What Is Financial Benchmarking?
Financial benchmarking and the use of key performance indicators (KPIs) are essential strategies for maintaining the financial health and sustainability of home health and hospice agencies. With increasing regulatory scrutiny and shifting reimbursement models, agencies must track and compare financial performance to industry peers, as well as state and national averages, to remain relevant and competitive. This allows agencies to assess operational efficiency, identify cost-saving opportunities, and evaluate profitability.
KPIs for Home Health & Hospice
Common financial KPIs for home health and hospice include:
- Net Margin: The percentage of revenue that remains after deducting all expenses.
- Days Sales Outstanding (DSO): The average number of days it takes to collect payment after a claim is submitted. Lower DSO means stronger cash flow.
- Payor Mix: The percentage of revenue coming from Medicare, Medicare Advantage, Medicaid, commercial, and private pay.
- Salaries & Employee Benefits as a Percentage of Revenue: Shows how much of an agency’s total revenue is spent on employee compensation and benefits.
- Administrative Costs as a Percentage of Revenue: Shows how much of an agency’s total revenue is spent on administrative expenses.
- Working Capital: A measure of an agency’s short-term financial health that represents the difference between current assets and current liabilities.
Home Health-Specific KPIs
Home health agencies rely on a mix of visit volume, staffing efficiency, and payor mix to remain financially strong, including:
- Gross Margin Per Episode: Measures profitability by subtracting direct costs from revenue per episode of care. Higher margins indicate efficient care delivery.
- Cost Per Visit (CPV): Tracks the average expense per skilled visit. Keeping CPV low while maintaining quality is critical.
- Revenue Per Visit: Helps identify how much revenue each visit generates; useful for understanding reimbursement efficiency across payors.
- Visit Productivity: Evaluates how many visits clinicians complete per day or week, directly impacting revenue generation and staffing costs.
Hospice-Specific KPIs
Hospice financial performance centers on appropriate length of stay and cost management while delivering high-quality, end-of-life care. Crucial hospice metrics include:
- Average Daily Census (ADC): A critical measure of volume, directly influencing revenue. Stable or growing ADC reflects consistent referrals and admissions.
- Cost Per Patient Day (CPPD): Assesses the average cost to care for a patient each day. Monitoring CPPD helps ensure expenses align with revenue.
- Revenue Per Day: A metric that measures the amount of revenue a hospice generates for each day a beneficiary is enrolled in hospice care, regardless of whether services were provided on that day.
- Length of Stay (LOS): Financial performance can suffer with too-short or excessively long LOS. Optimal LOS balances care quality with cost-effectiveness.
- Live Discharge Rate: Impacts reimbursement and indicates the appropriateness of hospice admission practices.
- Medication & Durable Medical Equipment (DME) Costs Per Patient: Managing pharmacy and equipment expenses without compromising care is a key financial lever.
Why These Metrics Matter
Tracking financial KPIs can help agencies:
- Optimize resource allocation and staffing
- Maintain healthy cash flow and margins
- Justify financial decisions with data
- Meet payor requirements for value-based reimbursement
- Support strategic planning and growth
- Promote accountability across teams
Conclusion
Financial benchmarking and KPI analysis are not just about cutting costs—they’re about improving overall agency performance. Home health and hospice agencies that actively monitor and respond to financial metrics can position themselves for long-term success in a competitive and value-driven healthcare environment.
How Forvis Mazars Can Help
Forvis Mazars offers customized benchmarking and KPI data based on agency size, location, and other demographics. We have recent data released from CMS, and we can help you identify areas of improvement within your agency.
If you have any questions or need assistance, please reach out to a Home Care & Hospice team member at Forvis Mazars.