Home Health: A look at the year and what’s ahead

2014 has been an interesting year for many agencies.  With reimbursement cuts taking effect, thanks to Obamacare, and the continued cuts going through to 2015, the industry is continuing to see changes.  While some changes have been slightly positive, such as the elimination of the narrative portion that must be completed by physicians on the Face to Face form, much work is still needed.

MedPac will likely be pressing for new reforms to the industry, yet again claiming that profit margins are too high.  As previously discussed, the method used for determining the profit margins is antiquated and does not include expenses that are required in order to operate a successful agency and business.

You will likely also see more mergers and joint ventures between national home health providers and other service providers.  2014 was the year of larger sales and takeovers from Kindred’s purchase of Gentiva, HealthSouth’s purchase of Encompass (see page 2) and the continued consolidation of smaller agencies combining resources with larger local agencies.

2015 represents significant opportunities for locally owned providers as well.  While home health has been designed to be personal and have strong ties to the community, the growth of large national companies is taking that personal touch away.  Clinical decisions are being overruled by managers hundreds of miles away and may not always be the best for the patient.  Relationships between home health providers and referral sources are also not the same.  No longer can a referral source pick up the phone and call the agency owner to address a problem. The referral source now needs to call a regional or area manager.  So where will the personal touch be in 2015?  Your agency.

Your agency is going to have many opportunities to prove itself to referral sources by going one step further than national companies who are limited by models directed by a corporate office.  The local home health agency is not a dinosaur, but a new competitive model that, when positioned correctly, has the ability to be a dominant force in the continuum of care.  But to do this in 2015, with shrinking reimbursement for agencies, is going to require a new way of doing business.

In 2015 we are going to be providing a strict operating model to help agencies succeed using a set of financial indicators and metrics.  These metrics will help you reach your targeted revenue, overhead, and direct expense, producing a profit that will help you maintain your agency – your business.  The metrics will also help you position your agency for future succession plans, should you decide that retirement is an option you would like to explore in the next few years.

We look forward to 2015 and continuing to provide you with important information and tactics to help you succeed! Please contact us for any questions you may have. Happy Holidays and great success in 2015!