As home-based care operators aim to achieve financial stability for caregivers and clinicians, many may take steps to recalibrate their compensation strategies. 

When determining which compensation model works best for an organization, leaders need to keep a number of factors in mind, according to Angela Huff, senior managing consultant at Forvis Mazars.

“You have to have a model that is fair to your employees, fair to the organization, and then FLSA compliant,” she said during a presentation at last month’s National Association for Home Care & Hospice (NAHC) Financial Management Conference. “You need to really think about what your approach is going to be, because whatever that’s going to be, has to line up with your agency’s goals.”

Huff noted that providers should also factor in employee recruitment and retention, as well as risk reduction to the agency, when deciding on a compensation model.

First and foremost, financial leaders should have a strong understanding of their company’s current challenges.

Broadly, there are three basic compensation models — hourly, salaried and pay per visit.

An hourly compensation model allows employers to negotiate what the rate will be upon hire. The model allows employers to compensate employees based on their experience, knowledge and tenure.

“You may hire and pay someone that has been a clinician for 20 years at a different rate than someone else that may be a new grad, just coming out of school, so it gives you some flexibility there,” Huff said.

However, there are some drawbacks to the hourly compensation model.

“It can reinforce your non-productive performers to take a longer time for those visits,” Huff said. “They’re reporting that they’re working, and they’ll be compensated. This could cause a little bit of a rift, where if you’ve got an efficient employee, they can actually be compensated less. They may see seven patients over eight hours, you may have another clinician that is seeing three patients over that same period of time. Your productive person who’s seen more patients isn’t actually getting compensated for that, and they know it.”

Huff also pointed out that there’s incentive to take on new patients under this model, and it requires management to oversee productivity.

With salary compensation, the amount is also negotiated upon hire. This gives employers the opportunity to determine this based on experience. That amount is paid regardless of the time worked.

Some of the drawbacks to this model is that there are inherent incentives built in for performance or efficiency. There’s also no incentive to take on new patients. While bonuses can be an effective motivator, it can also drive up costs for companies.

The pay per visit model only pays for productive or accountable time. One of the downsides to this model is that it can create a “visit focus” in care management rather than “patient focus.”

No matter what compensation model a company implements, providers need to have strong understanding of the the Fair Labor Standards Act (FLSA). 

“Those FLSA protections are broad, and the violations are expensive,” Huff said. “We’re seeing a lot of wage and hour Department of Labor activity in our space, for sure.”