Grow Your Private Pay Home Care Business

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GROW YOUR PRIVATE PAY HOME CARE BUSINESS

More Home Health Agencies Focus On Private Pay To Reduce Dependence On Government Payers

October 20, 2010

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In this issue...

-- Certified Home Health Agencies Growing Private Pay Home Care

-- Private Pay In Home Health Is larger Than Independent Private Duty Companies

-- How To Get More Business For Your Home Health Agency

-- The Academy for Private Duty Home Care - December 10, Orlando, FL

-- Navigating The FOG Of Health Care Reform

-- About the Author

-- Permission to Reproduce

Welcome, Reader,

to this issue of Home Health Care Today, the leading electronic newsletter for home health care and hospice executives who want to grow their business and get ready for the future.

Certified Home Health Agencies Growing Private Pay Home Care

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The phone rings in our office late in the day. The caller is the CEO of a healthy, growing home health agency who is interested in growing their private pay business. Or perhaps, the caller wants to add private pay to their Medicare certified business.

This has been a growing trend over the past five years as more and more home health agencies are exploring the private pay marketplace. There are two primary reasons that CEOs of home health agencies want to explore private pay; 1) to generate additional revenue, and 2) to reduce their dependency on government payers.

While many of the callers already have a private pay business within their agency, most of them have struggled. While I avoid making broad generalizations, one that I make often is that most Medicare Certified Home Health Agencies that offer private pay have difficulties growing their business and making it profitable.

A significant part of our work at Leading Home Care is working with home health agencies to grow their Medicare referrals to home health, and working with home health agencies to grow their private pay business.

Last year, we conducted an industry survey of private duty companies to develop benchmarks and best practices for the private pay business. This year, we surveyed home health agencies that also have private duty to identify new benchmarks.

The 2010 Private Pay in Home Health Care survey has just closed and we are in the process of analyzing the data. Below is a look at the preliminary data.

Private Pay In Home Health Is larger Than Independent Private Duty Companies

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The data from our 2010 Private Pay in Home Health Survey shows that the private pay sector of Certified Home Health Agencies tends to be larger in revenue dollars than either independent or franchised private duty companies. The average private duty business affiliated with a home health agencies generates just under $2,000,000 in revenue. Sixty six percent of that comes from private pay, and the balance from Medicaid Waiver, Long Term Care Insurance, and other government payers.

This compares with the independent and franchise companies we studied in our 2009 Private Duty Benchmarking and State of the Industry Report. The median sized independent private duty company is about $1,000,000 in revenue, but has 90% of it's revenue from private pay.

While private pay businesses affiliated with home health are larger in volume, they tend to be less profitable. The average agency earned a net profit of 3.26% of revenue. These agencies did, however, contribute 4.60% of revenue to corporate overhead. So, if you add net profit and corporate overhead, these agencies generated 7.86% of revenue in operating income and contributed $157,700. Independents and franchises earned total owners compensation and net profit of 13% or $138,803.

For those of you who participated in our survey, you will be receiving a copy of the results prior to the end of this year, 2010.

The survey helps us provide answers to two questions we get frequently from executives of home health agencies:

"Should we be in the private duty business?"

"If so, why?"

You'll have to decide the answer to the first question. Our answer to the second question is two fold. There are two good reasons for a Medicare Certified Home Health Agency to be in the private pay business. One is to provide another entry doorway for patients into your home health or hospice services. Many private pay clients eventually need home health services.

The other reason is to generate positive cash flow to support your charitable services or to add to your bottom line.

If you are not currently in the private pay business and are exploring it, you'll want to consider attending our Academy for Private Duty Home Care. This is a great way to get the big picture of this business and to learn about the best practices of growing successful companies.

If you are currently in the private pay business, but struggling to make it profitable, give us a call and we can talk about our private duty planning and coaching process. This is a service that we provide to help you develop a strategic growth plan for your private pay business with ongoing coaching to help you implement the plan and get measurable results.

What questions do you have about private pay in home health? Hit reply and email us your questions.

How To Get More Business For Your Home Health Agency

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We get this question from just about everyone we talk with. Usually, we tell them that they can increase their referrals by making direct sales calls on more qualified potential referral sources and by making sure their actual referrals are of the highest quality and a good match for their agency.

However, we know that you have limited resources to make sales calls. You need to supplement your sales effort with effective marketing and public relations techniques. Our first home health care sales and marketing survey back in 2004 ranked broadcast television as the 4th most effective technique for bringing in referrals that turn into admissions. Since then, the marketplace has changed but television is still an effective medium for reaching out to patients, families, and referral sources in our local marketplace.

Now there is another resource for you to consider - Trusted Hands Network.

