Understanding the 5 Financial Challenges That Make This Industry Different
Are you constantly chasing down insurance reimbursements, trying to make sense of Medicare reporting, or dealing with payroll headaches that take time away from patient care?
Do you feel like the financial side of your home health or hospice agency is far more complicated than it should be… and no one really prepared you for it?
You’re not wrong. In fact, the accounting side of this industry is just as specialized and nuanced as the care you provide. And if your financial systems aren’t built to handle that complexity, it leads to burnout, cash flow problems, and compliance risks.
At Patrick Accounting, we work with home health and hospice agencies across the country. We’ve seen what happens when your systems work with your agency instead of against it, and we’ve also seen the damage that disorganized, generic accounting can cause.
In this article, we’ll walk you through the five biggest financial challenges that make this industry more complex than traditional small businesses. And we’ll show you why understanding these issues is critical if you want to grow, stay compliant, and take care of both your staff and patients.
Why Traditional Small Business Accounting Doesn't Work for Home Health
Most small business accounting is relatively straightforward: You provide a service or product, you bill for it, you get paid, and you track everything in QuickBooks.
But home health and hospice don't work that way.
The services you provide aren't standardized. The revenue sources are complex. The staffing needs are diverse. The reporting requirements go far beyond what most small businesses deal with.
Let's break down exactly what makes this industry different.
Problem #1: Patient Services Are Individualized, Which Complicates Billing
The first challenge is that neither home care nor hospice represent a standardized product or service. Instead, these services are tailored to the unique needs of each individual patient. The services provided for one patient will rarely look the same as the services provided for another.
Consider the wide range of services that might be involved in hospice care alone:
- Physician care
- Nursing and medical services
- Medical treatments
- In-home aides and homemaker services
- Physical therapy services
- Occupational therapy services
- Speech-language pathology services
- Social services
- Dietary counseling
- Spiritual counseling and bereavement services
- Short-term inpatient care
This diverse array of professional services creates a unique challenge when it comes to financial management. You're not just tracking one or two service lines. You're managing billing, staffing, and cash flow across multiple service categories, each with its own requirements and reimbursement structures.
Managing cash flow and keeping all these moving parts working in sync requires accounting systems specifically designed for the complexity of home health and hospice.
Problem #2: Complex Staffing Needs and Burnout Strain Payroll Systems
The diverse needs associated with restorative and palliative care present unique challenges when it comes to staffing your agency. You need registered nurses, licensed practical nurses, certified nursing assistants, therapists, social workers, and administrative staff. And they all have to be coordinated to serve your patients.
The bigger problem is that for those working with the terminally ill, fatigue and burnout are extremely common.
According to the 2021 Hospice Report, over 60% of hospice clinicians experience burnout, making this the greatest non-pandemic-related challenge facing the industry.
When your staff is already stretched thin emotionally, the last thing they need is administrative chaos adding to their burden.
Agencies that don't have proper payroll systems in place put additional stress on an already-overloaded staff. Processing payroll, managing time tracking for multiple types of caregivers, and handling benefits administration all take time away from patient care.
A smoother payroll process can help you take better care of your staff by eliminating critical administrative tasks that shouldn't fall on clinical team members.
Problem #3: Advanced Equipment Costs Demand Strong Cash Flow Management
One of the challenges of home-based healthcare is that it requires the delivery and maintenance of relatively advanced equipment used for therapeutic services or as drug-delivery systems. Patients with disabilities or those aging may also require equipment for basic mobility.
This equipment isn't cheap, and maintaining it can be costly, especially since technology tends to change rapidly.
Home health providers need proper revenue management so they have the funds necessary to:
- Purchase advanced medical devices
- Maintain and service existing equipment
- Replace outdated technology
- Staff the team needed to distribute and install devices
Without strong cash flow management, you can't afford the equipment your patients need. And without the right equipment, you can't deliver the quality of care your agency promises.
Optimizing your revenue cycle management gives you better control of your cash flow, which allows you to direct funds toward these important technological needs.
Problem #4: Multiple Payers Make Reimbursements Hard to Track
How do hospice and home care agencies get paid? Sometimes, it depends on the nature of the services provided and the patient's insurance coverage.
While Medicare often covers in-home services, it doesn’t cover room and board in residential facilities, creating a coverage gap many agencies must account for. Other patients may rely on other forms of insurance, like a private insurer or Medicaid.
It gets even more complicated because some private insurers may send benefits directly to the insured party, while others will send benefits to the healthcare provider. This means you might be waiting on reimbursement from multiple sources, tracking different payment timelines, and following up on claims that should have been paid weeks ago.
The right financial systems can ease the stress and confusion of this process by:
- Ensuring bills are submitted correctly and on time
- Tracking which insurance claims are pending
- Following up on overdue reimbursements
- Submitting claims to the appropriate agency
Disorganized billing systems make an already complicated reimbursement process even worse. And in an industry where margins are already tight, you can't afford to have cash flow problems caused by disorganized billing.
Problem #5: Medicare Cost Reports Require Specialized Financial Tracking
One of the greatest administrative challenges associated with home health services like hospice care is the unique reporting demands associated with the industry.
Every year, applicable providers must submit a Medicare Cost Report (MCR), based on requirements and regulations set by the Centers for Medicaid and Medicare Services (CMS).
These reports contain information such as:
- Characteristics of the facility/company
- Company financial data
- Provider information
- Costs (both direct and indirect)
- Medicare settlement data
This information goes beyond traditional bookkeeping needs, though your financial data will nonetheless play a vital role in the reporting process.
Poor bookkeeping puts your Medicare reimbursements and compliance at risk.
If your books aren't properly organized throughout the year, preparing your MCR becomes a nightmare. And if your MCR isn't accurate and submitted on time, you risk compliance issues that could jeopardize your Medicare reimbursements.
The Financial Side of Home Health Should Support Your Mission, Not Add to Your Stress
At the end of the day, providing quality home health and hospice care already takes everything you’ve got—mentally, emotionally, and logistically.
But now you’ve seen how the financial side of this industry works, and why most generic accounting solutions fall short.
Unfortunately, you can't focus on patient care when you're worried about payroll problems, cash flow gaps, missing reimbursements, or compliance reporting you don't understand.
If you're still trying to make traditional systems fit your specialized needs, it may be time to consider a change. We work with agency owners like you every day.
Let us help you simplify your accounting, stay compliant, and reduce financial stress, so you can get back to what matters most: caring for your patients and team.
→ Learn more about how we help home health and hospice agencies like yours.
