Episode Transcript
[00:00:02] Speaker A: Welcome to Home Health Revealed where we share real stories from industry leaders about home health, palliative and hospice care brought to you by Velocity. Velocity's easy to read coding and revenue cycle dashboards let you grab your cup of coffee and quickly see the health of your organization. Welcome to Home Health Revealed podcast. I am your host today, Hannah Vail. Michael Greenlee wasn't able to make it with us today, but I didn't want you to miss out on the content and material that we're going to talk about because it is so timely. I have a guest with me today that I been really excited to talk with. Her name is Victoria Cuclina and she is known as the FinTech CFO of Pinnacle Home Care formerly. She's going to talk to us about what adventure and entrepreneurial journey she is on currently. But she has played a pivotal role in steering Pinnacle in their strategic financial direction. And as a seasoned financial leader, she has leveraged cutting edge information technology and driven data analytics to really fuel their aggressive growth trajectory. And today she is doing that on behalf of home health agencies. Victoria, welcome.
[00:01:06] Speaker B: Thank you so much, Hannah. I really enjoy speaking with you and I'm really excited to be here today with you.
[00:01:12] Speaker A: Can you talk about some of your experience?
[00:01:14] Speaker B: Yes, absolutely.
I am here on the mission and this experience is definitely something that has driven my mission for the past 20 years. I have been working with different types of experience industries including SaaS and manufacturing and even retail. So I've learned a lot along the way and I kind of picked up on the best practices. And then when I came into home care, I was able to combine it all together. And I think that being in the home care industry, that's when I found and discovered my real mission and my true why.
When I joined pinnacle in 2017 was a smaller agency. At that time we were just at $17 million in revenue and in seven and a half of us working together, we were able to scale the company to 200 million and we went from 1,000 senses to about 10,000 census. And yeah, that was such an incredible journey because for me what I understood is what it means is how many families and how many people that we touch and that really makes a big difference for what we do and what drives us getting up every morning. And I'm sure that you can connect with that too because when we are talking about our patients, we all like light up and even though we're in in the support function that is is really our, you know, guiding light. And so I was at the last year Around September, October, we were able to get through a really successful transaction and I exited the business and I had some time to pause a little and take a sabbatical, which was amazing. I read a lot of books, I reflected a lot. And a bittersweet moment for us, for me and my husband, our kids, we have twin boys, so they started college at the same time and it was really bittersweet moment for us. But now we became empty nesters pretty much at once. And now in this chapter, my husband and I decided to join forces. We bring together my 20 years of financial leadership experience and his 20 years of technology leadership experience to bring something special to life. We're really excited about this because it's our 2025 baby.
It's a startup and we're pioneering a new type of a software that's going to be a platform for home health care agencies that is going to bring clarity and discipline and confidence that leaders can identify the issues that they need to fix and this will help them navigate the changes and position them for increased capacity needs that are coming our way.
[00:04:00] Speaker A: So a busy startup, congratulations on a successful exit and then, gosh, it's so exciting for you, I'm sure to take some time but then to be able to send your boys off and really start something new. So congrats all around to them and I hope they have a really great college year too.
And I know you're busy with a startup, so talk to me about your startup environment and in the early stages of your business growth.
[00:04:27] Speaker B: Thank you, thank you for that. I really am very excited for them and I'm excited about our startup as it's a, you know, it's all exciting and at the same time it's very busy. As you know yourself as well with the startup, there comes a lot of new documentation, strategies, the delivery of the message that needs to come out as well as being present on the social media. So we were busy with that for a little bit and now I think we're ready to go with dealing with face to face with clients and start helping them and help them get through exactly what's happening in 2026. Now is the time where we can step in and really make a difference for our agencies.
[00:05:14] Speaker A: And with the elderly population tripling over the next 20 years, I know we've talked about that stat and it's out there as an understood you are really helping the industry take care of that aging population. And as we approach approach Q4, a lot of agencies are in this usual year end scramble, but this Year it looks a little different.
[00:05:38] Speaker B: Yes, we are definitely in the situation that looks like something we have experienced before.
Every year we have this scramble with the changes to our reimbursement rate, and at the end, it kind of evens out and falls to be either neutral or not as bad.
But this year is different, and it looks like something is really going to impact our reimbursement rate, and we're going to jump into the details of those. But it does really feel like this year it's going to be real.
[00:06:14] Speaker A: Yeah, unfortunately, I think that's what a lot of people are feeling. So you're talking about the proposed rule for Medicare rate cuts. Can you talk more about why it's so significant for home health agencies in 2026?