Trusted Hands Network is like no other lead generation service and prides itself on that fact. Karissa Price, Ph.D., President of Trusted Hands Network, created this company based on personal experiences and wanted to make sure that others didn't face the same challenges she faced when trying to find someone to care for her mother. Trusted Hands Network prides itself on making sure that not only the potential client is served but their partners get the best and most qualified leads possible. This is accomplished by answering 3 simple questions:

Q. How is Trusted Hands Network referral service different than the others out there?

A. First, Trusted Hands Network's leads are exclusive-they are only delivered to one agency at a time. Second, Trusted Hands Network's leads are generated from TV advertising and qualified by live phone agents so there are no junk leads. Third, Trusted Hands Network guarantee's their leads will have the funds to pay a minimum of $100-$200 a week, want to start services in the next 90 days or less, and meet the Trusted Hands Networks geographic and service criteria.

Q. How does Trusted Hands Network protect the individuals requesting information?

A. All of Trusted Hands Network's agency partners are thoroughly screened by a private investigation firm and must meet the highest industry standards in order to receive leads from us.

Q. Why should I consider Trusted Hands Network for leads?

Trusted Hands Network's business is personal to us as we have family members who have used or are currently using home care and home health services.

So Leading Home Care is pleased to introduce you to Karissa's company and we encourage you to look at Trusted Hands Network if you want more leads, better leads and higher quality leads.

Learn More About Trusted Hands Network

The Academy for Private Duty Home Care - December 10, Orlando, FL

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If your home health agency operates a private duty home care business, or if you are thinking about starting a private duty business, you'll want to join us for The Academy for Private Duty Home Care.

We had a terrific group of participants at our program in Franklin, TN on August 12th, and we had an even bigger group in Anaheim, CA on September 23rd .

Join us in Orlando, Florida on December 10, 2010 for the Academy co-hosted by The Home Care Association of Florida.

Navigating The FOG Of Health Care Reform

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Last Friday, I had the privilege of speaking at the Harvard Club in New York City for the Home Care Association of New York State's Health Reform Conference. Nearly 100 home health agency executives from across the state gathered to explore the opportunities and threats provided by the Patient Protection and Affordable Care Act signed into law by President Obama on March 23, 2010.

Other noted speakers on the program were Bob Fazzi, from Fazzi Associates; Bill Dombi from NAHC, Larry Mannix from the American Association for Homes and Services for the Aging, Susan Van Meter from the Healthcare Association of New York, and Wendy Saunders, Chair of the New York State Health Care Reform Cabinet.

Bill Dombi gave us some specific information about the Medicare rate changes that begin in 2011:

2011

1 point reduction in inflation update
2.5 point outlier pool reduction
3.79% proposed case mix creep adjustment

2012:

1 point reduction in inflation update
3.79% proposed case mix creep adjustment

2013

1 point reduction in inflation update

2014 - Rebasing begins with 4 year phase in and 3.5% cap on reduction

2015 - Annual productivity adjustment begins

These potential reimbursement cuts will be significant and, while not as severe as 1997, will have a huge impact on our industry. In his comments Bill said, "I can see 500 agencies closing in Texas, alone."

To conclude the day, I led a discussion of "What do I need to do first to build my 'Organizational Road Map for Success'?" As part of that presentation, I shared the preliminary results of our health care reform survey.

Five Biggest Opportunities:

Removal of barriers to providing home and community based services
Protecting home health benefits
Hospital Readmission Reduction Program
Increase in number of covered Americans
Independence At Home demonstration project

Five Other Positives:

New authority for Physician Assistants to order Home Health services
Removing barriers to Medicare Preventive Services
Community Preventive and Wellness Services
Small Employer Credit
Integrated Care demonstration project

Five Biggest Threats:

Increased employer responsibility
Home health payment adjustments
Physician face-to-face requirement
Physician PECOS enrollment
Market basket adjustments

What do you think about the opportunities and threats provided by the health care reform law? Give us your our input by completing Leading Home Care's Health Care Reform Survey

Complete Leading Home Care's Health Care Reform Industry Survey

About the Author

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Stephen Tweed, CSP, is Chairman and CEO of Leading Home Care ... a Tweed Jeffries company. For over 25 years he has been a recognized leader in strategy and leadership development for home health care & hospice companies and associations. He is the author or co-author of seven books, five of which were written specifically for the home care industry. He has served on the boards of directors of three not-for-profit home care agencies, and has served as interim President & CEO of a $25 million home care company.

Stephen is a past-President of the National Speakers Association, a 3500 member international society of experts who speak professionally, and currently serves and Chairman of the Board of Trustees of the NSA Foundation. He is also the father of an adult son who is physically disabled and uses the services of home care on a daily basis.

Meet the entire Leading Home Care Team

Permission to Reproduce

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Permission is granted to healthcare publications, associations and companies to reproduce this article in your publication, or to distribute copies to your leaders, on the condition that you reproduce the credits and contact information as follows: "Reprinted with permission from Home Health Care Today. Copyright 2010 Stephen C. Tweed. To receive a FREE subscription to this newsletter, log on to www.leadinghomecare.com."

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