financial efficiency its no longer

Friday, August 15, 2008

Financial Efficiency – it’s no longer an option

As I mentioned earlier, I believe there has been a real resistance within the hospice community to accept the fact that hospice is a business and that we need to adopt best business practices. In my mind, Andrew Reed of Multi View Incorporated has been the industry’s John the Baptist as he has been carrying this message through the wilderness for years. He has been preaching financial accountability, visit tracking, and benchmarking for a dozen years now, and we have finally reached the time where listening to the message is no longer an option. In this post I want to explain why I think having less than solid business practices is no longer an option.

First, burying your head in the sand and wishing for the days when hospice was an all volunteer movement was never a good idea. Some have done this for a few years now, and survived. I believe the changes that have come in the last three months have proven that, not only are we never going back, we are going to be forced into more and more accountability in the coming years. Let’s look at what has happened and the possible future impact:

  1. CR 5567 has forced hospices to report the number of visits made to each patient each week by a specific discipline. Medicare has never asked hospices to actually report what they are doing for their patients. Now we are reporting exactly how many times we see them each week. A year before this visit reporting was mandated, they required hospices to begin reporting where each patient received services. They have told us that they have no real plans to use any of this data to change the reimbursement system, but any logical person knows that isn’t true. If they collect and analyze this data, why in the world wouldn’t they use the data? (Yes, you could argue that our government collecting data and doing nothing with it would be less than shocking, but I think we better assume that they may actually do something here.) What could come from the analysis of visit and location information? Ask home health! If the data shows that a dementia patient in the nursing home receives half as many nursing visit as a cancer patient at home, then wouldn’t it follow that they may decide that we should get paid less for the dementia patient in the nursing home? If we are on the path to a payment system based on the diagnosis, location, and acuity of the patient, then we better be ready to operate our hospices in a way that we can deliver great care within that system. The only way to do that is to have in-depth knowledge of your staff’s efficiency and ability. Too much staff doing too little work is not an option in a home health type payment system. It just will not work.
  2. The new Medicare Hospice Conditions of Participation have set our industry on a quality centered path that will never stop. Each year we are going to be held accountable for finding those things that we don’t do well and fixing them. When you get one problem solved, then you must find another one and solve it. Each year you will be required to find a new problem, solve it, and check to make sure that the problems you solved in previous years are still solved. It is a program that will grow. For the next couple of years most hospices will be able to pick the low hanging fruit from the quality improvement tree. They will “identify” the problems they already knew existed and implement solutions they already knew would work. The problems will probably not be of any real serious nature and the solutions won’t take a whole lot of time or energy, but at some point, we’ll actually have to start taking on some very hard projects that will take time and money to fix. That is the nature of the Quality Assessment/Performance Improvement process. (That is also why it is a great idea.) Thus, as time goes on, we will have more work.
  3. The rate cuts should be the biggest wake up call. While it seems that NHPCO holds out hope that the rate cuts may still be defeated, I believe that is immaterial to this discussion. We must remember that when we started this round of possible cuts we were facing a cut in the actual rate (or the lack of rate increase for a few years) and a cut in the wage index. We dodged one of the bullets this time, but there is little doubt that the belief (valid or not) that hospice is an industry that could use a bit of belt tightening is somewhat widely accepted in Washington. We have avoided much of the significant pain to date. Even if we continue to avoid significant cuts, we must expect nominal pay increases at best in the future.

All of this adds up to an environment where we, as an industry, must deal with our financial reality. At best, our payment rates are going to remain even. Odds are, they are going to get worse. That means that any hospice that is having trouble making their financial ends meet today, is, at best, going to continue to struggle and odds are they are going to be in real financial trouble soon. Those hospices must make some changes to their business practices. Hospices that are doing fine today but couldn’t withstand a negative change in the payment structure better start looking at what they will do if the other shoe drops. In reality, they should start making changes today so that when the other shoe drops they have some money in the bank to survive the crazy period.

Now that I have you in a really cheery mood, let me kick you while you are down, because I think there is one more downturn that is coming that nobody is talking about. I believe that hospices that live and die by the donations they receive are going to struggle, because I think fund raising for hospices is going to get much more difficult. I think the ongoing fight over the hospice cap has raised and will continue to raise awareness across the nation that hospice is in fact a business and that some in the industry are not quite the wonderful white hat wearing heroes the public has always associated with hospice. Those donors are going to start asking more questions and giving less money. As the battle over Medicare reimbursement and the reality of the hospice industry get more public attention it will increase public awareness of the reality of the hospice industry even more and donors will become more leery of donating to a hospice. I read an article recently that quoted a hospice that has to raise $20 for every patient day, because their expenses are that much higher than the reimbursement. Twenty bucks a day is a huge amount of money! If your donations drop and Medicare payments drop, you will not survive. One or both of those painful experiences are in your future and both could be. Are you going to bury your head in the sand or start preparing?

The commenter is right. Those who are not being responsible with their money and running their business like a business will not be reading this blog in a few years. They will be doing something else for a living. I’ll talk about what preparations may need to be made in a later post.

1 comment:


heheh, I can’t imagine trying to run a hospice depending on 10-20% of my operating budget from the good people who do donate. Bad bad business practice – like you said: one bad quarter and you are out of business. I believe donations are for those “going above and beyond” projects, not your general budget items.

Great direction you are taking these discussions HG. MVI does rock, too. :thumbsup: