Cost-Conscious Home Care Providers Find Innovative Ways to Survive

Vol. 11 •Issue 3 • Page 32
Home Pathways

Cost-Conscious Home Care Providers Find Innovative Ways to Survive

Some years ago, in those halcyon days before the federal government instituted its prospective payment system, Patrick Dunne, MEd, RRT, lectured in an auditorium filled with RTs who specialize in home care. He didn’t talk about patient care. He talked about equity, balance sheets, income/loss statements, general ledgers and other decidedly non-clinical subjects.

“We haven’t been trained in this,” Dunne told his audience. “Respiratory therapists get into this business out of humanitarian care. But to insulate yourself against the cost pressures of a DME company is unwise.”

Today, Dunne would probably amend that last word to “suicidal.”

In the post-PPS world, literally every penny counts. Home care providers only marginally acquainted with basic accounting principles and other essential knowledge will see their businesses fold quicker than you can say “survival of the fittest.” Cuts in home care reimbursement, with more slashing on the way, coupled with government demands for more exhaustive patient documentation and, soon, tighter security measures to protect the privacy of patient data, have tipped the balance sheets of many home care providers heavily on the liability side.

The industry is fighting back. Computer firms are selling software designed to tame the beast of bureaucratic complexity. Home health agencies (HHAs) are banding together to obtain group discounts and recruiting case managers and other skilled personnel to help make informed decisions and hard choices. Everyone is hustling.

“The game has changed for us,” remarked Jay Weil, CFO for R & R Homecare, in Metairie, La. “It’s become a bit more complex. It requires more technology and more creativity.”


Before PPS, trach tubes and 177 other medical supplies, many of them disposable, could be billed to Medicare as separate items. Now they are bundled into the nursing service fee and no longer regarded as billable items. Home oxygen, a big item, has seen a 30-percent cut in reimbursement.

But the most significant change is how the Centers for Medicare and Medicaid Services (CMS) reimburses. Instead of paying for individual supplies and services, the agency formerly known as HCFA now pays a set prospective payment rate based on a 60-day episode of care. Lump sums range between $1,000 and $5,900, depending on acuity level and patient needs.

“Many of our providers had severe cash flow problems between October 2000 and February 2001, due to difficulties in submitting claims,” said Todd Stallings, CHE, executive director of the Indiana Association for Home and Hospice Care (IAHHC).

“A lot of that stemmed from a relatively short implementation cycle for the agencies and the computer system vendors. Apart from that, the jury is still out. Some of our members report that they are doing better under PPS than the interim system that preceded it. Some are actually turning a margin on Medicare. However, no one has filed a cost report, and many agencies may be forced to return funds to Medicare after audits.

“The biggest problem,” he added, “is the 15-percent cut in Medicare home health reimbursement that is looming. This was mandated by (the Balanced Budget Act of ’97) and could cause another crippling round of agency closures.”


To determine patient acuity levels and, hence, reimbursement, CMS requires home care providers to submit voluminous documentation for every patient under a new program called OASIS (the Outcome and Assessment Information Set). OASIS is a group of data elements that form a comprehensive assessment of an adult home care patient and provide the basis for measuring patient outcomes.

Ten years in development, OASIS has “utility for outcome monitoring, clinical assessment, care planning and other internal agency-level applications,” according to the CMS Web site. HHAs are required to transmit OASIS data to state agencies, which collect and prepare them for federal inspection.

“OASIS is onerous and adds a lot of cost to treating not only Medicare patients, but all patients,” Stallings said.

Oasis “is really crippling home health care agencies out there. It takes three hours to fill out the documentation,” added Scott Lara, director of government affairs for the American Home Care Association, Jacksonville, Fla.

Two years ago, appearing before a congressional subcommittee examining home care issues, Lara unrolled OASIS paperwork in a line whose length left lawmakers dazed. “They couldn’t believe it,” Lara recalled. “They couldn’t speak. They asked: ‘Why all this paperwork?’”

OASIS’ breathtaking amount of information documents a patient’s medical condition at various times to analyze improvements (or lack of) in the patient. “They monitor 13 parameters and send back to you data that indicate where you stand relative to the median,” Weil explained. “Their expectation is that when you get this report, you will dig in and identify specific patients and take corrective action, if need be.”

The challenge for providers “is to analyze this information before they can,” he added, because “these reports will eventually be used to cite you and to weed out agencies that don’t produce good outcomes.”


To meet the demands of OASIS and to better improve its level of care (even though state auditors just passed R & R Homecare with no deficiencies for the 11th consecutive year), Weil purchased a point-of-service computer system. The hand-held, touch-screen computer’s pull-down menus guarantee objective data because data elements are selected from a list, not typed in, he explained. For example, the caregiver chooses objective data about a wound: what type of wound it is, its size, measurement, description, color, etc. Once loaded in, these reports allow the HHA (and CMS officials) to quickly analyze whether healing is proceeding.

“Instead of reviewing 10 charts per month, we can do 100,” Weil explained. “And we can look at many more data elements and zero in on much more relevant information than ever before. — It’s really amazing what we are able to do now that is virtually impossible to do on paper. We’re collecting more than 100 questions on the admission, then much more through subsequent time points. Probably, over the 60-day admission period, we collect maybe 150 to 200 data elements.”

OASIS scores how sick a patient is. This determines how much reimbursement a provider gets. Point of service “downloads the data, does the calculations, tells us what our reimbursement will be, and tells us our staffing costs as we assign resources to the patients,” Weil said. “We give patients what we think they need. But if patients are consistently exceeding their allocations, then we look for as many creative ways to access community resources as we can.”


Technology isn’t the only way to shave costs. Never underestimate the value of highly trained, dedicated flesh-and-blood assets. For example, R and R has hired:

• A full-time social worker to access community resources such as Meals On Wheels, to assess patient needs, and to help decide if a patient is better referred to long-term care rather than home care. “Our social worker has been a godsend to us,” Weil said.

• A certified care manager to put together a comprehensive care plan for every patient

• A licensed OT with a background in rehab to examine the home of a patient with physical limitations, then consult with an architect to make necessary changes to the patient’s environment

• An exercise physiologist

• A nutritionist

• Staff PTs, rather than contract PTs, to gain more control over time spent with patients. “When you have full-time staff, you get a higher degree of dedication,” Weil said.

R & R Homecare may add a staff RT to care for COPD and asthma patients, even though the visits won’t be reimbursed, said administrator Catherine Weil.

“We’re looking at the big picture and researching our patient population to see if they would be better served,” she said. “Interestingly, we’ve had RN-RTs on staff. They are the best of both worlds. They are able to impart their knowledge to other nurses. Even if you can’t use them full time, they can consult for you and help nurses acquire the depth of knowledge needed for respiratory patients.”

Among its educational initiatives, the Indiana association is contracting RTs to teach its member agencies protocols for COPD disease management, Stallings reported. The IAHHC also is negotiating with a purchasing group for medical supplies, forms, etc., to obtain discounts and save its members money.

Finally, like everyone else in the business, Stallings is now bracing for the impact of the Health Information Portability and Accountability Act (HIPAA). “HIPAA is expected to cost the average home care agency $5,656,” he said. “However, I believe the actual figure could easily run double or triple that. IAHHC is developing a HIPAA Compliance Template for its members and that should allow them to achieve compliance at much less cost.”

Michael Gibbons is senior associate editor of ADVANCE.