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Posts tagged ‘Health Care Business strategies’

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.

Goals and Strategy

Every week, I try to read at least one book from the business section of  To be sure, many of them are rubbish.  The really great ones change the way I think – Blink, for example, by Malcolm Gladwell.  This week’s book is Good Strategy Bad Strategy by Richard Rumelt.  This book is neither rubbish nor changes the way I think but it articulates many of my own feelings about both business and nursing.

Mr. Rumelt should have talked to nurses before he wrote his book.  Good nurses are excellent at planning strategy except we call it care planning.  On the business side of things, we often confuse strategy with goals.  Or we think a mission statement or ‘shared vision’ is the answer to growing business.  We have entire strategic planning events where a grocery list of goals is put forth.  But in business, we rarely come up with good strategy.

Strategy is the part we gloss over.  Strategy is the part where we roll up our sleeves and do things to accomplish the goal.  A good strategy takes into account the obvious hurdles.  A bad strategy is easily recognized by buzzwords and cliché’s.  Nurses do not write, “Dress wound appropriately using innovative and imaginative methodologies and the latest technology to outshine the competition.”  I would love to see a surveyor go after that order.  They simply determine how to best treat the wound.  In other words, they write about specific orders.

The greatest barrier I have found in strategic planning is an agency is fear.  Great strategy means making focused decisions and setting priorities for the organization.  It is not a democracy.  There may be other needs in the agency that are not being met while resources are focused on another area.  The ‘shared vision’ may not be universally shared when attention is focused on only one part of the agency.

However, like all businesses health care sells widgets.  Our widget is patient care.  A blog readers states that documentation is akin to a receipt for payment.  So, the first question you should ask is whether or not your clinician skills are where they need to be and if the documentation supports payment.  Only when the answer to that question is a confident, ‘Yes!’ can you address other areas in the agency.  So, most home health industry leaders agree that clinical care and subsequent documentation is critical.

But, what is the strategy?  I have seen many that don’t work.  Reading notes as they come through the door and writing deficiency reports is not the answer.  The value of note outside of the context of a chart cannot be determined.  Scolding the nurses as though they were two year olds is not good leadership.  I didn’t read that in a book.  It is just a gut feeling.  Electronic programs such as Episode Master are great tools but like a hammer, it is limited in scope.  You cannot build an entire building with only a hammer as a tool and you cannot build clinical excellence with Episode Master.  So really.  What is your strategy?  What are the specific steps that need to be taken to improve your clinical skills and documentation?


Assuming documentation is your Achilles’ Heel, think of all of the other problems improving documentation can solve.  Billing is done timelier and more efficient.  Marketing is easier when good documentation allows for communication with referral sources.  It is easier to assess skills of clinicians when they are documenting appropriately.  Surveys are conducted by surveyors instead of terrorists.  Money earned is money kept.  The list can go on forever.

So whether it is documentation or another area in your agency that is jeopardizing your future, be strategic about it.  Find the problem.  Diagnose the cause of it.  Get all the information you can and then make the hard decisions.  Limit your focus to what is ailing you.

You cannot fix everything wrong with your agency in one fell swoop and yet, if you have a bad survey that is exactly what will be expected of you.

If you are feeling creative today, post a comment about what your strategy is for the future.  Or, email me with your comments.

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