When Agency Margins Are Tight, Should You Cut Costs or Invest?

Sep 6, 2016 8:03:26 AM

Cut back or dive in? When profit margins are getting squeezed, the hair-trigger reaction is “Cut costs!” Reduce staff, rein in capital expenses, cut anything that’s deemed “non-essential.”

That may work in the short-term to meet some quarterly financial target, but what’s the long-term effect? Is that approach sustainable? Will it help your business grow? 

Spend-Save_350.jpgMany home health agencies are grappling with this critical business decision. As wages rise, Medicare payments get cut, and more competitors stream into the market, the conversation in agency boardrooms often starts with “How can we control costs while growing the business?”

Increasingly, the answer is “Invest wisely.”

Home Heath Care News suggests three areas “Where it Pays for Home Health Agencies to Spend More.” One of them is technology. As HHCN reports, “Tech may seem like low-hanging fruit to go after when an agency is looking to cut costs.” But it goes on to say that IT can help improve gross margin by automating processes and improving productivity.

One example of this is CarePartners, an Ontario, Canada home healthcare services provider with 4000 mobile workers providing personal support, nursing and therapy services across the province. CarePartners was using a system that relied on a weekly voicemail message to communicate staff schedules and patient information to the field staff.

“If there were cancellations or missed visits, we wouldn’t know about it until the following week,” said Kelly Baechler, Manager of Organizational Change at CarePartners. “It was also difficult to track exactly where any staff member was at a given time.”

Missed visits were a significant drain on CarePartners’ profitability. After implementing a mobile solution from CellTrak, CarePartners gained the ability to make adjustments on-the-fly and reduced missed patient visits to less than 0.1 percent.

Mobile technology can also deliver savings to home health agencies from another typical high-cost area: mileage reimbursements. Costs add up in so many ways: during the admission process, from visit to visit, within visits when clients need transportation to facilities or stores, when caregivers make trips to get supplies, for trips to the office to pick up or drop off paperwork or to attend meetings, and more.

Automating mileage tracking with a mobile GPS-based system can improve staff efficiency and save money by reducing manual data entry time (and eliminating the potential for errors), and calculating mileage accurately and automatically. Agencies commonly report saving 20% or more in mileage reimbursement once they switch from self- reported mileage to a GPS-based system.

Technology is perfect for automating processes, thus reducing time and manual labor. But IT investments offer many other ways to cut costs, boost productivity and improve compliance. Learn about them in “14 Ways a Complete Mobile Health Care Delivery Management Solution Helps Your Bottom Line.”

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Topics: Cost Reduction, Savings