Private Pay in Home Health Care - NAHC 2013
Private Pay
in Home Health Care
How
Medicare Certified
Home Health Agencies
Can Succeed in
Private Duty
Home Care
© 2013 Leading Home Care
Two Main Reasons to be
in the Private Duty Business
1. To create a new doorway for patients and
families into your continuum of care.
2. To earn net income from operations to
support your mission.
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Private Pay in Home Health Care - NAHC 2013
Private Pay
in Home Health Study
CHHA All Respondents
Indicator
Revenue
Cost of Care
Gross Margin
Marketing Exp.
Recruiting
Office Wages
Overhead
Alloc. & Profit
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Median
$2,292,018
$1,244,698
$993,572
$17,163
$14,400
$359,375
$168,673
$84,348
Mean (Average)
$2,119,241
$1,298,135
$821,106
$113,600
$71,810
$499,660
$199,930
$143,073
Private Pay in Home Health Care - NAHC 2013
CHHA Financial Benchmarks
 Mean Revenue
 Cost of Care
 Gross Margin
 Recruiting Costs
 Marketing Costs
 Office Employee Costs
 Operating Expenses
 Corp. Alloc. & Profit
$1,924,272
$1,159,566
$ 766,630
$ 42.435
$ 61.284
$ 314,233
$ 192,427
$ 157,058
100%
60.26%
39.84%
2.2%
3.2%
16.33%
10%
8.11%
Independent & Franchise
Benchmark Companies - 2008
Indicator
Mean
Revenue
$3,928,295
Cost of Care $2,356,977
Gross Margin $1,571,318
Marketing
$137,490
Recruiting
$58,924
Office Wages $471,395
Overhead
$392,829
Owner Comp. $510,678
Median
$1,466,732
$880,038
$586,692
$51,335
$22,000
$176,008
$146,673
$190,675
& Profit
Companies in business 3 years, and profitable in 2008
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% of Rev.
100%
60%
40%
3.5%
1.5%
12%
10%
13%
Private Pay in Home Health Care - NAHC 2013
Analysis by Company Type
Page 28
Of
2010
Private Pay
In
Home Health
Study
The Big Difference
Employee Costs
CHHA based PD – 16%
Independents – 12%
Net Profit & Corporate Allocation
CHHA Based PD – 8.11%
Independents – 13%
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Private Pay in Home Health Care - NAHC 2013
Payer Mix
Payer
Franchise
Independent
CHHA
Private Pay 90.20%
79.55%
63.20%
MA Waiver 2.80%
7.20%
9.93%
VA
0.96%
2.15%
2.08%
Cat Fund
0.44%
0.15%
NA
Other Govt. 0.83%
2.50%
9.54%
LTC Ins.
5.29%
4.55%
5.29%
Other
0.71%
3.90%
9.87%
We learned about CHHA
affiliated PDHC
Tend to be larger than independents or
franchises
Tend to have lower revenue per client and
lower revenue per caregiver
Tend to have lower private pay %, and
higher MA Waiver & Other Govt. %
Tend to have higher overhead expenses
Tend to have lower profits and growth
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Private Pay in Home Health Care - NAHC 2013
The Affiliated COTF
 $4 to $6 million in Revenue
 12 - 15% EBITDA
 Growing 18 – 20% per year
 A systematic marketing process for capturing
new referrals that turn into admissions
 60% conversion ratio
 A systematic process for recruiting and
retaining caregivers
 A stable, competent office team that does not
depend on the owner for day to day operations
Four Big Barriers
to Success
1.
2.
3.
4.
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Lack of Entrepreneurial Leadership
Overcoming the “Medicare Mind Set”
Overcoming the “Nursing Mind Set”
Overcoming the “Back Office Integration
Mind Set”
Private Pay in Home Health Care - NAHC 2013
Pricing
Secret Shop your competitors
Prepare price comparisons
Develop your pricing philosophy
“Not the lowest price”
price”
“Not
We suggest upper middle or high price
We
Prove added value
Prove
With staff shortages, send staff to clients who
With
are willing to pay our price.
Gross Margins
Need to have gross margins of 40%
Set prices that cover our direct cost of care
Carefully define our cost of care
Wages
Wages
Taxes
Taxes
Benefits
Benefits
Workers Comp and Unemployment Insurance
Workers
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Private Pay in Home Health Care - NAHC 2013
Operating Costs
Target operating costs to be =/< 27% of net
patient revenue
Establish a lean, mean operating machine
to run a focused, non-medical, private pay
business.
Net Profit and
Corporate Allocation of
Overhead
Pretax Profit and Overhead Allocation =
12 – 15%% of total revenue
Focus on increasing Net Operating Income
You Decide how to divide net profit and
corporate allocation to overhead.
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Private Pay in Home Health Care - NAHC 2013
To achieve those ends:
 Separate your PD business from your home
health agency as much as possible
 Hire the right person to run it
 Give that person the autonomy to run the
business
 Make a commitment to overcome the Four Big
Barriers
 Go with the FLOW!
Go with the FLOW!
Attraction
Conversion
Staffing
Caregiving
Collection
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Private Pay in Home Health Care - NAHC 2013
Attraction
Attraction
Purpose: “Make the Phone
Ring.”
Consumer or Referral Marketing
Clear Marketing Message
Top Techniques
Create Competitive Advantage
Conversion
 Purpose: “Convert Inquiries
Conversion
into Admissions”
 Take Inquiry Calls
 Build Rapport
 Develop Trust
 Ask Questions
 Schedule In-home Assessment
 Close Sale – Signed Engagement
Agreement
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Private Pay in Home Health Care - NAHC 2013
Staffing
 Purpose: “Find and Keep High
Staffing
Quality Caregivers”
 Focused, consistent recruiting
process
 Clear recruiting message
 Top Recruiting Techniques
 Effective Selection System
 Communication with Caregivers
 Tracking Retention
 Reconciling time and attendance for
payroll
Caregiving
 Purpose: “Matching Clients and
Caregiving
Caregivers, and providing support to
Caregivers”
 Scheduling Coordinator must be
“Charming”, and you can’t teach Charm.
 Automated Scheduling Software with
Telephony
 In-home supervisory visits
 Regular contact, support, and
encouragement of caregivers
 Regular contact and feedback to clients
and families
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Private Pay in Home Health Care - NAHC 2013
Collection
Purpose: “Keep cash flowing,
and assure compliance”
Billing
Collection
Record keeping
Data tracking
Office operations
Collection
Measure your Progress
Critical Measures of Success
 Clients served
 Referrals/Inquiries
 In-home Assessments
 Admissions
 Conversion Ratio
 Hours of service
 Caregiver Retention
 Revenue
 Gross Margin %
 Profit - EBITDA
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Private Pay in Home Health Care - NAHC 2013
?
?
Questions?
?
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?
?
Private Pay in Home Health Care - NAHC 2013
Stephen Tweed, CSP
CEO
Leading Home Care
… a Tweed Jeffries company
9750 Ormsby Station Road, Suite 205
Louisville, KY 40223
502-339-0653
www.leadinghomecare.com
www.privatedutyacademy.org
www.caregiverquality.com
[email protected]
Stephen Tweed - www.privatedutyacademy.org
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