panpha financial implications of your home health, hospice and home care strategies november 18,...

PANPHAPANPHA Financial Implications of Your Financial Implications of Your

Home Health, Home Health, Hospice and Home Care StrategiesHospice and Home Care Strategies

November 18, 2010November 18, 2010

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With You TodayWith You TodayPamela RichmondPamela Richmond

DirectorDirectorParente Randolph, LLCParente Randolph, LLCphone: (419) 517-4230phone: (419) 517-4230

[email protected]@parentebeard.com

Denise HarrisDenise HarrisDirectorDirector

Parente Randolph, LLCParente Randolph, LLCphone: (717) 790-0473phone: (717) 790-0473

[email protected]@gmail.com

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Learning ObjectivesLearning Objectives

1.1. Gain a greater understanding of the initial Gain a greater understanding of the initial financial impact of starting, home health, financial impact of starting, home health, hospice or home care services in the current hospice or home care services in the current environment. environment.

2.2. Be able to discuss the key changes to Be able to discuss the key changes to reimbursement and expenses that will reimbursement and expenses that will affect your home and community based affect your home and community based service programs over the next five years.service programs over the next five years.

3.3. Learn how to utilize this knowledge to Learn how to utilize this knowledge to strengthen your organization’s services. strengthen your organization’s services.

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Current Economic RealityCurrent Economic Reality

New Normal New Normal oror

Tip of the Iceberg?Tip of the Iceberg?

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Medicaid Enrollment Has Increased by Nearly 6 Million Medicaid Enrollment Has Increased by Nearly 6 Million Since the Start of the RecessionSince the Start of the Recession

40.4 41.9 42.6 42.3 42.8 44.848.6

Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09SOURCE: Analysis for KCMU by Health Management Associates, using compiled state Medicaid enrollment reports

Monthly Enrollment in Millions

Funding – Total MedicaidFunding – Total Medicaid

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Medicaid Funding – Nursing HomeMedicaid Funding – Nursing Home

• Medicaid costs are higher than Medicaid reimbursement.• State Budget deficits and increased Medicaid beneficiaries are adding

further pressure to reduce Medicaid spending. 7

Health Care Reform & Skilled Nursing Health Care Reform & Skilled Nursing Facility PPS CutsFacility PPS Cuts

PPD – Pennsylvania FY10 to FY19PPD – Pennsylvania FY10 to FY19

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Public Company PerformancePublic Company PerformanceLong Term Care vs. Hospice and Home HealthLong Term Care vs. Hospice and Home Health

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Source: The Braff Group: Index of Public CompaniesSource: The Braff Group: Index of Public Companies

•Gray (top line) is Home Health and HospiceGray (top line) is Home Health and Hospice

•Blue (bottom line) is Long Term CareBlue (bottom line) is Long Term Care

Economy Slows % of Seniors Moving:Economy Slows % of Seniors Moving:Seniors Staying At Home LongerSeniors Staying At Home Longer

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

65 to 69 years 70 to 74 years 75 to 79 years 80 to 84 years 85+ years

Percentage of Each Age Group Who Moved That Year for 65+Source: U.S.Census Bureau, Current Population Survey for Each Year

1999 -2000

2002-2003

2005-2006

2008-2009

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What are Home and What are Home and Community-Based Services (HCBS)?Community-Based Services (HCBS)?

• Home HealthHome Health– Patient criteria: skilled need, home-bound, intermittent carePatient criteria: skilled need, home-bound, intermittent care– Services: Nursing, OT, PT, SLP, Social work, Aide Services: Nursing, OT, PT, SLP, Social work, Aide

• HospiceHospice– All-inclusive care for the terminally illAll-inclusive care for the terminally ill– 95% care at home; 5% facility-based95% care at home; 5% facility-based– 24-hour/day available, interdisciplinary team24-hour/day available, interdisciplinary team

• Home CareHome Care– Non-skilled personal care and support—predominately ADL’sNon-skilled personal care and support—predominately ADL’s– Homemaker/Companion ServicesHomemaker/Companion Services– Transportation, chore services Transportation, chore services – Private pay Private pay

HCBS Licensure/Certification Elements HCBS Licensure/Certification Elements

• All program types are licensed and surveyed by the All program types are licensed and surveyed by the PA Department of Health division of Home HealthPA Department of Health division of Home Health

• Each component has a unique set of standardsEach component has a unique set of standards• Home health and Hospice are subject to survey Home health and Hospice are subject to survey

under state and federal (Medicare) standardsunder state and federal (Medicare) standards• Policies & procedures are unique to each programPolicies & procedures are unique to each program• Some insurers require accreditation (ACHC, JCAHO, Some insurers require accreditation (ACHC, JCAHO,

or CHAP) beyond licensure and certification for or CHAP) beyond licensure and certification for participationparticipation

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Successful Diversification:Successful Diversification:Does Your Organization Have What It Takes?Does Your Organization Have What It Takes?

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Photographer: Renjith Krishnan http://www.freedigitalphotos.net

Approximately 70% of All Change Initiatives FailApproximately 70% of All Change Initiatives Fail

Approximately 70% of all M&A’s fail to > share holder value Approximately 70% of all M&A’s fail to > share holder value

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Definition of Financial StabilityDefinition of Financial Stability

• What is Your Organization’s Definition? What is Your Organization’s Definition? • Indicators of Financial Stability: Indicators of Financial Stability:

Occupancy / Patients servedOccupancy / Patients servedNet Operating MarginNet Operating MarginAnnual Cash FlowAnnual Cash FlowDebt Service Coverage Ratio (hospice IPU, leveraged Debt Service Coverage Ratio (hospice IPU, leveraged

purchase)purchase)Days Cash on HandDays Cash on Hand

• Compare indicators to budget and benchmarks Compare indicators to budget and benchmarks • Develop financial metrics Develop financial metrics

Key ConsiderationsKey Considerations

• What is your core business / ministry? What is your core business / ministry? • How do such services enhance or How do such services enhance or

threaten existing service lines? threaten existing service lines? • As a campus based provider, are you As a campus based provider, are you

ready to turn your focus toward the ready to turn your focus toward the community at large? community at large?

• What time line, talent, and resources What time line, talent, and resources are we willing to commit to this are we willing to commit to this transformation?transformation?

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Options for Adding HCBS ServicesOptions for Adding HCBS Services1.1. Partner with Existing Provider/Joint VenturePartner with Existing Provider/Joint Venture

• Provide care on campus & in communityProvide care on campus & in community

2.2. New Agency Start-up New Agency Start-up • Provide care on campusProvide care on campus• Evaluate/expand care in community Evaluate/expand care in community

3.3. Purchase Existing Provider/LicensePurchase Existing Provider/License• Merger/acquisition Merger/acquisition • Provide care to existing patient populationProvide care to existing patient population• Expand care to campusExpand care to campus

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CAUTION•Consolidation of providers: national mergers Consolidation of providers: national mergers and acquisitionsand acquisitions

•Increased regulation (States: Licensure / CON; Increased regulation (States: Licensure / CON; Federal Health Care Reform; RAC Audits) Federal Health Care Reform; RAC Audits)

•Falling reimbursement from 3rd party sourcesFalling reimbursement from 3rd party sources

•The need for cost control and for streamlining The need for cost control and for streamlining operations operations

Are Home and Community Based Are Home and Community Based Services the Answer?Services the Answer?

Mergers and AcquisitionsMergers and Acquisitions 2009 Top Home Health and Hospice2009 Top Home Health and Hospice

– LHC Group – SeniorBridge*– Amedisys, Inc.

– Gentiva Health ServicesGentiva Health Services– Sun Healthcare GroupSun Healthcare Group

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* Home Health only; hospice services not offered.

Source: The Senior Care Acquisition Report, 2010.

One Merger and Acquisition Strategy

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Odyssey / Gentiva Health Services Odyssey / Gentiva Health Services • Consist of 350 offices in 39 statesConsist of 350 offices in 39 states• Gentiva acquired Odyssey in August Gentiva acquired Odyssey in August

20102010• Became largest home health & hospice Became largest home health & hospice

provider in U.S.provider in U.S.• Strategic Priorities for Growth: Strategic Priorities for Growth:

• Employer of choiceEmployer of choice• Put a new clinical management system into Put a new clinical management system into

practicepractice• Grow MedicareGrow Medicare• Expand specialty programsExpand specialty programs• Grow hospiceGrow hospice• Improve commercial pricingImprove commercial pricing

Evaluating Purchase, Joint Venture or Evaluating Purchase, Joint Venture or Start-UpStart-Up

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Photographer: Renjith Krishnan http://www.freedigitalphotos.net/images/Other_Objects_g271-Magnifying_Glass__p2159.html

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Partnering/Joint Venture Considerations Partnering/Joint Venture Considerations 1.1. Start-up immediate Start-up immediate 2.2. May/may not require equity position with May/may not require equity position with

bottom line effect bottom line effect 3.3. No initial Medicare/DOH survey issuesNo initial Medicare/DOH survey issues4.4. Potential lease income for CCRC Potential lease income for CCRC 5.5. Mutual understanding by both partners of Mutual understanding by both partners of

each other’s business each other’s business 6.6. Shared risk, loss and control Shared risk, loss and control 7.7. Greater risk of conflict with your mission Greater risk of conflict with your mission

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New Agency Start-up ConsiderationsNew Agency Start-up Considerations

1.1. Lengthy lead time due to licensure, certificationLengthy lead time due to licensure, certificationand accreditationand accreditation

2.2. Start-up capital requiredStart-up capital required• Infusion of cashInfusion of cash• Medicare certified business requires lead timeMedicare certified business requires lead time

with unreimbursed care with unreimbursed care 3.3. Probable failure if business is campus onlyProbable failure if business is campus only4.4. Marketing for home care & CCRC’s differentMarketing for home care & CCRC’s different5.5. Design program in harmony with mission Design program in harmony with mission

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Start-up Considerations ContinuedStart-up Considerations Continued

