1. Preventive options, client and home assessment, financial health of your agency.
When a risk creates loss or potential for loss, management needs to consider options available to prevent the loss. If the loss cannot be absolutely prevented, methods need to be employed to keep the impact of the loss, or loss type, in check. Regardless of the type of problem being addressed or the industry involved, risk management theory outlines the same approach to developing controls. You can transfer the risk away, engineer the problems out, or implement practices and policies to reduce the possibility for loss.
v Transfer or avoid the hazard – The most effective way to avoid a risk is not to engage in practices that create a potential source of risk. In many cases, however, being willing to accept a particular risk is the reason companies are in business. Something a company could do but chooses not to. Examples of avoiding a hazard in home healthcare are, a company’s refusal to transfer bariatric clients, or to provide services to customers owning dangerous dogs.
v Develop engineering controls – For the risks we accept, when problems occur or there is a potential for a loss, the most effective control is to engineer or design the problem out. In the manufacturing world, this might include installing a guard on a machine, or changing the way a machine works to avoid amputations. In the home healthcare arena, this could include eliminating the need to physically lift a client. Regarding client transfers, an engineering control would be the use of client transfer equipment which eliminates the need to lift or reduces the physical stress on the healthcare worker.
v Implement Administrative control practices – Engineering solutions are not always possible. They can be prohibitively expensive or impractical. Where we cannot remove a hazard by avoiding it or engineering the risk out, we have to take other measures. While the least effective, in the home healthcare world, most of the controls to prevent loss are administrative controls. Administrative controls for client transfers involve things like hiring, training and the use of client transfer protocols.
v Accept the risk – A company can always decide to accept a risk and not to apply any controls. While this might seem like a poor way to manage risk, the reality is that most companies do this on a daily basis, usually for minor or insignificant risks. Helping someone to take a seat or holding a chair are activities that most organizations would not refuse to do or have written procedures or training on how to handle. While there is a potential risk, it is judged as too small to try and actively manage.
CLIENT AND HOME ASSESSMENTS
Client and home assessments are critical, not only to prevent injuries to the healthcare worker, but also to avoid situations that place a home healthcare organization at a higher risk for potentially fraudulent liability claims.
Thorough evaluations of client current status, future needs, and what is required to promote safety for both client and caregiver is key.
- The assessment of the client identifies physical and psychological characteristics that must be considered in the plan of care. When done correctly, these assessments provide a detailed plan that should incorporate specific client transfer equipment (chair lifts, Hoyer lifts etc.) Ergonomic tools (pivot discs, slip sheets etc.) and instructions to the home care provider on how to deal with psychological needs (“client suffers from dementia…”.)
- Examination of the home environment can uncover situations that present a hazard to both the client and the caregiver. These needs must be incorporated into the clients care plan, and updated on an ongoing basis as needs change. Use of and regular documentation of formal care plans plays a key role in preventing injuries to employees and expensive lawsuits related to client care.
Some accrediting organizations, such as the Joint Commission, specify what these assessments need to include. Companies must also be willing to walk away when these needs cannot be addressed due to financing or other reasons.
Client physical characteristics requiring adaptive equipment.
The initial assessment needs to include an evaluation of specific duties and activities required of the home healthcare worker, and the physical and mental characteristics and limitations of the client. Whenever possible, client transfers should not be done without mechanical assistance. This should be mandatory for bariatric clients and those with significant cognitive or physical limitation that prohibit or limit their ability to assist with the transfer. Where equipment is needed there may be challenges related to expense and funding for the equipment. As difficult as it may be, if the caregiver is at risk for injury, chances are the client is as well. Back strains and serious falls can result in permanent disability and in hundreds of thousands of dollars in medical expenses. If equipment is needed and cannot be obtained, the home health agency needs to decline the assignment. Where there is a need for ergonomic equipment, procedures and vendors need to be identified that can aid in proper selection, requirements for client education, maintenance and inspection. Homecare staff needs to be adequately trained in its use, and this may be best facilitated by a physical therapist.
Over time, the client’s condition may change. It is important to monitor these changes and to take appropriate action. Action certainly includes notations to the file and may require notification of the physician and changes to equipment or client care instructions.
HAZARDS AROUND THE HOME.
Home healthcare employees all too often encounter hazards in the home that can present a danger to themselves and potentially the clients as well. Client homes represent environments not under the control of the home care agency. Housekeeping neglect, smoking, vermin, spoiled food and other conditions increase risks to both the caregiver and the client. When detected during the initial assessment, the organization needs to require that hazardous conditions be corrected before initiating care, or find ways to protect the person or persons who will be working in the home.
