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The Key to Home Health Care Survival: Diversification

Thirty years ago most home health agencies were nonprofit Medicare agencies. Many had private pay home care as part of the organization services. At that time, most of the Medicare agencies were VNAs or attached to a hospital system. We had our Medicare caseload and he 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 home care agencies began to drop their private pay programs. At that time the Health Care Financing Agency, HCFA, now CMS, began to allow for-profit organizations to participate in the Medicare Home Health benefit. When the Medicare rule enforcement began, agencies that ran private pay home care with the Medicare began to close the private pay sections because they were losing money. Running the agencies under the Medicare license were considerably costly with less income to balance the P&L.

We are now coming full circle with Medicare Home Health and Private Pay services. We see articles in the industry media about the need for diversification. They allude to the inclusion of home care private pay services as another revenue stream for the Medicare Certified agencies. For 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. Managers of home care private pay agencies 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. Our recommendations if you’re considering this addition? 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 for a home care agency to survive in today’s business. As the competition becomes more intense for the private pay line of business, we see the need for home care private pay agencies to differentiate themselves from others. 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 is local, so are home care services.

Diversification takes two different forms in the private pay industry: additional lines of services like Cruise Companions, Day Surgery Support, Mom and Babe, pharmacy drug reviews with recommendations and counseling, home modifications and Holiday Helpers just to name a few, and value-added products that are part of the 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. They are 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 or days of services currently provided by the agency. Sometimes the extra charge is as little as $25/hour more with the benefit to your client being many times greater!

Whatever services or value-added elements you select, make sure your particular customers view these services or products as added value they are willing to pay for. 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 determining what other services or value added elements would be appropriate for your home care agency to go beyond mere survival, call Ginny Kenyon at 206-721-5091 or e-mail us at Kenyon HomeCare Consulting. We are here to help.

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