6.6. Full control of organization possibleFull control of organization possible7.7. Billing process, accounting and IT system Billing process, accounting and IT system

differs greatly from CCRCdiffers greatly from CCRC8.8. Initial time must be spent developing Initial time must be spent developing

policies, procedures and processespolicies, procedures and processes9.9. Difficult to find staff to work for Difficult to find staff to work for newnew

companycompany10.10.Additional per diem staff neededAdditional per diem staff needed11.11.WC and liability rates higher than in CCRCWC and liability rates higher than in CCRC

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Purchase Considerations Purchase Considerations

1.1. Possible significant financial outlayPossible significant financial outlay2.2. ““Buy” license and Medicare provider Buy” license and Medicare provider

numbernumber3.3. Immediate availability of market share and Immediate availability of market share and

revenue streamrevenue stream4.4. Inherit the provider’s “good and bad”Inherit the provider’s “good and bad”5.5. Eliminate a competitorEliminate a competitor6.6. Risk conflict with your mission Risk conflict with your mission

Purchase Considerations ContinuedPurchase Considerations Continued

7.7. Work with someone experienced in Work with someone experienced in sales/HCBS agency operations and sales/HCBS agency operations and purchasespurchases

8.8. Due diligence key—leave no stone Due diligence key—leave no stone unturnedunturned

9.9. Sale must be well-structured—make Sale must be well-structured—make certain you’re covered for liability purposescertain you’re covered for liability purposes

10.10.Be willing to walk away from a “bad” dealBe willing to walk away from a “bad” deal11.11.Conversion for employees can be difficultConversion for employees can be difficult

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Purchase or Start-up CostsPurchase or Start-up Costs

Valuation is .50 to 1.50 x Annual RevenueValuation is .50 to 1.50 x Annual RevenueFor Home Health and HospiceFor Home Health and Hospice

.3 to .5 for Home Care.3 to .5 for Home CareCannot sell for 36 months after purchase Cannot sell for 36 months after purchase

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• $$250,000 to $800,000 per service line to develop business plan 250,000 to $800,000 per service line to develop business plan • Out of pocket working capital as you pay staff, wait for Out of pocket working capital as you pay staff, wait for

licensure and build the businesslicensure and build the business• First 10 Home Health or First 5 Hospice Medicare Cases are FreeFirst 10 Home Health or First 5 Hospice Medicare Cases are Free• Difficult to obtain line of creditDifficult to obtain line of credit• Cannot sell for 36 months after start-upCannot sell for 36 months after start-up

Start-Up CostsStart-Up Costs

Diversification Strategies Diversification Strategies

– Madlyn and Leonard Abramson Center for Madlyn and Leonard Abramson Center for Jewish Life (Single Site CCRC)Jewish Life (Single Site CCRC)• Hospice - Start-upHospice - Start-up• Adult Day - Start-upAdult Day - Start-up• Caregiver Support - Start-upCaregiver Support - Start-up• Geriatric Care Management - Start-upGeriatric Care Management - Start-up• Home Care – Start-upHome Care – Start-up

– Advanced Living Communities 202/Tax Advanced Living Communities 202/Tax Credit (Multi-site Subsidized Housing)Credit (Multi-site Subsidized Housing)• Adult Day Services – JV North Penn Adult Day Services – JV North Penn

Visiting Nurse AssociationVisiting Nurse Association• Home Care – Start-upHome Care – Start-up

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More Diversification StrategiesMore Diversification Strategies• Start-UpStart-Up

– Ohio Masonic (Multi-site CCRC) Home Care Ohio Masonic (Multi-site CCRC) Home Care agency serving 3 CCRCs and community at agency serving 3 CCRCs and community at largelarge

• PurchasePurchase– Ohio Masonic (Multi-site CCRC) purchased Ohio Masonic (Multi-site CCRC) purchased

small provider: hospice, home health and small provider: hospice, home health and home care; expanded to purchase second home care; expanded to purchase second location location

– Otterbein (Multi-site CCRC) purchased home Otterbein (Multi-site CCRC) purchased home health care agency now serving 8 countieshealth care agency now serving 8 counties

• Joint VentureJoint Venture– Senior Independence OPRS AffiliateSenior Independence OPRS Affiliate– Kendal at Oberlin, Northern OHKendal at Oberlin, Northern OH

• Home care, home healthHome care, home health29

Will HCBS Increase Your Prosperity Will HCBS Increase Your Prosperity and Growth?and Growth?

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Photographer: Renjith Krishnan http://www.freedigitalphotos.net/images/Fowl_g318-Egg_And_Nest_p19726.html

Largest Strategic Pitfall Related to Largest Strategic Pitfall Related to Adding HCBS?Adding HCBS?

• Treating HCBS as if it were a nursing Treating HCBS as if it were a nursing home or assisted living facility without home or assisted living facility without walls.walls.

• Regulations, administrative processes, Regulations, administrative processes, policies, procedures, compensation of policies, procedures, compensation of staff, assessment, coding and billing are staff, assessment, coding and billing are significantly differentsignificantly different from nursing from nursing home and assisted living operations. home and assisted living operations.