Slip, trip and fall hazards– These represent a significant potential for injury to the worker and the client. Statistically, falls are the number one source of injuries to clients in the home care environment and second only to strains and sprains as injury sources for employees.
The potential for a fall injury increases when you are assisting a client with a move, or while carrying something. In home care, this might involve helping a client to stand, carrying groceries, handling trash or moving furniture.
Begin with the exterior of the home.
- Where will your employee be parking? If they will be providing services at night, is lighting adequate?
- What is the route like from the car into the home? Are walkways free of debris, holes and large cracks? Are stairways provided with handrails and well maintained?
In inclement weather, the contract should require that the walkway and any exterior stairs be kept free of snow and ice. Some companies also keep small quantities of sand in their vehicles for use by homecare providers to improve traction. Another option is to require wearing of shoes with slip resistive soles or to provide removable traction aids for shoes.
Inside the home
Falls most often occur in the home when we trip over objects, when there is inadequate friction between our shoes and the walkway, or when a surface we are standing on is unstable. Look for:
- Cords, household goods or other items in main walkways or in areas where client transfers will occur;
- Spills and slippery surfaces.
- The client’s footwear can be a problem on smooth surfaces.
If there is a need to reach an object at a higher level, use only step stools. Never use chairs or other objects not designed for the purpose.
May not become apparent until after service starts or when medical equipment or electric beds are installed.
- Extension cords, which are designed for temporary use, can catch fire if overloaded. The possibility of overload and fire is more extensive with light weight, ungrounded cords. Whenever possible, equipment should be plugged directly into the outlet.
- In older homes, wall sockets may be ungrounded or circuits unable to handle additional load. This will usually be identified as a problem when equipment is delivered and installed. If during the initial walkthrough and home assessment, things like grounding plugs being cut off, wall plates without grounding sockets or gang plugs (one outlet with multiple plugs) are noticed, the home healthcare provider should require that the system be checked and wiring updated as necessary to safely handle the equipment. While primary responsibility would ordinarily rest with the home medical equipment company, the home healthcare provider could be found liable as well. Where the home healthcare provider provides equipment, they may be fully liable for any fires that may result.
- On future service visits, look for modifications made by the homeowner, client or other caregiver. Telltale signs are when equipment has been moved from the original location. Look for added extension cords.
- Watch for situations where electrical cords extend into walkways and around the bed. While extension cords should ordinarily not be used, if they are, they need to be out of the way or secured to the floor.
Mold, insect or rodent infestation or other unhealthy conditions–
These conditions can present serious health problems to the home healthcare worker, and, have resulted in significant claims. Be aware of and follow any legal obligations for reporting these situations, and do not accept contracts where these conditions present a hazard to employees.
Animals– Pets can be important to the health and general well-being of clients, but can also represent potential problems. The obvious problem is a vicious or overly protective animal. These animals need to be secured or removed during service calls. Small, friendly pets have also been associated trips and falls, particularly during client transfers.
Making sense of your financial.
What’s the first thing you look at when you get your homecare agency’s Profit and Loss statement (P&L) each month? If you’re like most people, it’s the bottom line. You want to know how much money your agency made or lost. Maybe you even glance at revenue or salary expenses. But if the results aren’t good, do you know how to improve them?
Imagine if you visited a patient whose primary complaint was that he “just didn’t feel good.” How would you know how to treat him? You would probably ask him questions and perform an examination. In other words, you would diagnose him so that you could develop a plan of care.
Think of the P&L as a tool for diagnosing the financial health of your agency. You might know that your agency “just doesn’t feel good” based on its bottom line, but you need to know what questions to ask and what examinations to perform to manage its financial outcomes.
Let’s take a look at the major categories on the P&L, also known as the income statement.
- Start at the Beginning – The first item on the P&L is revenue. Revenue is the income the agency earns by providing services to patients. Revenue can be influenced by a number of factors, the most obvious being patient volumes like admissions or census. Generally speaking, a higher census results in higher revenue. But there are a number of other important factors impacting revenue that your agency should be measuring, reporting, and managing on a regular basis.
- Home Health Revenue – Many home health payers, particularly Medicaid and Commercial Insurance, reimburse home health agencies in a straightforward manner. Payments are based on the number of visits or the hours of care provided to each patient. If clinically appropriate, additional visits and hours can result in additional revenue.
Things get more complicated when we start talking about Medicare reimbursement. Medicare pays agencies under the Prospective Payment System (PPS). PPS reimbursement is a predetermined amount that is based on each patient’s condition and service use during a 60-day episode of care. A number of Commercial Insurers have adopted the PPS reimbursement methodology over the last several years.
