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.
[00:00:18] Speaker B: Okay, Victoria, welcome back. I see you've got your coffee again. Perfect timing. I guess I should have grabbed another cup. On our last episode we talked about the nitty gritty of some numbers and you are so knowledgeable. So thank you so much for again the time to meet with us about the proposed rule. We're all nail biting, waiting on the final rule to come out, but I want to talk to agencies about what they need to do to start planning and getting ahead of this so that they're not scrambling at the end. And I anticipate there's still going to be some level of scrambling right when our numbers come out and we think, okay, this is it now. But I want to start with talking about scenario planning and early budgeting and why that is so critical now with these anticipated cuts.
[00:01:03] Speaker C: I am really excited to be here today Hannah. Thank you so much for having me. I absolutely love this topic. This really is the reason why I am here and I love to help with this specific area of expertise of mine. So budgeting, let's talk about budgets. I was really inspired to to be here with you and speak with you about budget because I've listened to your other podcast where you and Mike have doven into the details in the how only about 50% of the industry does the budgets and a small percentage of the other 50% actually use their budget throughout the year.
So I was really excited to jump on here and spread the word on how important budgeting is. Especially now with 2026 coming our way, budgets could not be more important. The way that I look at the budget is really it's a communication tool. It connects all of the teams together in the company. Whether you're in operations or in sales or even in finance. That budget is one tool that the only one tool that the company can have that can really incentivize people to be steering in the same direction and to have that one path forward and where they're going so the team knows where they're going, why they're going there and how they will get there together.
[00:02:30] Speaker B: Thank you for the accolade on the podcast, but I do love you framing it as a communication tool because I really hadn't thought about it that way. But your right because you know my grandfather always Told me if you look at somebody's checkbook, you can tell a lot about their heart. I always thought that was so true. We don't really use checkbooks like he did, an old paper checkbook. But what he was saying was, you know, you can follow the money and you can tell a lot about a company and the way they operate, the way they work together and yes, like you said, the way they communicate by where their money is going. And you can also give a growth trajectory based on that?
[00:03:04] Speaker C: Yes, absolutely. I love that analogy to the chat book. Because really when we are running companies, the 13 week cash flow projection becomes our checkbook because in there we will have our actuals of where we are and our cash as well as where we will be in the next 13 weeks, which is 1/4 out.
So that's how companies can keep themselves organized, just like you would with a checkbook, making sure that you can take care of your expenses.
[00:03:30] Speaker B: So how would you lay out the scenario planning? Kind of get into the details of that with me. If you're an agency, pretend I'm an agency owner. What exactly am I? What am I writing down on my scrap piece of paper, my napkin, my Excel spreadsheet? Where am I looking?
[00:03:44] Speaker C: So once the budget is done, then the next step is to layer in scenario planning. With the scenario planning we need to be working with the same budget but adjusting the levers that are going to be changing. So what we need to look at what will happen to our bottom line if our revenue gets reduced by that 6.4% or if half of our business is Medicare, then it's going to be a 3.2%. Also I would layer in the additional sequestration. What would it look like all of that happens as well as bottom line. Now you can tie it to what will happen to your staffing, what will happen to your cash flow, is that 13 week cash flow we just talked about and how much money you really need to start accumulating now before it starts in January.
So you would have that money saved up so you can take care of any of the, you know, mishaps that are happening in the new processes as you're finding what is really happening in.
[00:04:39] Speaker B: Reality when we hit January, kind of like that squirrel gathering its nuts for the winter as we head into 2026. Really stashing that cash away a little bit with any process change, with any change in, you know, the loop of thresholds and different things we would rather be safe than sorry. Plan for like you said, those mishaps and know that we're going to be okay. And with the scenario planning, so you're saying take the budget line item by line item and kind of create different columns for okay, if we're at that 6.4% or however it impacts your Medicaid, Medic and non Medicare. So splitting that revenue and then applying that cut to that portion of your revenue to see where your EBITDA is at the, at the bottom of that. Right?
[00:05:25] Speaker C: Yes, yes, absolutely. And I would also create three types of scenario plans. You would have the best case, the worst case and somewhere in the middle. And so you can have those as three different tabs in your spreadsheet and you could see where you think that it can land.
Usually, you know, you're kind of relying on the middle point and then from there you can start seeing what will be the ripple effect across the organization if that was to happen. And yes, I was called a squirrel going through rcd.
