The Key To Home Health Care Survival: Diversification

About thirty years ago, most home health agencies were non-profit Medicare agencies. Many had private pay home care as part of the organization's services. Back then, most of the Medicare agencies were VNAs or attached to a hospital system. We had our Medicare caseload and then there was the private pay which also included the DSHS Chore Services personal care program. There were few free standing private pay agencies. Approximately twenty years ago many of the Medicare agencies began to drop their private pay programs. It was about that time that that HCFA, now CMS began to allow for-profit organizations to participate in the Medicare Home Health benefit. The Medicare rules began to be enforced and those agencies which ran the private pay home care with the Medicare began to close the private pay sections because they were losing money. Most of that had to do with running the agencies under the Medicare license thus costing considerably more with less income to balance the P&L.

We are now coming full circle with Medicare Home Health and Private Pay services. We are beginning to see articles in the industry media about the need for diversification and alluding to the inclusion of home care private pay services as another revenue stream for the Medicare Certified agencies. For those Medicare Home Health agencies considering this move, there is one word of caution, run the new private pay company under a separate license. In looking back at why Medicare Home Health and Hospice agencies divested themselves of the private pay, it is clear that applying the Medicare rules to private pay made the private pay business a loser. In addition, the home care private pay business is a very different type of business and must be run differently. While Medicare is highly regulated, private pay is either moderately regulated or not regulated at all depending on the state. The managers of the home care private pay agency must be open minded and able to respond to the environment without regard to the constraints of Medicare. We have found that Medicare Home Health or Hospice staff has difficulty moving out of the regulated box they live in. It is for that reason we recommend that if you are considering this addition, you should run the home care private pay under a separate license with different home care staff.

Diversification to include a private pay program may still not be enough. As the competition becomes more intense for the private pay line of business, we are now seeing the need for home care private pay agencies to differentiate themselves from others as well. No longer will the tried and true personal care services only guarantee success. Private pay home health must add additional streams of revenue in order to survive and grow. There is no single set of services that will fit all agencies. Just as all politics are local, so are services.

Diversification takes two different forms in the private pay industry, additional lines of services (e.g. Cruise Companions, Day Surgery Support, Mom and Babe, pharmacy drug reviews with recommendations and counseling, home modifications and Holiday Helpers) and value added products that are part of service packages. Value added products include such things as Life Alerts, pharmacy discount and delivery, and financial management support. When addressing value added services, the services are included in the hourly or daily rate. The clients do not pay extra for these services or products, but receive them as part of agency package. As long as the client is a customer of the agency, they automatically receive the product or service. The cost of the value added is embedded in the hourly or daily rate by calculating the cost of the value added feature and dividing that cost by the hours of days of services currently provided by the agency. Sometimes the extra charge is as little as $.25/hour more.

Whatever services or value added elements you select, they must be services or products that your particular customers view as something they are willing to pay for or see as an added value. With this in mind it is critical that you survey your customers to make sure they see what you have to offer is something they want.

If you need help with determining what other services or value added elements would be appropriate for your agency, call Kenyon Homecare Consultin g at 206-721-5091 or contact us online today!