3 Ways Hospices Are Managing Rising Costs of Care Delivery

Technology, cost control, and family caregiver support have emerged as cost-saving strategies as headwinds mount for hospice providers.

Efficiency has become a watchword in the hospice space. Providers, many of whom are unstaffed, have sought ways to do more with fewer resources and to relieve some of the burden on employees. A range of operators have found solutions with new technology, though this means they had to take on the upfront costs.

Reimbursement vs. inflation

Despite rising demand for their services, many hospices are seeing their margins nibbled away by inflation, fuel expenses and labor and supply costs.

Some in the space have voiced concern that reimbursement has not kept pace with the headwinds. The U.S. Centers for Medicare & Medicaid Services (CMS) raised hospice per diems by 3.8% for Fiscal Year 2023, but some industry leaders have said that this falls short of what providers’ need to maintain capacity and complete for jobseekers.

“While we believe the 3.8% update will be helpful in addressing the financial pressures hospices are experiencing, we have continuing concerns that it will not fully address current cost inflation and will seek support for further increases that would cover the increasing labor and other costs affecting hospice providers,” National Association for Home Care & Hospice President Bill Dombi previously told Hospice News.

Top of mind for most providers are the industry wide labor pressures, according to Theresa Forster, vice president for hospice policy and programs at NAHC.

Rampant inflation has driven many clinicians to take jobs that can offer them higher compensation with other providers, such as health systems or travel nurse companies. As providers try to keep pace, hospice workers have seen wage increases of 3% to 6% since the start of the pandemic in spring 2020, according to NAHC.

“Related to workforce issues, [providers are seeing] increased costs related to management fees, outsourcing of work, recruitment and staff retention, reduced productivity and lost revenue related to staff turnover,” said Forster during a recent NAHC webinar. “With much of hospice payments and revenues coming from Medicare, it’s virtually impossible for hospices to shift costs to other payers. They have limited options.”

3 cost-saving strategies

Under the weight of these pressures, hospices are employing a variety of tactics to sustain their programs, but three key themes often emerge:

• Investing in technology designed to boost efficiency
• Doubling down on cost control, often with a particular focus on medical equipment and supplies
• Concentrating more intently on caregiver support and filling gaps in patient and family needs

Technology a top strategy

For hospices, the labor force is the “single largest cost bucket by a significant margin,” largely due to the high cost of turnover, according to Reverence CEO Lee Hudson Teslik. Reverence is a staff scheduling technology company that serves home-based care providers, including hospices.

The cost of benefits like health insurance and rising wages also take a financial toll.

“Many of these costs arise from unsustainable levels of staff turnover, with providers replacing over half their labor force each year given low retention rates,” Teslik told Hospice News. “Much can be done to modernize how provider groups deploy their most precious resource – their workforce – including clinical and non-clinical personnel.”

Utilizing technology in their staffing processes can aid hospices in better care coordination, reduce unnecessary patient visits, and cut staff travel costs, Teslik added.

Utilizing better technologies that automate scheduling, reduce dropped shifts, capture more market demand, reduce dependency on expensive third-party staffing providers, and give practitioners more of a say in how and when they are deployed is a critical part of this equation, he continued.

A clear example is telehealth, which has boomed during the pandemic — prompted by a series of regulatory flexibilities implemented during the COVID-19 public health emergency (PHE).

While these flexibilities are temporary and are set to expire five months after the PHE ends, many providers contend that telehealth has become an integral component of care delivery.

“One small unforeseen benefit of the COVID-19 pandemic has been the rapid development of telehealth technologies and practices which help patients access care more easily, without sacrificing quality,” a coalition of industry groups recently said in a letter to congressional committee leaders.

Nearly half of respondents (47%) of the 2021 Hospice Industry Outlook Report indicated that telemedicine and telehealth would yield the highest return on investment this year compared to 2020. Telehealth outpaced other solutions such as predictive analytics (20%)and electronic health and medical record systems (29%).

Other hospices have leveraged remote patient monitoring systems, integrated electronic health records (EHR), and predictive analytics.

Enhabit Home Health & Hospice (NYSE: EHAB) uses a predictive analytics tool to decipher what patient care regions are in greatest need of clinical staff coverage, according to Enhabit President and CEO Barbara Jacobsmeyer.