You know, I've, I've learned the hard way sometimes that when you don't have enough money in that bank account stashed away for those days, and I wouldn't, you know, I would just put it in a different bank account and it would be kind of like a savings for those days that would come and I wouldn't use it for, for the regular operations. So this way I could sleep at night because I've lost way too many two sleepless nights. And then when we were going through our city, that really helped us because I was able to use that as our own self funded kind of line of credit that I would then replenish again to make sure that that money is still sitting there for anything that may come up later.
[00:06:38] Speaker B: And I know I had seen or heard you make a point before about even if you're not one of those five RCD states to start gearing your policies from an agency perspective to some of those points where you know, you're going to have to have a process for getting that face to face, for getting that documentation in prior to the op, so that if it gets sprung on you, you're ready for those policies.
[00:07:02] Speaker C: Absolutely, absolutely. I could not stress it enough. If the RCD is going to be rolled out to the rest of the nation and it's. Maybe it will hit not all states at the same time. Maybe there's going to be a slow implementation.
No matter what, everybody should be ready for this RCD because it really does put a whole agency at risk and of course your patients. So if you're a very large agency for us, it's pinnacle taking care of 10,000 patients. It was just a scary thought thinking about how do we take care of patients if our money is stuck in unbilled ar? It's just a number on the paper and you can't use that. So unfortunately, that's what happens when you go through rcd. And the best way to prepare for it is to get your ducks in a row with your process on collecting orders. Your DSO should be really, really good right now without rcd.
[00:08:00] Speaker B: Yes. So talk a little bit more about how the disconnect between the CMS policies that we are looking at having and the realities of the front lines of care that agencies are experiencing. Right. Those are very disconnected right now. But what can agencies do to drive that sustainability?
[00:08:20] Speaker C: I think that a lot of the policies and analysis is coming from analytical standpoint. From the numbers such as, you know, mapac looking at 20%. Bottom line for Medicare, that seems to be high. Let's cut it. But let's look at the fact that Medicare has been kind of subsidizing the managed care and that negative 15% was able to cover that. So it would be very helpful if we were able to address the issue as a whole and not just a part of it. Yeah, and we are. When we're seeing patients, we see a patient as a whole. We don't just address their leg or their arm. You know, we come and we look at the patient, see what they need. It could be physical therapy, it could be, you know, nursing and it could be mental health support. So it could be so many different things that our patients experience. So we look at the patient holistically and it would be great if the Congress and the policies looked at home health, home health and home care together as a holistic body of patients that we're taking care of. And look at our bottom line of 8.2%, not 20% and how we can scale together with that status statistics of our patients tripling in the next 20 years and at the same time our margins being reduced.
So logically we know that capacity is going to start reducing and with the reduction of capacity, how can we scale to take care of more patients if we're struggling to keep up with the current capacity? So I feel like we're already there in terms of capacity issues, wouldn't you agree? Like we see our payers struggling taking care of already a current capacity as it is. And so tripling, that is, you know, something that doesn't, I can't put it together. It doesn't the does do not connect. And how we can do that together as people that take care of the elderly.
[00:10:20] Speaker B: Correct. I mean, you're talking about, we say all these words, growth and scalability and sometimes I feel like we repeat them so much that it feels like, yeah, we know. Yeah, we know. But you put numbers to this and you say, okay, by 2060, our 85 and over population who are wanting to age in place longer, we know that it has benefits, benefits. It actually is a cost savings overall to Medicare. I kind of feel like they should be worshiping the ground we walk on.
[00:10:44] Speaker C: But that's a, that's a whole.
[00:10:45] Speaker B: Nother. That's a whole.
But that population is going to be aging from about 7 million to 19 million. The demand that you're talking about is real. It's needing more workers, needing more processes. And so putting these additional stringencies on these home health agencies is something that we really have to think through. And I know you are in a prime position with what you're doing at Fin Health and you already are putting some tools in place because you're so forward thinking. You have a process called a Fin Health Score. And can you explain about the Fin Health Score? Because this is something that I want people to take advantage of. If you are in an agency, you're thinking, oh my gosh, this is overwhelming as I think we're all feeling that really. But you want to get into the details, you've got to get a better understanding. Maybe you're a CFO yourself and you are looking at these numbers and you're thinking, I need another noggin to bounce against. I need someone to talk to. Victor, Victoria, tell us about the Fin Health Score, what it measures, how you're already helping agencies to evaluate and improve their financial health for the future.
[00:11:51] Speaker C: I would love to do that. And Fin Health Score was really born out of something that we were always challenged at at Pinnacle. And even in prior industries, when you have a lot of data, when everything is important, nothing is important. You end up by swimming in all of these KPIs and all of this big data. Really, you don't know what's most important and what to look at. It seems like everything is overwhelming.
