How Home Health Agencies Could Trim Costs Ahead Of Medicare Rate Cuts

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It’s easy to understand why many home health agencies today are focused on fighting and advocating against a significant cut to reimbursement rates.

Regardless of those efforts, the possibility exists that a final rule — which may come any day now — will still include some type of cut that will be financially and operationally difficult for many agencies.

In preparation for that, home health agencies have to get creative to find ways to cut costs.


According to an analysis by the National Association for Home Care and Hospice (NAHC), an estimated 51% of home health providers would be operating in the red if the proposed rate reduction of 7.69% from the Centers for Medicare & Medicaid Services (CMS) materialized for 2023.

“You’ve got to reduce your cost of care because that’s what CMS is really trying to have agencies do,” Lindsey Doak, BerryDunn’s national study leader, told Home Health Care News. “To prove our value by proving we can reduce the cost of care and increase outcomes. As the home-based care industry, if we’re able to prove that we can do those things, I think we’ll get our due and the acknowledgment. But we have to be able to do it.”

Earlier this year, the accounting and consulting firm BerryDunn published a study that examined some of the best practices agencies could implement to be prepared for an evolving industry. The study worked with a steering committee made up of dozens of professionals in the home health and home care space.


More specifically, the committee was focused on cost reductions agencies could make that allowed them to maintain a high quality of care and high patient satisfaction outcomes.

“We knew that higher productivity would result in reduced RN per visit costs, but we found that jumping from four visits per day to five doesn’t diminish quality or satisfaction,” Doak said. “In fact, patients’ satisfaction is higher.”

Agencies surveyed in the study reported an average cost of $108 per visit when making four visits or fewer. That cost fell to $86 per visit when making more than five visits, while star satisfaction ratings increased from 3.5 to 4.

Labor pressures

Workforce efficiencies can also help home health agencies cut costs ahead of possible Medicare rate cuts.

Current labor pressures are going to persist no matter what CMS decides, AccentCare CEO Steve Rodgers told HHCN. But the key is to find ways to better use the workforce agencies already have.

Rodgers believes agencies and CMS can work together to find solutions.

“There seems to be a relatively unlimited demand from the health systems and other partners that we have across the system,” Rodgers said. “We can’t fill all the orders that are coming into us, and a lot of that is predicated on an antiquated model that requires us to physically go see patients when we know we can be just as effective in other ways.”

By mixing up physical visits with more “touch point” visits, as Rodgers called them — like telehealth visits and phone calls — agencies can have a positive impact on patients while stretching their staff.

“But we don’t get paid to pick up the phone or do a telehealth visit today,” Rodgers said. “That creates an economic disincentive for us while we’re trying to do the right thing.”

Retention also plays a big role in profitability for agencies.

Agencies surveyed with a turnover rate between 21% and 30% had a Patient-Driven Groupings Model (PDGM) surplus percentage of just 0.97%. For the agencies that had a turnover rate under 10%, that number shot up to 18.94%.

“While, again, a lot of factors go into the makeup of PDGM surplus, we definitely see a correlation with increased turnover and profit,” Doak said. “It’s likely a result of turning away referrals; 89% of home health agencies say they’ve had to turn away referrals in the past 12 months. And [there’s] the heavy cost of replacing staff. Retention is critical.”

AccentCare has been working on a number of proposals for CMS in the case that a drastic cut to reimbursement is finalized, Rodgers said. However, he is keeping those proposals close to the chest and is encouraged to work in good faith with CMS when negotiation time comes, he said.

Staffing smarter

Regardless of what CMS decides, the time is now for home health agencies to find efficiencies wherever they can.

One of the ways is to make sure clinicians and caregivers are performing tasks that require a specific license. In other words, agencies need to make sure they’re staffing smarter by putting their people in spots that best utilize their skills.

“If we’re using clinical staff for administrative, back-office, transactional workflows and other tasks, we’re probably not maximizing value,” Tim Ashe, chief clinical officer at the post-acute care technology and analytics company WellSky, told HHCN. “When you think about the overall rate and revenue pressure in the market and overlay that with the value-based purchasing movement, specifically in certified home health, we have to make sure that people are operating at the top of their license.”

The simple idea of having clinicians work at the top of their license can also go a long way in retention, Ashe said.

“If I’m a nurse, I’m operating at the top of my license and I’m free from that transactional, non-clinical workflow, it allows me to feel more satisfied because I’m focusing on patient care,” he said. “I’m using my clinical skills, my clinical judgment, clinical decision-making abilities, and that all adds to my professional satisfaction in the workplace.”

For some home health agencies, fighting a severe cut to reimbursements is priority No. 1, especially considering some home-based care and hospice agencies have already stopped operations due to staffing shortages and a lag in reimbursement.

While they fight, home health agencies should also be figuring out ways to be as efficient as they can be moving forward.

“Hopefully the CMS cuts are eliminated with the final rule, because if they do happen, it will be devastating for the home health industry,” Doak said. “But while we are facing the unknown, agencies should be looking at building efficiencies. With the focus on reduced health care spending, building efficiencies is going to be inevitable for all agencies at some point.”

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