Labor costs are rising – and the HME industry is feeling the impact.
Providers are understaffed and under pressure to retain workers while growing revenues. As HomeCare Magazine’s latest salary survey reveals, 44% of providers did not hire new staff over the past year. Of these providers, 60% gave raises to employees and 18% froze their salaries.
Are these fixed or increasing labor costs negatively affecting your business? If so, let’s look at the origins of these costs before working towards a solution.
The U.S. has added 18 million jobs since 2010, tightening the labor market and increasing labor costs. According to the Bureau of Labor Statistics, employment costs have risen an average of 2.1% per year from 2010 to 2016, with a 2.5% increase in 2017 and a 2.6% increase in 2018. There is also active legislation in Congress to increase the federal minimum wage to $15 per hour, more than double the current $7.25 per hour.
Health care, including HME, is one of the most affected industries.
The demand for homecare continues to grow, but providers are being stretched thin by reimbursement cuts from the industry’s major payers, who are generally price-matching Medicare’s competitive bidding program. In turn, these providers face pressure to reduce labor costs while retaining staff or even increasing wages to recruit new employees.
“Unfortunately, low home health care reimbursement rates are directly impacting…wages and therefore the industry’s ability to effectively recruit,” said David Baiada, a participant in HomeCare Magazine’s salary survey.
What, then, can be done to combat these rising costs?
Fourteen percent of providers surveyed added intake assistance, human resources and marketing teams, payer relations, or insurance verification to offset costs. Nine percent of providers, however, turned to another option: outsourcing.
What is outsourcing? Why are providers turning to it to reduce labor costs?
Business process outsourcing (BPO), as it is officially known, reduces or eliminates large departments such as intake, billing, collections, and deliveries. In doing so, HME providers can cut labor costs and focus more on what matters: quality patient care. Outsourcing can also lower your overall costs. It provides better visibility into your processes and better tools for your business.
There are typically two outsourcing options: full service billing and staff augmentation.
Full-service billing is a suite of services that outsources the management of your entire billing function, thus cutting your labor costs significantly. With this option, the outsourcing partner you select is paid on a percentage of collections. What does that mean for you? Your partner only gets paid when you do. Staff augmentation, on the other hand, brings low-cost assistance to your existing front or back-office team.
Which option is right for your HME business? Keep up with our blog as we dive more deeply into these options soon. Until then, take our quick HME Health Check to see where your business stands.
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Prochant helps HME providers become more profitable by combining superior billing and process outsourcing with highly-skilled specialists. We audit existing front and back-office processes, rapidly implement changes, and conduct proactive analytics to enable providers to consistently exceed industry benchmarks. Headquartered in Charlotte, North Carolina, our clients include leading medical equipment providers and health systems.