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THE Formula

The formula for making money in home health is simple.  Take the number of patients you have and multiply it by the average payment and you can get a pretty good idea of what your revenue will be.  I don’t think you need a degree in higher mathematics to figure that out.  What I have trouble conveying to certain people is how the census influences the average revenue.  The significant decrease in later episodes is enough to make a sane person think twice about holding onto patients who have met their goals but sanity doesn’t seem to be our strong point at times. 

Luckily for me, Palmetto GBA has simplified the explanation for me.  Here are some numbers that PGBA sent to one provider as an explanation for why they were undergoing a probe audit.

Length of Stay in Days


It would seem that this particular provider has an average length of stay close to a thousand days but Louisiana in general is closer to 400 (that is not a typo) and all PGBA states are just over the 200 mark.  More than half of the agency’s patient are on service longer than 975 days. 

Based upon these numbers, one would think that the provider who received this letter was paid a whole lot more than they should have been, right?  After all, their patients were on service for twice as long as most Louisiana patients and three times as long as the average of all patients in the states that PGBA serves as a MAC.  But, you would be wrong.  Otherwise, I would not be writing this post.  Here is the reality in dollars and cents.

Disbursement per Beneficiary


Suddenly the tops of the bars are a little closer together.  The blue provider is only making slightly more per patient than agencies with a shorter length of stay and about 2K greater than all PGBA states.

So, if your strategy for increasing your census is to hold onto patients until they die, or quite possibly you die, you may want to re-visit that strategy.  Everything else aside, the agency in blue is now burdened with the extra expense and stress of getting records ready for review by Palmetto GBA.  In agencies with a large number of later episodes, the average HHRG will come up simply by discharging patients who are on service for longer than they need to be.

Keep one other thing in mind as you look at these numbers.  The PPS system results in higher reimbursement for some occurrences in the later episodes offsetting this natural decline in payment.  Patients who have surgical incisions in later episodes or a need for therapy actually pay much higher than the average.  What this means is that patients who truly do require extra services because of a new diagnosis or event will generate the revenue required to take care of them. 

The original formula still works but in order to succeed agencies need to understand how the numbers affect each other and aggressively pursue new admissions as the only way to build census.  Holding onto patients apparently costs the agencies more than it does the payor source but it won’t stop them from coming after you if your numbers produce a graph such as this.

If you have received a copy of a similar letter from PGBA, I would very much like to see a copy of it.  You can delete your agency information or you can be assured that I would never disclose your identity. 

Don’t forget to register for the Food, Football and Fun event.  Your nurses will come away with the tools your agency needs to survive the scrutiny that is apparently our fate this year.

Note: The blue numbers have altered insignificantly so that a provider’s actual data was not posted in a blog.

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