[00:06:30] Speaker B: Yes, the Medicare proposed a cut of 6.4%, but that 6.4% is a net number that is after a 2.4% that we should have received as an increase for the inflation. And so by not receiving that adjustment for the inflation, that really makes it an 8.8 adjustment for us, which will feel like it's going to be a significant impact to our reimbursement rate. Now, this also is not a straightforward number.
It will include things like loop adjustments, LUPA thresholds, adjustments, comorbidities, and other billing changes. So it is going to be so complex that we not only have to prepare for the percentage on the decrease on our reimbursement rate, but also on the complexity of the billing, which I'm sure you're already starting to look at in terms of how your clients are going to be impacted on the billing side.
[00:07:34] Speaker A: And it can be different regionally.
[00:07:35] Speaker B: Right?
[00:07:36] Speaker A: I think that's what you're referring to with some of that complexity. So regionally, people may really feel this at a greater depth.
[00:07:43] Speaker B: Yes, absolutely. I believe it was Symmetry that posted an analysis that some of the regions could experience something like over 9% of an impact, as opposed to 6.4.
So some regions will have lower impacts and some will have higher.
I think that the agencies need to start looking into what their specific impact is going to be in their region.
[00:08:05] Speaker A: And I know you're getting ready to release a white paper, and we're going to link to that with some of the resources for this episode. And I think that's so great because you have been literally swimming in the information and in the data. Could you summarize for us the key points from your upcoming white paper that proposed 6.4% Medicare cut and talk a little bit about the 7% PAC? Suggestion?
[00:08:29] Speaker B: Yes. I was swimming in the details for over a month and I can tell you that information is very complex in terms of the the amount of different areas that are coming our way. So I had to separate them out into kind of three components of how I see that coming into our industry and that that is what the White Paper is discussing. And overall we can cover the three. So the first one is the easy one. Everybody knows it now. It's Medicare 6.4%.
Interestingly, that 6.4% impact is going to be total up to $1.13 billion on the billion.
And out of the complete total annual spend of 15.7 billion that comes to 7% reduction. They are looking to save to the budget. 7% was that 6.4% cut? So how does that happen? It also does kind of correlate to the 7% reduction that Medpat, which is a Medicare payment advisory Commission, advises the Congress every year on the payment changes that should be made for home health care and other healthcare organizations. This year they recommended a 7% reduction to overall payments. Basically that would be a 7% straight reduction from any type of payments done.
Thing is that they come together, they do not stack on top of each other.
So what it seems like that Medicare and medpack are going acting together and they are either going to have a 6.4% cut for us or 7.
So we are definitely hoping that it's not going to be higher but lower. But that's what makes me think that this year is really different from all the others. That really that hit is going to come. There is one more direction where the hit is coming from. The One Big Beautiful Bill. We already know that One Big Beautiful Bill act is reducing significantly federal Medicaid spending. And over 10 years they're looking to reduce the spend on Medicare by $911 billion. So that's over 10 years. But what that means is that that will reshape access to care.
There is one more thing. In the One Big Beautiful Bill act if Congress doesn't step in to offset the projected deficit, then PAYGO will go into effect. And if PayGo goes into effect, our sequestration can increase by another 4%. So we're currently paying 2% sequestration that can go up to 6% and that is separate from Medicare or Medpack recommendations.
[00:11:29] Speaker A: I wanted you to talk a little bit about some contradictions in the MEDPAC report and then how that's really going to affect agency margins.
[00:11:38] Speaker B: And so yes, interestingly the same report has a lot of information and extracting what really is important for us to look as an industry.
The MEDPAC reported that Medicare bottom line margins are 20.2%, which seems to be great, right? It's 20%, it's pretty high. Don't we wish we all had that? But the overall industry bottom line margin is 8.2%. Now we all are dealing with patients that are coming from with Medicare coverage or managed care coverage or Medicaid coverage. So we have to take care of patients as they come. And we don't want to pick and choose. This is our industry. We have to service our patients. And so we're looking at an average of 8.2 for the.
But if you do reverse engineering of the margins, MEDPEC also had reported that 66% of starts are Medicare. If we assume that that's our margin breakdown because they don't have the exact margin breakdown in percentages in the report. But if we assume 66%, 20% of the margin belongs to Medicare and the 34% is actually 15% loss.
So that means that our industry and our sector that takes care of non Medicare patients is operating at a bottom line loss of 15%. And so those numbers are staggering because if they also reported that we have a deeper managed care penetration, so patients are moving from Medicare to managed care, so they are already doing that as part of the patient's enrollment.
