Home Care Agencies Need to Plan First, Purchase Second – Part 1
The following article is the first part in a three-part series written by Tim Rowan, Founder & President of Rowan Consulting Associates. In it, he describes the need for home care agencies to carefully plan their next technology purchase.
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Plan First, Purchase Second
Successfully Navigating the Technology Selection Process
Why do some technology purchase decisions lead to smooth, successful implementations while others seem destined for disaster? Is there a common denominator underlying every on-schedule, as-budgeted systems acquisition that is usually missing from the unsuccessful ones? There is. In our experience, that common denominator is careful, thorough planning. Rushing toward a purchase without taking the time to plan almost certainly guarantees at least headaches, at worst failure.
Over the course of the past two decades, home care practice has changed dramatically as provider organizations expand their use of technology in response to a changing regulatory, reimbursement and public health environment. It will have to expand again in an era of reform and federal encouragement of the universal use of Healthcare Information Technology (HIT).
Economists have been warning for some time now that Americans need to shed the idea they will always have whatever level of care they wish. Nor will healthcare providers be free to offer unlimited care, even if they want to. There is simply not enough money in the nation’s entire economy to continue to provide current care levels for a population that is increasing not only in age but also in its incidence of obesity, diabetes and other chronic health conditions.
Not only is there not enough money but there are not enough clinicians on whom to spend what money there is. If medical and nursing school graduation rates remain flat, as widely predicted, the unpleasant prospect of healthcare rationing looms as perhaps the only option to deal with an older, fatter and sweeter nation. Even the 2010 Patient Protection and Affordable Care Act can do little more than slow the expected effects of these conditions.
Home care must be ready
Caring for individuals in their homes is an economical alternative to other care locations and its importance will grow as the above-mentioned factors exacerbate. The question is whether home care providers will be ready when called upon. Though already substantially more efficient than institutional alternatives such as hospitals and skilled nursing facilities, home care nevertheless struggles with the same issues as its bricks-and-mortar cousins, shrinking dollars and too many patients for the number of available caregivers.
Efficient use of HIT to streamline agency operations and improve patient care can only grow in importance as public and private payment systems respond to demographic and economic realities. Border technologies, those available but not widely implemented, and future technologies, those on the drawing board but not yet on the market, have the potential to extend caregiver reach without drastically increasing provider costs. More importantly, they are also likely to be more readily available than additional staff nurses are.
While cost control has always been essential to home care operations, it is ascending from essential to urgent following recently announced PPS pay rate cuts for Calendar Year 2011 that are likely to continue to shrink every year for the foreseeable future. Add to this the prospect of payment bundling, set to begin as a pilot program in January, 2013, and stepped up state and federal fraud control efforts, which are already producing increased payment denials for fraudulent and honest agencies alike, and it is clear that home care and hospice providers must turn to technology to control costs and extend the reach and accuracy of their clinical workforce.
Many providers, however, will find that this advice stretches them beyond their traditional high-touch, low-tech comfort-zone. They may resist; they may choose the comfort zone over technology as many actually have, operating their small agencies almost entirely on paper. These agencies, however, will not survive through the gauntlet of rate cuts, bundling, aging Baby Boomers, fewer nurses and national healthcare reform. They will either be acquired by a technologically sophisticated chain of agencies or close their doors.
For beyond that comfort-zone lies not only the world of electronic billing, point-of-care systems and home telehealth but that is also where one finds major league business and information systems planning. This is where too many agencies make their fatal mistake.
Uncomfortable in this unfamiliar world beyond, they go in halfway, quickly purchasing a little technology, perhaps based on the likeability of the first sales person they meet, in the process failing to take the time and effort to base that major purchase decision on mature business planning procedures.
Proper business and HIT planning establishes the prerequisites to assure that the technologies a provider selects are a “best fit” for its current and future needs.
Business plans and systems plans are not merely indispensable, they are interdependent. An excellent systems plan ignorant of or not based on a business plan will fail. A business plan alone is not sufficient to direct systems purchase. In this section, we identify key elements of business plan development. We then discuss systems planning, and establish the link between business plans and technology acquisition plans.
First, however, a word about the above-referenced Home Health Prospective Payment System (HHPPS) rate cuts. It is important to understand why the federal government is doing this in order to be able to construct both a business plan and systems plan that will carry you through the next five years.
Anyone who experienced the government’s imposition of Diagnosis Related Groups (DRG) in the early 80’s knew what to expect when CMS introduced prospective payment to home care. Medicare hospital payment rates started on the high side and gradually found their proper level as the government gathered more data and increased its understanding. Convinced such a plan worked 30 years ago with hospitals, they are replaying it today in home care, hoping to influence your clinical and operational behavior through rules, regulations and reimbursement.
CMS started home care’s PPS journey with generous reimbursement rates in what, looking back, was clearly recognizable as phase one. They most likely did this for two reasons.
First, they could not have been sure in advance exactly what the proper rates should be until they had time to observe their impact in a live environment. They chose to err on the high side rather than inadvertently put providers out of business.
Second, they wanted to provide agencies a period to adjust their clinical and business practices to PPS’s episodic reimbursement model and to begin streamlining operations. When industry pundits’ dire forecasts that there would be thousands of unserved patients as agencies across the nation shuttered their doors did not materialize, the feds had clear sailing to move into PPS phase two.
During this second phase, reimbursement rates have been routinely challenged by MedPAC to begin flattening inflationary increases permitted during PPS’s early years. Citing substantial profit margins as their rationale for putting downward pressure on reimbursement, the feds won most battles.
The Century’s second decade is clearly identifiable as PPS’s inevitable third phase. CMS believes agencies were given ample profit margins over a sufficient period of time to both adjust their practices and acquire the technology they need to gain efficiencies. PPS is a system designed to reward the most efficient providers. Those who squandered the money during phase one instead of investing in technology may find that it is too late to catch up now that profit margins are being squeezed.
Unfortunately, this phase is already placing strains on smaller, rural providers, many of whom began their PPS journey with modest margins and few resources to invest in technology. We are already seeing some of these agencies disappear, many gobbled up by large national chain organizations, just as we watched smaller rural and inner city hospitals shutter their doors or join the nearest city’s IDN in the late 1980s.
Among the bulk of agencies profiting under PPS, those that have already invested in efficiency-producing technologies and started to slow the rate at which their costs rise will be far better prepared than those who chose to spend their early-phase profits elsewhere. If this admonition sounds familiar, look up Aesop’s “The Grasshopper and the Ants.”
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In part two of this three-part series, Tim goes deeper into the Business Planning Process.