[00:12:20] Speaker B: It almost becomes an analysis paralysis where there is so much data but you don't know what to do with it. And so you do nothing. And that's not the answer right now.
[00:12:28] Speaker C: Yes, yes. And this is what we are here to help agencies navigate because data is, is important only as you know which lens to look at through as well. As which pieces of information to pick out. So Fin Health score is the simplest way to look at an agency. And when you run your numbers as and this is specifically designed for home healthcare agency, you will run your numbers through finheal score and it's going to give you one number, one number that will tell you how well your financial health is at your agency. And it looks at many different things like the different KPIs, the DSOs that we have discussed, the EBITDA, the overall company's ability to take on stress, the staffing and many other things. At the end of the day, when you look at your Fin Health score as an agency, you will have a clear and quick read on what your financial health looks like at your agency.
[00:13:29] Speaker B: And this is a free tool that you've provided. And knowing you, it's not about judgment. So if you come in and you have a score that you feel like is horrible, this is not about beating anybody up. It's about seeing risks as early as possible and then about acting before you get into a crisis or if you feel like you're already in a crisis, giving you as much information to turn that around.
[00:13:53] Speaker C: Exactly. And knowing your score will also tell you where your lowest ha fruit is. So as you go after those low hanging fruit, you will start increasing your score and then you will see your numbers on the bottom line improve as well as cash will start accumulating and so you can get ready for 2026. And we're doing this for free because we're here with a mission to help navigate through all of this, all of these changes and it's going to give them a really quick way to analyze and get ready for 2026. And I'm also hoping that people will start working on their because this is the time to actually sit down in September and think about January and start doing those scenario planning as we were discussing. We're here to help and so this is something that we absolutely love doing. It could be a lot faster if we just help you with a quick budget and then you move on with your life. But at least you will know what the risks are. And if you are there with your budget, do it now, don't wait just.
[00:14:58] Speaker B: To kind of rehash here.
Start your budget like she said. Get your scenario plan out. Start, start working through your numbers. Do your always start with your worst case scenario, right? Because it's always up from there and you can kind of figure out in between own your cash. So start improving your dso. And when I tell people and Maybe you're the same to look at their dso. I tell them to take their Medicare DSO plop in those numbers so their net patient revenue and things. At Health Rev we do have a free DSO calculator on our website that you're, you're welcome to use. Um, I would really encourage you to out to Victoria and that DSO becomes a part of a bigger picture that she puts together with that Fin Health score and that's going to give you some really good action items to start working on the low hanging fruit. Start getting a little bit better every day, every week with your team to make sure that you have a cash reserve for payroll for any unexpected bumps in the road as we hit 2026 keeping track of those policy changes. When it comes out then say okay, where did I come up with my scenario that's going to be the closest to where we land and can I do Final rule should be out end of October, beginning of November. We just closed the period where you could enter comments and that ended August 29th. So just recently. But if you are not a person who entered comments because maybe you don't feel the need to reach out to CMS or you think maybe they don't listen, I would say get those thoughts outta your head the next year when this rolls around. This is my pep talk for next year. Start thinking about the scenarios that you're going to encounter in 2026 and how those are gonna impact your agency because CMS likes to hear specifics, specific use cases, scenarios from you as an agency to help drive the next set of changes. Don't feel like you're not a part of the conversation. Don't feel like you're too small. Be thinking about this stuff and pushing to be a part of your state association. Get involved in the alliance. They're a great organization and they are out there advocating for a lot of these changes. Victoria, I want to give you the chance to tell listeners where they can find you and where they can find their Fin Health score.
[00:17:03] Speaker C: Of course our website has all of that information that would be at www.fin-health.com. when you get there you will be able to see the FinHealth score. Once you click on that you can fill out the form and we will be calculating your finheal score for you as well as you can find all of the information about the company there online. I invite you to follow us on LinkedIn. Fin Health Company is always posting some very useful and valuable information information. I would love to connect with you guys and you know stay connected over the the social media because that's how we can interact.
[00:17:39] Speaker B: This has been helpful. Please share this episode for somebody who needs it. We would really appreciate it. Thank you so much. Victoria, I. I can't tell you how much I appreciate you sitting down with me, sharing all this information and being willing to help this industry be a resource. Thanks for being in this with us.
[00:17:55] Speaker C: Thank you so much, Hannah. Same to you.