But also if we reduce the reimbursement rate on the Medicare side, that 8.2% will go down. And depending on how much business you have coming in from Medicare, that will dictate how much lower your margins are going to be based on these changes.
[00:13:41] Speaker A: Right. Because right now I feel like people are playing this game of differentiating payers to get to a point where it's sustainable. Right. They're depending on certain payers to make that level out. Overall, I feel like leaders. This is a core contradiction for leaders. Right. And really wrestling with this because of these numbers that you've given. So this is really going to impact the industry finances and consequently patient care access.
[00:14:09] Speaker B: Yes, yes. Unfortunately that is the ripple effect or domino because what's going to happen is the overall margin is going to drop, access to care is going to drop, hospitalization is going to increase, the hospital system is going to be out of capacity and so that capacity is going to cost us more money later down the road where patients are not being seen. We're paying more money in the hospitals. And so nobody really wins at this years after this overall start.
Maybe it's going to take a couple of years for us to really feel the hospital system starting to feel this. But it just. Because logically something has a capacity, has to take these patients in if the home care is not going to be available for them.
[00:15:00] Speaker A: Right. We're walking on thin ice, as you've said. With every payroll run even.
[00:15:06] Speaker B: Yes. And with such thin margins, there is not much cash left in the bank account or to be saved away for, you know, for a needed time later. And without having any of the extra money stashed away for that payroll that is needed. Home care home health agencies are walking thin ice every payroll, making sure that enough money has come in in order for them to meet the payroll. It's kind of the name of the game in the home health care industry.
Did we collect enough cash today so we can pay payroll? And because we're taking care of patients and the most vulnerable population, this is really not a place where we want this sector to be in because 80% of our expenses is payroll. These are our clinicians.
[00:15:54] Speaker A: You're talking really about the operational and financial challenges the agencies are facing related to our dso. So our day sales outstanding. Some of the metrics that you and Health Rev both look at when we're working with our clients because it's an indicator of health. Talk about that. Along with these regulatory burdens, DSO is.
[00:16:13] Speaker B: One of the most important KPIs that we have to look at in the home healthcare industry. Because we are so highly dependent on our orders being signed, especially the freestanding agencies. We're chasing our doctors to sign our face to faces and orders and only then we can send our bill for payment. And so that time to collect on the orders and to send the bill and then to wait for the payment to commence, unfortunately is at 1 and a half to 2 months average right now. And even those that are at that range are probably thinking we're doing okay. But in reality, this is a really long time to get paid because we front payroll. We have to pay payroll no matter what.
Our clinicians took care of the patients. And so we need to take money from our bank account and pay payroll and then wait for those bills to be paid by Medicare or insurance companies in order for us to then put the money back into our bank account and then front the next payroll. So we're always chasing, basically chasing those payments to make sure we can afford the payroll run. And having the thin ice on that puts agencies at risk. And if there is any small regulation that affects DSO specifically, it puts those agencies at risk of not having enough Cash to pay payroll. Even if they have that unbilled accounts receivable. Even if they have accounts receivable. But cash is king. If cash is not in the bank account, the payroll is at risk.
[00:17:50] Speaker A: So how are new regulatory changes like rcd, the Review Choice Demonstration that I know you guys have seen in Florida already, how is that affecting home health agencies?
[00:18:00] Speaker B: Review Choice Demonstration is, is something that has hit five, five states so far.
Five pilot states that would include Ohio, Illinois, Texas, North Carolina and Florida. In Florida, we've gone through that in 2019 and really what it hits is DSO because it requires for you to have face to face in your hands before you can submit for authorization to Medicare and only then after you have received that authorization back, you will be able to issue a final bill. But also of course you need to have your orders in place because you can't send even if you have the authorization from Medicare but you don't have orders, you're waiting. So what you want to have is you want to have all of your ducks in a row with orders and face to faces. So all you're waiting is Medicare. And that sometimes is, is, you know, still a, a wait, a wait time because Medicare also has to go through hiring of extra people to take care of this extra volume that came in for the new state that's joining. And then there is an extra wait time for us to receive that authorization back. But on average it adds another 30 days to the DSO. So with a single digit bottom line margin and if there is no extra money that is sitting there just in case for, you know, things like this that come up, companies will be basically looking at how do I get money in the bank account so I can pay payroll.
[00:19:34] Speaker A: So on the next episode we are going to take all of this that you've given to us and talk about some things that agencies can do like scenario planning, like some of those budgeting items. So I don't want you to miss, I know this is a lot of information, but I don't want our listeners to miss the, the what to do about it.