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Reasons Reasons NOTNOT to Provide HCBS to Provide HCBS

• To fund a losing operationTo fund a losing operation• To “save” a flailing systemTo “save” a flailing system• To breathe life into a dying operationTo breathe life into a dying operation

Home and Community Based Services must Home and Community Based Services must be part of your strategic plan; be part of your strategic plan; they take significant resources and time to they take significant resources and time to prove a ROI: Tprove a ROI: They will not save your other hey will not save your other programs! programs!

Costs of Maintaining and Growing Costs of Maintaining and Growing Market Share Market Share

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Is My Local Market a Mature Market?Is My Local Market a Mature Market?

34Is it a growing Market or do I need to take market share?

Is My Local Market a Mature Market?Is My Local Market a Mature Market?

35Is it a growing Market or do I need to take market share?

What Affects Utilization Rates?What Affects Utilization Rates?County by County County by County

HOME HEALTHHOME HEALTH• GeographyGeography• TopographyTopography• Cultural and ethnic beliefsCultural and ethnic beliefs• Physician philosophy of Physician philosophy of

carecare• Both competition fromBoth competition from and and

referrals to rehab hospitals referrals to rehab hospitals and nursing homesand nursing homes

• Hospital discharge planners Hospital discharge planners current practicescurrent practices

HOSPICEHOSPICE• GeographyGeography• TopographyTopography• Cultural, Cultural, religious religious and and

ethnic beliefsethnic beliefs• Physician philosophy of Physician philosophy of

carecare• Referrals fromReferrals from hospitals hospitals

and nursing homesand nursing homes• Hospital discharge planners Hospital discharge planners

current practicescurrent practices

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Is My Local Market a Competitive Market?Is My Local Market a Competitive Market?• Do the top three agencies Do the top three agencies

in my market area have in my market area have 60% to 70% of market 60% to 70% of market share?share?– Market is likely difficult to Market is likely difficult to

capture – exercise capture – exercise considerable caution. considerable caution.

– Look at M&A or JV Look at M&A or JV opportunities but be opportunities but be happy with their current happy with their current market share plus the market share plus the relationships and relationships and opportunities your opportunities your organization brings. organization brings.

38http://www.amazon.com/Rule-Three-Surviving-Thriving-Competitive/dp/product-description/074320560X

Key to Success: RelationshipsKey to Success: Relationships

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PACEPACEGeriatric Geriatric

Care Care MgrsMgrs

PACEPACEGeriatric Geriatric

Care Care MgrsMgrs

Gov’tGov’tAAAAAA

CountyCounty

Gov’tGov’tAAAAAA

CountyCounty

Senior Senior CentersCentersAdult Adult

DaycareDaycare

Senior Senior CentersCentersAdult Adult

DaycareDaycare

Assisted Assisted andand

Independent Independent LivingLiving

Assisted Assisted andand

Independent Independent LivingLiving Home Home

HealthHealth

Home Home HealthHealth

Nursing Nursing HomeHome

Nursing Nursing HomeHome

Religious Religious or Cultural or Cultural

OrgsOrgs

Religious Religious or Cultural or Cultural

OrgsOrgs

PhysiciansPhysiciansPhysiciansPhysicians

Home CareHome CareHome CareHome Care

HospitalsHospitalsHospitalsHospitals

My My ServicesServices

My My ServicesServices

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Short Run and Long Run Cost/Benefit to Short Run and Long Run Cost/Benefit to Other Service Lines Other Service Lines

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How Will HCBS Affect My Existing How Will HCBS Affect My Existing Operations Short Term?Operations Short Term?

• Fix current independent living Fix current independent living occupancy issues as people “age in occupancy issues as people “age in place”place”

• Satisfy residents’ desire to stay in their Satisfy residents’ desire to stay in their “home”“home”

• If delivering services in the community If delivering services in the community you expand your potential marketyou expand your potential market

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How Will HCBS Affect My Existing How Will HCBS Affect My Existing Operations Long Term?Operations Long Term?

• Do you have the governing and managerial expertise Do you have the governing and managerial expertise to achieve success?to achieve success?

• Likely to affect turnover entrance fee revenues if you Likely to affect turnover entrance fee revenues if you are a CCRCare a CCRC

• Is cash flow sufficient to meet any debt financial Is cash flow sufficient to meet any debt financial covenants?covenants?

• Harder to fill IL as potential IL residents are likely to Harder to fill IL as potential IL residents are likely to be younger and more active than the current be younger and more active than the current populationpopulation

• Likely to turn your IL to AL and your AL to NF and NF Likely to turn your IL to AL and your AL to NF and NF to Hospiceto Hospice

How Will HCBS Affect My Existing How Will HCBS Affect My Existing Operations Long Term?Operations Long Term?

• Synergy: Real or Imagined?Synergy: Real or Imagined?– Business officeBusiness office– Human resourcesHuman resources– Group purchasing: economies of scale?Group purchasing: economies of scale?

• Do you really have administrative staff that has extra Do you really have administrative staff that has extra time on their hands?time on their hands?

