What are the best tips for financial success in Hospice care management?

Hospice care agencies operate in a unique and challenging financial environment. Providing quality care for patients and families while maintaining financial stability requires strategic planning and disciplined execution. Hospice executives can use these financial management best practices to ensure the long-term sustainability of their organizations.

Management by Metrics

In addition to standard financial ratios, such as liquidity ratios and profitability ratios, hospices have their own industry KPIs that provide insight into the health of the agency. These drive broader financial indicators such as operating margin.

• Cost per Patient Day: This measures the average daily cost of providing care for a single patient. Inefficiencies can drive up cost per patient day, while using tools such as staffing models and predictive analytics can help optimize the allocation of resources to decrease cost per day.

• Average Length of Stay (ALOS): Short stays can strain resources, due to the upfront costs of admitting patients, stabilizing them, and implementing a care plan. For example, initial patient assessments, care planning, and setting up necessary equipment often involve significant staff time and logistical efforts, which may not be offset if the stay is brief. Shorter stays can also occur when referrals happen late, during the last few days of life. This can signal a need for referring provider education, so that patients and families can get the full benefit hospice offers. 

Higher ALOS can signal effectiveness when it comes to admitting patients earlier in the end of life stage and can also be driven by a greater proportion of patients with diagnoses associated with longer stays.

• Medicare Cap Tracking: Hospice agencies need to track their Medicare aggregate cap throughout the year to avoid repayment liabilities.
• Days in Accounts Receivable (AR): Keeping AR days low ensures your agency maintains adequate cash flow to meet payroll and vendor obligations.
• Level of Care (LOC) mix: LOC mix directly impacts revenue and resource allocation. A balanced care mix ensures that higher-cost services, like inpatient and continuous care, are provided as needed while optimizing reimbursement opportunities.

By understanding and acting on these metrics, hospice leaders can make informed decisions that positively impact their bottom line.

An Effective Budget Process

Budgeting provides a roadmap for achieving your hospice agency’s strategic goals. Characteristics of a good budget include:

• Driver-based: Flexible, driver-based budgeting allows hospice organizations to quickly recalculate their revenues and expenses if the underlying assumptions such as admissions and ALOS change. It also aids in variance analysis by making it easy to isolate root causes of actual-to-budget variances.

• Stakeholder engagement: Meaningful budgets include input from key staff from clinical, operational, and administrative departments, resulting in a more complete picture and accurate budget assumptions.
• Timely review and action: The budget process should not end once the final budget is approved. Results should be monitored and action taken in a timely manner if the agency is off-track.

A proactive, dynamic, and thoughtful approach to budgeting allows hospices to allocate resources efficiently and adapt to changing circumstances.

Optimized Revenue Cycle Management (RCM)

Efficient revenue cycle management is critical to financial stability. Best practices to streamline your RCM processes include managing to RCM KPIs and engaging in open communication with leaders and staff “upstream” from billing. Setting and managing RCM target metrics such as clean claim rates, timely bill submission, days in accounts receivable, and denial rates ensures that issues are promptly identified.

Hospice billing can be particularly susceptible to “upstream” issues such as incomplete or incorrect documentation, missed visits, and late physician signatures. For example, an intake team’s failure to accurately capture demographic and insurance information at admission can result in losses later. Clinicians entering the wrong level of care for a particular setting, such as GIP in a home setting, can also cause billing issues. Late face-to-face visits or certifications of terminal not signed can also result in revenue loss. Consequently, RCM optimization depends on open and timely communication between various areas within a hospice organization.

Another best practice is proactively managing the cost to collect. Hospice leaders should periodically review vendor contracts to avoid duplication of services, ensure that pricing tiers are appropriate to actual volume, and wind down legacy systems in a timely manner. Leveraging technology to measure staff productivity also helps ensure cost-effective RCM. In some cases, outsourcing may be a cost-effective alternative.

Diversification of Revenue Streams

Relying solely on Medicare or Medicaid reimbursements can be risky. Diversifying revenue streams can provide financial stability and enable growth. Innovative hospices have been exploring

• Complementary service lines. Hospices may be able to leverage their experience providing care in the home setting to offer adjacent services.
• Value-based care arrangements. Hospices can contract with ACOs to negotiate mutually beneficial terms and potentially receive reimbursement for services not covered by Medicare.
• Community grants. Hospices may be able to obtain funding for otherwise uncompensated care from local governments or community organizations.

Hospices may also explore programs that find third-party payers for uninsured patients.

Strong Financial Leadership Team

A competent financial leadership team plays a key role in effective management. Best practices include:

• Hiring Experienced Professionals: Recruiting visionary finance leaders with expertise in healthcare and hospice operations sets a hospice agency up to successfully navigate a complex and dynamic industry.
• Continuing Education: Hospice leaders should provide opportunities for staff to stay current on financial and regulatory developments.
• Collaboration: Active dialogue between finance, admissions, clinical, and operational teams plays a crucial role in driving favorable financial results.

The Takeaway

Hospice executives can better position their organizations for long-term success and financial sustainability by adopting these best practices. A hospice agency’s financial health is critical to its ability to retain an adequate workforce and deliver uninterrupted quality services to patients, families, and communities.

Related blogs:

1. What are the key performance indicators for hospice agencies?
2. What are the top strategies to grow your hospice referrals?
3. What are the crucial skills for home health and hospice hiring?
4. Selecting the best caregiver for end-of-life care