Too small to outsource? Agencies reconsider as margins tighten

For small home health agency owners battling rising labor and supply costs against a backlog of claims waiting to be processed and a spate of claim denials, Medicare’s proposed pay cut for 2023 makes the prospect of profitability daunting.

Success in an economic downturn hinges in large measure on upskilling staff with training, prioritizing growth and considering the value of expert help, according to SimiTree consultants.

“When times get tougher, businesses can still be profitable, but having sound business strategies in place becomes even more important,” said SimiTree Principal Rob Simione, who serves as SVP for Finance Consulting.

Outsourcing revenue cycle management services to a competent and professional firm is one of the best ways an agency can focus on delivering quality health care instead of struggling with ongoing staffing and regulatory issues.

Increasing workload for billers

Many smaller agencies are looking to outsource revenue cycle management because of an increasing back-office workload associated with a shift from traditional Medicare to Medicare Advantage and other payors.

“Agencies may have previously had the mindset that they were too small to outsource, that outsourcing was something only larger agencies do. But a ballooning matrix of payors, plans and verification requirements is causing smaller agencies to re-evaluate their thinking on using an outside provider,” Simione said.

“It is costly for smaller agencies to have multiple personnel in their administrative team to cover these functions and turnover can put significant dollar at risk for smaller agencies,” he said.

Medicare Advantage, with a variety of plans and requirements, is expected to account for more than half of all Medicare beneficiaries by 2030, according to projections from the Better Medicare Alliance, an industry advocacy organization. Agencies of all sizes are already seeing more demands on their billers, and the workload will continue to grow in 2023.

Compensation costs vs. outsourcing

Small agencies often find it more cost effective to rely on an outsourcing partner rather than expand existing billing staff.

“In an always changing market where regulations are increasing and payment methodologies are evolving, it is costly to keep your staff updated to ensure requirements are met and revenue is maximized,” Simione said.

“But the biggest miss isn’t really even the cost necessarily but the missed revenue opportunities,” he added.

“Agencies that are not using industry experts often have increased write off amounts and low case weight mix – and nothing is more frustrating than not getting paid correctly for the quality services provided.”

Indirect advantages

Small agencies often benefit from outsourcing arrangements in ways beyond the work being outsourced, Simione said.

Having additional resources available through the partnership improves governance and accountability through exposure to best practices and discussion of agency issues. It also helps management teams refine business objectives and strategies.

“The right outsourcing partner will be a good fit for a small agency, easing into the existing back office seamlessly, doing the work for the agency and providing any additional resources which may be needed as problems arise,” Simione said.

SimiTree often offers experts in other areas that can be leveraged in its outsourcing relationships, he said. Cost reporting, compliance, and staff training and education are examples.

Priorities for 2023

Simione and other SimiTree consultants recommend three other priorities for small agencies feeling trepidation about 2023.

1. Prioritize cash flow.

Delays in claims processing are the bane of small agencies. The rising cost of doing business in an inflationary environment makes it more important than ever for agencies to ensure adequate cashflow by expediting claims processing.

Minimize claims processing holds, ADRs and denials by making sure your billers have the necessary training and regulatory expertise. Upstream issues can also impact the speed and efficiency of claims processing, so make certain all your clinicians have a full understanding of how their timeliness and diligence impacts agency finances.

“Accountability should be everyone’s priority in 2203,” Simione said. “Look at ways your agency can track accountability and hold staff responsible for timely completion of documentation.”

2. Upskill your workforce.

A savvy workforce is essential. Training dollars are dollars well spent, mitigating the agency risk for fraud or non-compliance, and increasing the likelihood of faster, full payment.

SimiTree consultants say the new OASIS-E launching in 2023 will significantly impact home health reimbursement under Value-Based Purchasing, with some OASIS measures counting toward an agency’s total performance score. Performance scores in 2023 will determine future payment adjustments.

The new version of OASIS will be completely restructured, adding many new standardized patient assessments to fulfill IMPACT Act requirements and align home health with other post-acute care sectors.

Staff training will be essential for agency success, SimiTree consultants say.

3. Invest in your growth.

If you’re not investing in your agency’s growth, you’re likely missing out on profitable opportunities. Take the steps now to grow your company to the next level, so that you will be better positioned to weather economic uncertainties with a stronger market presence and a viable plan for increasing revenue.

“Small agencies in particular need to understand their market position and have a a set of strategic goals for increasing their scope of business and differentiating themselves from the competition,” Simione said.

SimiTree’s Market Analysis Program, MAP, can direct small agencies in understanding their market dynamics, delivering precise information about referrals and competitors to help small agencies grow faster. SimiTree also provides industry-leading benchmarking reports to help agencies understand how they compare to other agencies on a state and national basis and measure their progress.

“Being proactive and focused on growth during an economic downturn can help by making it easier to run your business and capitalize on what you do well,” Simione said.

SimiTree can help

SimiTree’s outsourcing team gives healthcare organizations access to a robust array of crucial services, from coding and OASIS review to full revenue cycle management. Our experts handle billing, collections, insurance verification, cash posting and all aspects of the revenue cycle.

We offer full QAPI outsourcing and Review Choice Demonstration outsourcing as well.

SimiTree’s expertise is the foundation for your agency’s growth and profitability. Use the form below to reach out to us today so that we can get started making your organization stronger and healthier overall in 2023.

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Let's work together to improve the health of your organization. At SimiTree, we balance financial expertise and clinical excellence to help our clients grow. How can we help you? Call us at 866.839.5471 or complete the form below.