• Even if they have time do they have education and Even if they have time do they have education and skill to understand a new service line?skill to understand a new service line?

• Do you have space in your current facilities and even Do you have space in your current facilities and even if you do, is it in the right location?if you do, is it in the right location?

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How Will HCBS Affect Existing Operations?How Will HCBS Affect Existing Operations?• Operating Expertise matters: Do it right the FIRST Operating Expertise matters: Do it right the FIRST

timetime• Do CCRC and HCBS wage scales line up?Do CCRC and HCBS wage scales line up?

– Pay by visitPay by visit– Pay by hourPay by hour

• Do CCRC and HCBS benefit packages compare?Do CCRC and HCBS benefit packages compare?• Each HCBS has its “own language”, policies and Each HCBS has its “own language”, policies and

procedures that are usually significantly different procedures that are usually significantly different from each other and from institutional based carefrom each other and from institutional based care

• DME, Pharmacy and Supply relationships may not DME, Pharmacy and Supply relationships may not cross overcross over

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Further Financial Considerations for HCBSFurther Financial Considerations for HCBS• Managed Care’s Effect on Home HealthManaged Care’s Effect on Home Health

• Authorization processAuthorization process• Fewer visits authorized per patientFewer visits authorized per patient• Lower reimbursement Lower reimbursement • HCBS must be lithe and leanHCBS must be lithe and lean• Realize that many CCRC’s not large enough Realize that many CCRC’s not large enough

to support skilled home health or hospice to support skilled home health or hospice operation aloneoperation alone

• To be financially viable, program must grow To be financially viable, program must grow beyond the facilitybeyond the facility

The Cost of Shifting Your Paradigm The Cost of Shifting Your Paradigm Central Campus Location to Multi-Site Central Campus Location to Multi-Site

Consumer Locations that Shifts on a Daily Consumer Locations that Shifts on a Daily BasisBasis

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http://www.freedigitalphotos.net/images/view_photog.php?photogid=1152

Multi-Site ConsiderationsMulti-Site Considerations• Mostly a Matter of Logistics Mostly a Matter of Logistics

– Right PeopleRight People– Right DisciplineRight Discipline– Right TimeRight Time– Right Location (people and Right Location (people and

supplies)supplies)– Efficient Travel PatternsEfficient Travel Patterns– Proper OversightProper Oversight– Strategic Office LocationsStrategic Office Locations– CommunicationsCommunications– Information ExchangeInformation Exchange

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Current and Future Current and Future Revenue IssuesRevenue Issues

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Institutional Care Vs. HCBSInstitutional Care Vs. HCBSWhat Should the Balance Be?What Should the Balance Be?

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Percentage of Medicaid Long-Term Care Percentage of Medicaid Long-Term Care SpendingSpending

0

10

20

30

40

50

60

HCBS Nursing Home

PA 2007US 2007

52http://www.statehealthfacts.org/ on October 28, 2010

What is the Real Cost of HCBS?What is the Real Cost of HCBS?

• Medicaid Waiver Medicaid Waiver • Supplemental Security Income (SSI)Supplemental Security Income (SSI)• Food StampsFood Stamps• Meals on WheelsMeals on Wheels• 202 or Tax Credit Housing Subsidies202 or Tax Credit Housing Subsidies• Medicare and Medicaid Acute Care ServicesMedicare and Medicaid Acute Care Services

Is there really savings?? Is there really savings??

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Impact of Health Care Reform?Impact of Health Care Reform?

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55http://www.house.gov/apps/list/press/tx08_brady/71509_hc_chart.html Fall 2009

Negative Key ComponentsNegative Key Components• Hospice:Hospice:

– Market basket Market basket reductions 2014 – 2019reductions 2014 – 2019

– Productivity adjustments Productivity adjustments begin 2013begin 2013

– Quality reporting Quality reporting required begin 2014required begin 2014

– Reduction of payments Reduction of payments begin 2013begin 2013

– Face to Face Face to Face recertification 2011recertification 2011

– HHS Secretary to HHS Secretary to medically review medically review agencies with long-stay agencies with long-stay residentsresidents

• Home Health Care:Home Health Care:– Market basket reductions Market basket reductions

yield 39.7 billion in savings yield 39.7 billion in savings over 10 yearsover 10 years

– New Independent Medicare New Independent Medicare Advisory board to make Advisory board to make recommendations to recommendations to Congress on issuesCongress on issues

– Transparency requirementsTransparency requirements– Elder Justice Act-reporting of Elder Justice Act-reporting of

crimes changescrimes changes– Health Insurance Health Insurance

requirements for providersrequirements for providers– Bundled payment initiativesBundled payment initiatives– Penalty for Medicare Penalty for Medicare

Advantage Plans Advantage Plans 56

Home Care ReimbursementHome Care ReimbursementPA Medicaid WaiversPA Medicaid Waivers

• Reimbursement has remained essentially flat Reimbursement has remained essentially flat over the past 3 years from the state—dollars over the past 3 years from the state—dollars are federally matched are federally matched

• Waiver programs are overseen by the Waiver programs are overseen by the countiescounties– Methods vary in terms of applications to Methods vary in terms of applications to

participate and claims processing participate and claims processing

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Home Care ReimbursementHome Care ReimbursementPrivate Duty – LTC InsurancePrivate Duty – LTC Insurance

58Source: Genworth Cost of Care Study 2010 www.genworth.com/costofcare search by MSA

HCBS HCBS Key Areas of Cost ControlKey Areas of Cost Control

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Direct Care Aides Direct Care Aides Median Hourly WagesMedian Hourly Wages

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Wage Rate Inflation Ahead?Wage Rate Inflation Ahead?

