A client interested in an acquisition approached me about potentially doing the clinical due diligence.  He said the agency was fairly small but had a good hospitalization rate and was located in an ideal area for him.  I turned towards my computer and looked at a couple of numbers and told him that he shouldn’t buy the agency because they had a very long length of stay and he would be assuming a huge Medicare risk if he assumed the Provider Number. 

We spent about five minutes looking at publicly available information and told him that the agency had a very long length of stay and assuming the provider number would put him in harm’s way should anyone decide to have a look.  He was skeptical and wanted to how we could deduce that in five minutes.  The official word on the street is that we have super powers. 

Truthfully, the very same hospitalization rate that impressed him so much is not possible in the real world.  The agency had less than half of the Louisiana average rate and was located in a particularly destitute part of the 9th ward which will never recover from Katrina.  They are not healthy people by and large. 

We guessed that the agency under consideration had less than five admissions a month and that over 70 percent of the claims were for late episodes.  The client took much longer than we did but eventually our heroic super powers were confirmed. 

Are you with us?  An extraordinarily low hospitalization rate can only happen when there are very few admissions.  Here’s how the number is measured.   The denominator is the total number of home health stays in which the patient had to be admitted to the hospital within 60 days.  The numerator is the total number of stays that began within the past 12 months. 

Notice the word ‘episode’ doesn’t appear anywhere in the equation. 

So, one very simple way to lower your hospitalization rate is to keep patients on service indefinitely.  Every patient who is on service for greater than 60 days but less than 12 months is part of the overall calculation but will not be included in the number of hospitalizations; thus diluting the true and accurate number. 

If you are really looking for low hospitalization rates, give it a try.  If you like having an average HHRG around $1600.00, go for it.  Why be greedy?  The Zone Contractors are much nicer than we had anticipated when they visited a client office recently. We’d  invite you to tag along but the client mysteriously closed. 

Should you wish to be ethical and compliant, this post still has a place in the archives. Your marketers now have something to work with when your competitor has an unrealistically low hospitalization rate.  Without calling anyone fraudulent, an explanation of how admission rates affect the number can be counter offered along with a suggestion that the referral source inquire about average lengths of stay.  Its amazing how many people do not know that number even though they have memorized their agency’s acute care hospitalization rate out to two decimals. 

If your own hospitalization rates are extremely low, you might want to consider how fast we nailed that agency.  Either we really do have super powers or CMS can see what we saw.

The numbers are just the numbers.  Turn your attention to preventing avoidable hospitalizations and the numbers will fall into place.   If your rate is ten percent higher than the average and you investigated all hospitalizations and find they were all unavoidable, so be it.  On the other hand, if only one patient and their family suffered the stress of an unnecessary hospitalization, you have work to do. 

Call us if you need help buying a provider.  If you are selling, you can always create a conflict of interest by paying us large sums of money in advance of the buyer but buyer beware – we do not make it a point to avoid conflict.