for referrals and quantity.

More than half of respondents that incentivized for quality were in the top two quartiles for Home Health Compare quality—the ratings system on Medicare-certified home health agencies compiled by Medicare. Over 60% of these respondents were also rated in the top two quartiles for emergency department (ED) use.

Compensation trends

Paying nurses by a salary or per visit rate is associated with higher Medicare profitability, a fact that is consistent with a 2009 Fazzi Associates study, the report notes.

Nearly three-quarters (72%) of home health care agencies that paid registered nurses (RNs) by salary or by per visit (79%) showed a profit. In contrast, only half the agencies that paid the hourly rate showed a profit.

Agencies in the highest quartile for Medicare quality were more likely to use an hourly pay structure (27.6%) than agencies in the lowest quartile (17.5%), and were less likely to use a per visit pay structure (39.5% compared to 48.8%).

“However, the reverse is true of profitability; agencies with higher Medicare margins are more likely to use per visit and less likely to use hourly,” the report reads. “Looking at agencies that rank the highest in both Medicare profitability and the lowest (best) for ACH scores, the per visit rate approach had as many respondents in the best rating as the hourly rate had in the poorest rating.”

About 59% of surveyed nonprofit agencies were more likely to use the hourly pay structure, whereas roughly half of all for-profit agencies who responded used that model.

For licensed practical nurses (LPNs), payment “had a significant correlation with quality,” the report said.

LPNs who were paid hourly averaged a quality score of 59.0, while LPNs who were paid on a per visit rate averaged 49.7 for quality. Agencies that paid their LPNs a salary had the highest ranking—39%—for Medicare profitability, according to the report.

For therapists, the salary method also showed the highest quality, averaging 61.9 compared to the per visit rate which averaged 49.6 for quality. Agencies in the highest Medicare profitability quartile (30%) used the per visit rate for therapists, while more nonprofits (35%) used the hourly rate for therapists than for-profits (just 6%).

Written by Tim Regan

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