61Current Unemployment Rate is Likely Masking this Issue. Current Unemployment Rate is Likely Masking this Issue.

2014 2014 Employer Mandated Health Care Employer Mandated Health Care

• Healthcare premiums are already increasing• 2014 an FTE calculation will be used to determine

employees for insurance– Total employee hours divided by 2080 hrs = FTEs

vs.– FT vs. PT status of your employees

• This will become a significant issue for home health agencies in particular as Medicare reimbursement is slated to decrease.

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Costs of TravelCosts of Travel

• Length of travel time can have a dramatic Length of travel time can have a dramatic effect on productivity effect on productivity

• Overlay direct care workers addresses with Overlay direct care workers addresses with patient/customer addresses patient/customer addresses – Do you have the right staff in the right locations? Do you have the right staff in the right locations? – Do you have staff in a location that you could be Do you have staff in a location that you could be

serving but are not?serving but are not?– To the extent possible eliminate satellite offices To the extent possible eliminate satellite offices

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Costs of TravelCosts of TravelWhat happens to home What happens to home

based services when based services when gasoline costs $3.50 or gasoline costs $3.50 or $4.00/ gallon and $4.00/ gallon and public transportation is public transportation is not readily available? not readily available?

Does your service model Does your service model make sense? make sense?

Will your customers be Will your customers be able to cover the able to cover the increased cost?increased cost?

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Light Crude Oil (CL, NYMEX)

Putting Your Strategy TogetherPutting Your Strategy Together

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Diversify Your Revenue StreamDiversify Your Revenue Stream• Commit ResourcesCommit Resources• Eyes wide open Eyes wide open

– PlanPlan– Surround yourself with Surround yourself with

Experienced, Wise Experienced, Wise AdvisorsAdvisors

– Hire Experienced StaffHire Experienced Staff– Make it work on a stand Make it work on a stand

alone basis alone basis – Synergies may be small Synergies may be small

or non-existentor non-existent– Impact on Administration Impact on Administration

can be substantial.can be substantial.

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Photographer: Renjith Krishnan http://www.freedigitalphotos.net/images/Charts_and_Graphs_g197-

_Man_And_Arrows_p22496.html

Maintain or Increase MarginsMaintain or Increase Margins• Build in M&A or Build in M&A or

start-up costsstart-up costs• Costs of GrowthCosts of Growth• Ensure communication Ensure communication

between service lines between service lines for seamless transferfor seamless transfer

• Use standard operating Use standard operating practices for each HCBS practices for each HCBS instead of applying instead of applying institutional standardsinstitutional standards– Policies and proceduresPolicies and procedures– Wage scales and benefit Wage scales and benefit

packagespackages

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Photographer: Renjith Krishnan http://www.freedigitalphotos.net/images/Charts_and_Graphs_g197-Business_Graph__p22491.html

HCBS IssuesHCBS Issues

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Growing Age Growing Age Qualified Qualified

Population Population with High with High

ExpectationsExpectations Economy Impacting Economy Impacting Private Duty, and Private Duty, and

Shrinking the Pool of Shrinking the Pool of Income Qualified Income Qualified

ResidentsResidents

Changing Changing Regulatory Regulatory Compliance Compliance

RequirementsRequirements

Possibility of Flat or Possibility of Flat or Decreased Decreased

Medicare Medicaid Medicare Medicaid PaymentsPayments

Increasing Emphasis Increasing Emphasis on Resident and on Resident and

Family SatisfactionFamily Satisfaction

Slowing Slowing Contributions and Contributions and

Investment Investment Earnings Leave Earnings Leave

Us Unable to Us Unable to Cover ExpensesCover Expenses

Increased Increased Travel Travel Costs Costs

Slow Third Party Slow Third Party Payors Increase Payors Increase Working Capital Working Capital

NeedsNeeds

Employee and Employee and Resident Safety and Resident Safety and

ConfidentialityConfidentiality

Market Share –Market Share –CompetitionCompetitionGrowth of Large Growth of Large ChainsChainsMARGIN

Cost of Care Cost of Care Inflating Faster Inflating Faster than General than General

InflationInflation

MISSION

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Update Update Services and Services and

ProductsProducts

Fine Tune Marketing Fine Tune Marketing Plan and Form Plan and Form

Strategic Alliances Strategic Alliances

Training and Training and Spot ChecksSpot ChecksOperations Operations

ImprovementImprovement

Administer Staff, Administer Staff, Resident and Family Resident and Family

SurveysSurveys

Separate Needs Separate Needs from Wants for from Wants for

OperationsOperations

Delay ExpansionDelay Expansion

Operations Operations ImprovementImprovement

Fleet Fleet Management Management and Leasing and Leasing AlternativesAlternatives

Step Up Step Up Collection Policy Collection Policy and Procedures, and Procedures, Clear Suspended Clear Suspended

ClaimsClaims

Training and Mock Training and Mock SurveysSurveys

Workers Comp Workers Comp Claim ManagementClaim Management

Alliances, Alliances, Merger, Merger, Acquisition, Acquisition, Reliance on State Reliance on State and National and National AssociationsAssociations

MARGIN

Control Costs Control Costs through through

Performance Performance ImprovementImprovement

GPOs GPOs

MISSION

HCBS Objectives to Solve IssuesHCBS Objectives to Solve Issues

Keys to Operational SuccessKeys to Operational Success

• Consumer focusConsumer focus– You are really are in You are really are in theirtheir home home

• Focus on staffFocus on staff– appropriate training, compensation, and technologyappropriate training, compensation, and technology

• Process, process, processProcess, process, process• Infuse viable technologyInfuse viable technology• Focus driving best of class quality outcomesFocus driving best of class quality outcomes

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Keys to Financial SuccessKeys to Financial Success• Build and sustain census and referralsBuild and sustain census and referrals• Build a diversified payor mixBuild a diversified payor mix• Produce accurate assessments for certified servicesProduce accurate assessments for certified services• Determine appropriate mix of servicesDetermine appropriate mix of services• Use specialists and build a mix in staffUse specialists and build a mix in staff

– both contract and paid staff are needed in the labor poolboth contract and paid staff are needed in the labor pool

• Measure, report and incentivize productivityMeasure, report and incentivize productivity• Master the revenue cycle (billing & collection)Master the revenue cycle (billing & collection)• Control expenditures but allow room for growthControl expenditures but allow room for growth• Mine financial and operational data for insightMine financial and operational data for insight

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QUESTIONS?QUESTIONS?

Appendix AAppendix A

Pennsylvania Medicaid Waivers for Pennsylvania Medicaid Waivers for HCBSHCBS

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Appendix BAppendix B

Health Care ReformHealth Care ReformImplications for HCBSImplications for HCBS

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Health Care ReformHealth Care Reform

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• Health Care BillHealth Care Bill– Patient Protection and Affordability Act Patient Protection and Affordability Act

(PPACA) H.R. 3590(PPACA) H.R. 3590• Effective March 23, 2010Effective March 23, 2010• Majority of provisions underlying Health Care Majority of provisions underlying Health Care

ReformReform– Health Care and Education Affordability Act Health Care and Education Affordability Act

(HCEAA) H.R. 4872(HCEAA) H.R. 4872» Effective March 30, 2010Effective March 30, 2010» Enacted several changes to PPACAEnacted several changes to PPACA

HealthCare Reform and Long-Term Care 2010HealthCare Reform and Long-Term Care 2010

Medicaid Community-Based Services Medicaid Community-Based Services Provides states with new options for offering home and community-based Provides states with new options for offering home and community-based services through a Medicaid state plan amendment to certain individuals.services through a Medicaid state plan amendment to certain individuals.Permits states to extend full Medicaid benefits to individuals receiving home Permits states to extend full Medicaid benefits to individuals receiving home and community-based services under a state plan. and community-based services under a state plan.

Implementation: October 1, 2010 Implementation: October 1, 2010

© 2010 THE HENRY J. KAISER FAMILY FOUNDATION

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HealthCare Reform and Long-Term Care 2011HealthCare Reform and Long-Term Care 2011Medicare Advantage Payment Changes Medicare Advantage Payment Changes

Restructures payments to private Medicare Advantage plans by phasing-in Restructures payments to private Medicare Advantage plans by phasing-in payments set at increasingly smaller percentages of Medicare fee-for-payments set at increasingly smaller percentages of Medicare fee-for-service rates; freezes 2011 payments at 2010 levels; and prohibits service rates; freezes 2011 payments at 2010 levels; and prohibits Medicare Advantage plans from imposing higher cost-sharing Medicare Advantage plans from imposing higher cost-sharing requirements for some Medicare covered benefits than is required under requirements for some Medicare covered benefits than is required under the traditional fee-for-service program.the traditional fee-for-service program.

Implementation: January 1, 2011Implementation: January 1, 2011

Chronic Disease Prevention in Medicaid Chronic Disease Prevention in Medicaid Provides 3-year grants to states to develop programs to provide Medicaid Provides 3-year grants to states to develop programs to provide Medicaid enrollees with incentives to participate in comprehensive health lifestyle enrollees with incentives to participate in comprehensive health lifestyle programs and meet certain health behavior targets.programs and meet certain health behavior targets.



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HealthCare Reform and Long-Term Care 2011HealthCare Reform and Long-Term Care 2011 Medicaid Health Homes Medicaid Health Homes

Creates a new Medicaid state option to permit certain Creates a new Medicaid state option to permit certain Medicaid enrollees to designate a provider as a health home Medicaid enrollees to designate a provider as a health home and provides states taking up the option with 90% federal and provides states taking up the option with 90% federal matching payments for two years for health home-related matching payments for two years for health home-related services.services.