“To complement our clinicians’ assessment skills, we utilize powerful predictive analytics tools to help us align our clinical resources with patient and family needs,” Jacobsmeyer told Hospice News in an email. “This type of actionable information also assists hospices in driving top-of-license practice so that we can optimize caregivers when appropriate, which keeps the cost of care down.”

Intrepid USA Healthcare & Hospice at Home has also implemented a variety of digital processes to help maximize efficiency in clinical workflows, according to Bob Parker, senior clinical and compliance officer at Intrepid and executive vice president of operations of Intrepid’s Hospice at Home.

The company has embedded an automated scheduling process into its electronic medical record system to ensure that it has enough staff to meet capacity.

The company worked to “virtualize” every back-office and clinical function that can be done remotely, said Parker.

“We have virtualized our clerical processes to build capacity for our direct care clinicians and other staff,” Parker told Hospice News in an email. “If the activity is not associated with needing to be managed within the walls of the agency, we have virtualized those processes to drive additional efficiencies – requiring fewer staff to manage more locations. In essence, we work in a more proactive way that speeds everything up and removes the distractions of the day-to-day minutia so our agency staff can focus on direct patient care.”

Intrepid has moved all “pre-billing activities” to a virtual model, said Parker. The pre-billing process begins as each patient is admitted to help finalize billing within days after the end of month.

Through this process, its billing department has been able to “drop claims sooner,” and ensure all technical requirements have been met around them, according to Parker. This has led to reduced claims processing time, he added.

While implementing a new technology costs money, the return on investment can be “well worth the expense,” according to Parker.

Enhancing cost control

While hospices can’t control the soaring prices of delivering care, they can keep a close watch on their expenses.

Hospices have had to walk a fine line to maintain an appropriate level of medical equipment, personal protective equipment (PPE), and non-clinical supplies amid two years of supply chain disruption and price increases.

PPE prices soared during the height of COVID-19’s, with some hospice providers suddenly spending hundreds of thousands of dollars on this alone, becoming a top financial concern for many. For example, Amedisys (NASDAQ: AMED) reported an additional roughly $200,000 of increased costs related to PPE in a Q1 2020 Earnings Call.

While some prices have come down, providers still contend with elevated costs for many essential supplies.

Inventory control is a key strategy for managing supply costs, according to Concordance Healthcare Solutions. Here too, some companies have turned to technology, such as automated inventory controls that promise to reduce the time staff spend on supply purchasing, Concordance indicated.

“It always begins with operational discipline,” said Jacobsmeyer. “[We] ensure [that] we monitor supplies and equipment for just-in-time inventory for the patients’ needs.”

Optimizing caregiver support, care plans

Some hospices see caregiver-support as a win-win, improving patient outcomes and reducing costs through avoidance of unnecessary visits or hospitalizations.

Caregivers themselves are often stretched thin in terms of time, energy, and the costs of taking care of a loved one.

Roughly 48 million caregivers nationwide are unpaid family members, according to a 2020 AARP report. About three-quarters of them spend upwards of $7,200 annually for costs related to caring for loved ones, AARP indicated. For many caregivers, this amounts to 26% of their income. Moreover, many lack the full scope of understanding when it comes to the nuances of hospice care delivery.

Stepping up caregiver education can go a long way toward fostering cost-effective care, according to Teslik.

“We see opportunities to better inform family caregivers regarding hospice care and empower them to navigate care more effectively for a loved-one,” said Teslik. “This includes equipping families with basic information: who to contact, what is covered by Medicare and when to initiate crisis care. That enables them to play a key role in reducing cost dynamics and improving clinical outcomes.”

Additionally, reconfiguring patient care models with a “proactive” approach can also help reduce labor costs, Parker said.

“Proactive care models mean a change in mindset of the ‘we’ve always done it this way’ mentality,” Parker said. “We can no longer arbitrarily set static frequencies that provide static care. We need innovation to increase hospice clinicians’ ability to determine who needs care today versus, ‘I’m going to see you on Monday and Thursday each week.’”

Intrepid has implemented a program designed to assess the labor costs associated with each aspect of patient care, Parker continued.

The company has also begun hiring clinically-trained staff to its office ranks, including to some clerical and administrative roles.

“Building all office staff from a clinical perspective has increased our turnaround times in delivering care,” said Parker. “Although this created some additional expense due to hiring licensed individuals for historically clerical positions, the benefit of having individuals who can be multi-purposed.”