There are three wonderful things about PPS payers. One, reimbursement from these payers typically makes up the majority of an agency’s home health revenue. Two, PPS payers are more profitable than other home health payers. And three, each agency actually has the ability to influence its PPS reimbursement on a patient-by-patient basis. How?
Agencies perform an evaluation of each PPS patient known as the Outcome and Assessment Information Set (OASIS). The OASIS reflects the client ‘s condition and service needs, which in turn determines the agency’s reimbursement for providing care for that client t. In other words, the agency’s reimbursement depends on how acute the client is, and how well the agency reflects that acuity in its OASIS documentation. Remember, Medicare and other PPS payers want to reimburse you more for caring for sicker client s.
If your agency’s PPS revenue is low, there’s a good chance your caregivers and staff aren’t properly educated on how to maximize appropriate PPS reimbursement. Poor revenue results may also be caused by a failure to closely monitor LUPA, PEP, and Therapy Adjustments, which can be devastating to PPS reimbursement. Both caregivers and management need to understand what causes PPS adjustments and how to minimize their frequency. The cost of an OASIS training and education program can pay for itself many times over through revenue improvements and long-term financial sustainability.
- Where Does the Money Go? – The remainder of the P&L deals with the agency’s expenses. Expenses are the costs required to operate the agency.
It’s extremely important that your agency’s P&L separates direct expenses from administrative expenses. Let’s looks at what that means and why it’s so critical.
- Direct (Caregiver) Expenses – Direct expenses are the costs directly associated with providing hands-on care for clients. They’re sometimes referred to as caregiver expenses since it’s the caregivers who provide client care. Direct expenses include caregiver salaries, caregiver benefits, contracted caregivers, caregiver mileage, and medical supplies. Hospice direct expenses go a step further to include the costs of pharmaceuticals, DME, imaging, labs, diagnostics, and all other ancillary services involved in providing client t care.
As a rule of thumb, total direct expenses for a home care-based agency should be between 60% and 70% of revenue. The number varies from agency to agency, but lower percentages are always better. So for example, let’s say your agency had $100,000 in revenue and $75,000 in direct expenses in January. That means direct expenses were 75% of revenue ($75,000 4 $100,000) for the month.
Based on our criteria, direct expenses as a percent of revenue are too high in the example above. Your next step would be figuring out why. Excess caregiver utilization and low caregiver productivity are two common causes of excessive direct expenses. A professional review of your agency’s utilization and productivity might be beneficial if your direct expenses are too high.
Does your current P&L display separate salary amounts for caregivers and office staff? Or are all agency salaries reported as a single dollar amount? What about benefits? If these expenses aren’t itemized, you obviously can’t perform the recommended calculation. Work with your accounting department to improve your P&L so that it lends itself to more straightforward analysis. Only then can you evaluate the appropriateness of your agency’s expenses.
- Administrative Expenses – Administrative expenses are the agency expenses not related to client care. The list of administrative expenses is long but typically includes management and clerical salaries; management and clerical benefits; building lease and maintenance; utilities; office supplies and equipment; telephones, cell phones, and pagers; insurance; conferences and training; licenses and certifications; advertising, recruitment, and community relations; and everything else!
Administrative expenses may also include overhead allocations from an affiliated hospital or corporate office. Overhead allocations are simply a way of assigning costs shared by the whole organization to each department of the organization. Common examples of shared costs include human resources, information technology, payroll, accounting, and marketing.
As a rule of thumb, total administrative expenses for an agency should be about 30% of revenue. Again, the number varies from agency to agency, but lower percentages are always better. So for example, let’s say your agency had $100,000 in revenue and $35,000 in administrative expenses in January. That means administrative expenses were 35% of revenue ($35,000 4 $100,000) for the month.
Based on our criteria, administrative expenses as a percent of revenue are too high in the example above. Like before, your next step would be figuring out why. Excessive administrative expenses can be caused by a number of factors including inefficient office processes, more office FTEs than the agency’s client census calls for, or excessive line-item expenses. A professional assessment of these areas might be beneficial if your agency’s administrative expenses are too high.
The Bottom Line
Revenue minus total expenses is called net income. If revenue is more than total expenses, the result is a positive number called a profit. If revenue is less than total expenses, the result is a negative number called a loss.
Many healthcare systems view homecare as part of the organization’s larger mission and don’t expect the agency to be profitable. But you should expect better. Even if you’re a non-profit agency, profits can be reinvested so that the agency can continue to provide the most efficient and effective care to your client s. If your agency isn’t profitable, now you know how to use the P&L as a starting point to diagnose its financial health.
For expert homecare advice, consult the experts