CLASS Program CLASS Program Establishes a national, voluntary insurance program for Establishes a national, voluntary insurance program for purchasing community living assistance services and supports purchasing community living assistance services and supports (CLASS program).(CLASS program).

Implementation: January 1, 2011 Implementation: January 1, 2011 © 2010 THE HENRY J. KAISER FAMILY FOUNDATION

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Medicaid Long-Term Care Services Medicaid Long-Term Care Services Creates the State Balancing Incentive Program in Medicaid to Creates the State Balancing Incentive Program in Medicaid to provide enhanced federal matching payments to increase non-provide enhanced federal matching payments to increase non-institutionally based long-term care services and establishes institutionally based long-term care services and establishes the Community First Choice Option in Medicaid to provide the Community First Choice Option in Medicaid to provide community-based attendant support services to certain community-based attendant support services to certain people with disabilities.people with disabilities.

Implementation: October 1, 2011Implementation: October 1, 2011

© 2010 THE HENRY J. KAISER FAMILY FOUNDATION © 2010 THE HENRY J. KAISER FAMILY FOUNDATION

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Accountable Care Organizations in Medicare Allows providers organized as accountable care organizations (ACOs) that voluntarily meet quality thresholds to share in the cost savings they achieve for the Medicare program.

Implementation: January 1, 2012 Medicare Advantage Plan Payments

Reduces rebates paid to Medicare Advantage plans and provides bonus

payments to high–quality plans.

Implementation: January 1, 2012


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FTC and Department of FTC and Department of Justice on Antitrust issues:Justice on Antitrust issues:““The Affordable Care Act’s The Affordable Care Act’s development of ACO’s is a development of ACO’s is a good example of how good example of how providers might work providers might work togethertogether (clinical and or (clinical and or financial integration) to financial integration) to deliver more efficient, high-deliver more efficient, high-quality care without inhibiting quality care without inhibiting competition, competition, so long as their so long as their collaborations are properly collaborations are properly constructed.constructed.” ” “Market Power” = Antitrust

Medicare Independence at Home Demonstration Medicare Independence at Home Demonstration Creates the Independence at Home demonstration program Creates the Independence at Home demonstration program to provide high-need Medicare beneficiaries with primary to provide high-need Medicare beneficiaries with primary care services in their home.care services in their home.


Medicare Provider Payment Changes Medicare Provider Payment Changes Adds a productivity adjustment to the market basket update Adds a productivity adjustment to the market basket update for certain providers, resulting in lower rates than otherwise for certain providers, resulting in lower rates than otherwise would have been paid.would have been paid.

Implementation: Begins calendar, fiscal, or rate year 2012, as Implementation: Begins calendar, fiscal, or rate year 2012, as appropriateappropriate

© 2010 THE HENRY J. KAISER FAMILY FOUNDATION © 2010 THE HENRY J. KAISER FAMILY FOUNDATION

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Fraud and Abuse Prevention Fraud and Abuse Prevention Establishes procedures for screening, oversight, and reporting for Establishes procedures for screening, oversight, and reporting for providers and suppliers that participate in Medicare, Medicaid, and providers and suppliers that participate in Medicare, Medicaid, and CHIP; requires additional entities to register under Medicare.CHIP; requires additional entities to register under Medicare.

Implementation: January 1, 2012 Implementation: January 1, 2012

Medicaid Payment Demonstration Projects Medicaid Payment Demonstration Projects Creates new demonstration projects in Medicaid for up to eight Creates new demonstration projects in Medicaid for up to eight states to pay bundled payments for episodes of care that include states to pay bundled payments for episodes of care that include hospitalizations and to allow pediatric medical providers organized hospitalizations and to allow pediatric medical providers organized as accountable care organizations to share in cost-savings.as accountable care organizations to share in cost-savings.

Implementation: January 1, 2012 through December 31, 2016 Implementation: January 1, 2012 through December 31, 2016

© 2010 THE HENRY J. KAISER FAMILY FOUNDATION© 2010 THE HENRY J. KAISER FAMILY FOUNDATION

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Medicare Value-Based Purchasing Medicare Value-Based Purchasing Establishes a hospital value-based purchasing program in Establishes a hospital value-based purchasing program in Medicare to pay hospitals based on performance on Medicare to pay hospitals based on performance on quality measures and requires plans to be developed to quality measures and requires plans to be developed to implement value-based purchasing programs for skilled implement value-based purchasing programs for skilled nursing facilities, home health agencies, and ambulatory nursing facilities, home health agencies, and ambulatory surgical centers.surgical centers.


Reduced Medicare Payments for Hospital Readmissions Reduced Medicare Payments for Hospital Readmissions Reduces Medicare payments that would otherwise be Reduces Medicare payments that would otherwise be made to hospitals to account for excess (preventable) made to hospitals to account for excess (preventable) hospital readmissions.hospital readmissions.



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