Collaboration, Leadership, and $500K to Start: What SNFs Need to Succeed in Home Health

As more hospitals discharge patients directly to home and lengths of stay decline, some skilled nursing facilities are looking at home health and home care as a way to take more control of the patient experience.

Starting a home health agency has some attractive perks for SNFs: The move allows them to get more insight into the full continuum of care, which is especially important when they can receive up to 2% in Medicare penalties under the SNF Value-Based Purchasing program if they don’t meet hospital readmission benchmarks.

But to be successful in the world of home health, providers in the SNF space have to overcome a host of challenges. They need to have good leadership in place, both in the home health business line and in the management at the SNF. They need to have strong collaboration among the different teams.

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And they’ll also need $500,000 in startup funds and a strong census to turn a profit.

That’s according to a panel on integrating home health into a SNF model at the Senior Care 360 conference held by Lincoln Healthcare Leadership in National Harbor, Md. last week.

And all the panelists emphasized that running a home health agency is very different from running a SNF, which puts additional labor pressure on the shoulders of the skilled nursing company.

“In our experience, the SNF management team, even the staff at the facility level, do not understand the home health agency business,” Donna Farr, the CEO of Touchpoints Therapy, part of the Connecticut SNF operator iCare Health Network. “You need to invest in a strong home health leader when you’re doing a startup.”

Differences in revenue

When executed properly, home health services can be a major support for both census and revenue. One SNF in the state of New York that expanded into home and community-based services was able to keep its occupancy at 100% because of its moves outside the brick-and-mortar SNF.

“The idea of an independent, standalone nursing home model as being the model to pursue — I think that ship has sailed,” Fort Hudson Health System CEO Andy Cruikshank told Skilled Nursing News at the time. “I just don’t think that model in and of itself works. You have to have integrated services.”

Bethesda Health Group, a non-profit continuing care retirement community (CCRC) based in St. Louis, started its home health business in 2007 and now makes around $450,000 to $500,000 a year in net profit, president and CEO Joseph Brinker said at the conference.

But it took the CCRC some time to get there, first partnering with another non-profit to get the home health agency off the ground. Leadership projections showed that the new venture would lose about $180,000 in the eight-month startup period — followed by a projected net operating income of about $190,000 in the first year

It didn’t quite work out as planned; the company did make about $100,000 in the second year, but as its census grew, accounts receivable also rose, even though the agency was doing well from a net-income basis.

“We had good people who knew how to do things and what needed to get done, but weren’t necessarily auditing and overseeing those things,” he said on the panel. “So we had a lot of end-of-episodes and bills that were sent back because we didn’t have physician signatures. We didn’t have all of the details, so we actually ran into a negative cash flow in the third year.”

Bethesda had believed that because it was a SNF company that knew how to bill Medicare, the process for home health would not be much different, Brinker said. But the CCRC ended up having to bring in a consultant to examine the billing process, he noted.

For iCare and Touchpoints, the break-even stabilized census was 65 patients, with “a decent profit” at 100, Farr said. And as with SNFs, quality mix will matter, she said.

Brinker agreed.

“We don’t do Medicaid but we’re seeing more managed care,” he said. “Managed care pays lower than traditional Medicare, and that’s a trend of the future too.”

Differences in staff

Another expensive mistake can be lack of home health expertise, according to Susan Adams, the vice president of Alliance Integration at Masonicare in Wallingford, Conn. The SNF and home health teams have to understand each other to keep momentum moving, she said on the panel.

Adams also recommended reaching out to state associations, since they will have SNFs in their domain that have gone through the home-health startup process and answer questions — as well as the home health associations on the national level.

Farr also strongly emphasized the need for good leadership on the home health level — particularly given the differences between clinical supervision skills and administrative supervision skills and the need for both.

But the management of the SNF also has to be on board, she said. Her management company, for instance, initially saw the home health business as entirely separate, as a silo.

“That didn’t work,” she said. “The basis for us deciding to start our own home care agency was for that continuum of care. It was what was best for our residents.”

Touchpoints ended up bringing in a transitional care nurse to bridge the gaps, working with iCare’s management, meeting with residents before discharge, and following up with them in the community, Farr said.

Key leadership positions for the home health agency include an administrator, director of nursing (DON), director of clinical services, and case managers, she added.

Bethesda had actually tried to ensure the full continuum of care by having therapists follow patients from SNF to home, but “it didn’t work as practically as we thought it might,” Brinker said. That led the CCRC to focus on the collaboration between nursing and therapy, as well as on strong communication — and on making sure that the patient transition from SNF to home health was done with as much transparency as possible, with follow-up calls and a handoff line when so-called “warm handoffs” weren’t possible.

“From a financial standpoint, all of those things are items that can help patient care and patient satisfaction, and result in continued referrals,” he said.

A changing health care world

It’s no secret that hospitals are increasingly sending patients directly home. Given that the St. Louis market is saturated with hospital-based home health agencies, Bethesda’s SNF discharge planners were worried that opening a home health agency would lead to decreased referrals.

That didn’t happen when the CCRC opened its home health agency, Brinker said, but it has started recently as hospitals begin to pay more attention to the continuum of care. To ensure it captures as much market share as possible, Bethesda made inroads into its own independent living population, and continued to rely on its referral sources for SNFs. Leaders also started having monthly calls with hospital discharge planners to find out why they were referring patients outside of Bethesda’s network.

The organization also approached the hospitals themselves. Bethesda specifically focused on opening cases within a 24-hour period, because it found this was an area where hospitals struggled — raising the likelihood of readmissions and making it harder for patients to receive care as quickly as they need, Brinker said.

In fact, for some high-risk patients, Bethesda will pursue same-day openings that other providers just can’t absorb. 

“Typically [hospitals] can’t always always open cases in a timely manner,” he said. “So we said: Make us your second choice, if you can’t do it.”

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