Home Health Compensation Models: What is the Right Fit for You?

With the switch to the Patient-Driven Groupings Model (PDGM), it has never been more critical to manage your home health agency’s margins. One of the approaches taken by most agencies is to set up a pay structure that works for both the employees and the agency’s finances. When doing so, you should keep in mind that your agency’s compensation model should recognize efficiency instead of visit volume, promote employee retention, provide incentives for efficient agency practices, and be compliant with government laws and regulations. There are generally three types of pay structures currently being used in the home health industry. Learn their pros and cons to know the right fit for you.

1. Hourly Compensation

Under this model, rates are usually negotiated when an employee is hired. They vary according to the knowledge, experience, and tenure of the hire. This structure is also the easiest to set up and administer in terms of payroll processing. Employees are paid according to the hours they reported whether they are on field, in the office, or working from home. This could be an internal control concern however since it oftentimes relies on a trust system that could be problematic especially when paying overtime hours. This model also does not inherently encourage employees to be more efficient with their time, leading to agency’s incurring higher manpower costs and having to police productivity.

2. Salary Compensation

The salary compensation model allows agencies to set a fixed rate upon hiring based on the employee’s qualifications and experience. This rate does not change no matter how efficient the employee is. For agencies who have salaried and non-salaried staff on their payroll, they usually utilize their salaried employees first to make sure that the rate they pay is equal to the work performed. Its difference from the hourly compensation model is that there is no concept of an “end point” in the work hours of salaried employees. However, this is a double-edged sword as this also means that employees are not incentivized to deliver efficiency and quality. Thus, productivity would also have to be monitored and managed.

3. Per-Visit Compensation

Agencies vary in their application of the per-visit compensation model. Some take the form of flat rates while others may apply different rates per individual or category. It is a model which pays for what are considered to be “productive hours” as it encourages employees to make more visits. Most agencies think that it is an easy way to pay staff as you will only have to rely on visit volume. However, it is important to take into account the travel time if you are considering adopting this pay structure. This is because one staff may be able to make more visits than the other because of relatively short travel times. Care provision may also be visit-focused rather than patient-focused. As such, it is important to appropriately design and implement this model in accordance with your agency’s practices and current regulations.

These three models each have their own pros and cons. It is better to consider these and do your research before adopting or switching to a new compensation model. Make sure that it does not only address your financial bottom lines but that it also works for your employees. Whatever model you choose though, you can rely on Home Health Centre’s HR Module for accurate payroll processing based on your staff’s hourly, salary, and visit rates reflected in the system. You can also set up geographical references for convenient mileage rates tracking and monitoring for per-visit compensation models. Learn more about the HR Module by scheduling a demo with Data Soft Logic now.

References:

Donlan, Andrew. “Finding the Right Employee Compensation Model under PDGM.” Home Health Care News, 2 Aug. 2020, homehealthcarenews.com/2020/08/finding-the-right-employee-compensation-model-under-pdgm/. Accessed 15 May 2021.

Vance, Karen, and Vickie Morgan. Compensation Models in Home Health