Readers of our blogs know we cover a variety of accounting issues, often with a particular focus on healthcare entities such as hospitals, clinics, private health practices, and hospices. Hospice agencies are interesting in that they face unique financial challenges that require specialized accounting practices to ensure financial stability, transparency, and compliance. For one, hospices need to manage complex reimbursement structures so they can adapt to an ever-changing regulatory environment.
In that spirit, we are pleased to offer some advice to show how accounting elements play an important role in sustaining these compassionate end-of-life services. This guide will explore some key practices and concepts for successful hospice accounting with insights and examples to illustrate their importance.
Understanding Hospice Accounting
The Complex Landscape of Hospice Finances
One of the primary reasons healthcare businesses have more complex financial and accounting issues to contend with is that they exist in a highly regulated industry. Their financial operations often involve multiple revenue streams, such as through private pay insurance, Medicare, and Medicaid. Additionally, some of these businesses are classified as either for or non-profit entities. As such, this includes managing various financial accounts, such as ones for payroll and ones for donor funds (again, non-profits can receive payments considered donations), as well as other patient-specific accounts needing to be handled correctly to ensure accurate tracking and reporting of all transactions.
So, unlike many other business types, hospice care agencies have to manage funds that are tied to their patients’ care while adhering to strict reporting requirements.
Imagine ComfortCare Hospice, a medium-sized agency in Ohio, which receives Medicare reimbursements for over 80% of its patients. To maintain compliance, the agency must track every dollar spent on patient care, administration, and operational costs, ensuring all Medicare-related expenses align with federal guidelines. A misstep in reporting could lead to audits, fines, or even loss of funding, jeopardizing their ability to serve patients.
The Importance of Accountability
Accountability is the cornerstone of hospice accounting. Accurate bookkeeping is required for compliance purposes but also is important in that it builds trust with patients, their families, and other stakeholders. Hospice agencies must implement stringent checks and balances, plus regular audits need to be conducted either in-house or by a qualified outside accounting firm.
Best Practices in Hospice Accounting: Establishing Robust Internal Controls
So, what are some of the systems that can be used by hospices to create ongoing checks and balances that will minimize the risk of errors and, worse, fraud? Internal controls like having employees conduct dual signoffs for larger transactions are one. Another is segregating duties amongst the staff so that no single individual has control over financial operations without a check. (Financial institutions have such procedures known as the “five-day rule” and will mandate employees to take time off in order for their work to be reviewed by others within the firm.)
Leveraging Technology
In our articles, we often refer to the power of technology as one of the best ways to maximize capital to ensure operational efficiency and compliance. Hospice agencies are no different in that they can benefit from advanced e-billing and accounting processes.
Effective accounting software and systems are indispensable for hospice and home care providers. These tools enable them to manage financial information, track expenses, and ensure compliance; all this ultimately leads to more efficient and accurate financial management.
Benefits of effective software include:
- Accuracy: Calculations entries must align with regulatory standards.
- Efficiency: Automated repetitive tasks like payroll, billing, and financial reporting can be better managed.
- Ease of Use: Staff tools that allow for easy adoption without extensive initial and ongoing training are ideal.
We also want to mention a few options for software packages that hospices (and other healthcare facilities) can opt for. Here are some elements to consider and some actual products that can meet your needs:
- Functionality: Software should be able to handle all aspects of hospice accounting, such as payroll, billing, and financial reporting. For example, CareTrack Solutions offers comprehensive features that can be tailored to the needs of hospice providers.
- Ease of Use: It’s important to choose software that is user-friendly. This is key for staff with limited accounting experience. One option is EasyBooks. It is known for its intuitive interface, which makes it accessible to all team members regardless of their tech availability.
- Integration: Lots of businesses have multiple technology platforms working together. Look for programs that are known to integrate well with other systems like electronic medical records (EMRs). HealthSync provides good integration capabilities.
- Security: One of the most important things to consider is security. Any package needs to have strong features that protect sensitive patient medical and financial information. One option? QuickBooks. It offers advanced encryption and multi-factor authentication to safeguard these critical data.
Partnering with Qualified Accounting Experts
For some businesses (like hospice agencies), it makes most sense to outsource the multitude of bookkeeping and accounting tasks needed. These firms offer industry-specific expertise so that hospices can manage compliance, necessary audits, and, importantly, cash flow. One thing to keep in mind however–it’s still crucial for the administrators of these businesses to fully understand what constitutes proper reporting and financial management, even when working with external partners. It is, indeed, the partnership between accounting experts and management that makes full use of such relationships. With ongoing servicing, businesses can realize efficiencies, take timely actions related to regulatory changes, and respond to the various competitive pressures that confront such firms.
Audits. For some, the word instills fear or even dread. However, regular audits and financial reviews are essential. They not only identify areas for improvement and uncover inefficiencies, but they can also be necessary to adhere to various state and federal regulations. Again, having the right outside counsel can make the process smoother and more successful.
Financial Management for Hospice Agencies
Preparing for the Future
Effective financial management is about more than meeting immediate needs; it involves planning for sustainability and growth. Hospice agencies must prepare for fluctuations in funding, changes in reimbursement rates, evolving patient demographics and wishes, and end-of-life laws. Strategic planning can reduce stress around these issues.
For instance, in the United States, the thinking around end-of-life options is continually changing. Multiple states have implemented what are called “Death with Dignity” or medically assisted dying laws. As of November 2024, these include California, Colorado, Hawaii, Maine, Montana, New Jersey (amendment pending), New Mexico, Oregon, Vermont, Washington, and Washington, D.C. Each of these jurisdictions have authorized such practices under differing and often strict conditions. Other states such as New York and Michigan have measures pending.
What this also means is that these legislative changes can significantly impact hospice care agencies. These providers are or will likely need to increasingly integrate discussions about more “proactive” options for assisted medical aid in dying into their care plan so that patients are fully informed of all available choices. Obviously, this will necessitate more training for hospice staff as they will need to navigate a greater amount of legal, ethical and emotional complexities that would come with assisted dying. With more of these laws coming into play throughout the nation, patient decisions regarding hospice enrollment (with possible earlier admission and even more personalized end-of-life experiences) are to be considered.
Another issue currently happening is that the hospice industry may need to adapt even more to regulatory changes that are aimed at providing better care. For example, proposed legislation introduced by Democratic Representative Earl Blumenauer of Oregon entitled the Hospice Care Accountability, Reform, and Enforcement (Hospice CARE) Act, H.R. 9803, seeks to improve Medicare’s hospice benefits with payment reforms and stronger measures to ensure program integrity. What this entails is revising payments for routine home care,e increasing palliative treatments such as dialysis and chemotherapy, and,d importantly, offering home-based respite care. The bill also introduces what’s called “transitional inpatient respite care” to facilitate easier transitions for patients from hospitals to hospice at home, therefore bypassing skilled nursing facilities altogether.
The Act also has provisions that are said to help curb abuse and fraud within the system and sets a five-year moratorium on new hospice enrollments into the Medicare program (with conditional exceptions). Read more about these proposed changes in the Hospice Care Act that may greatly impact the delivery of such end-of-life care services.
Final Thoughts: Competitive Landscape and Paths to Success
Hospice accounting is a particularly nuanced field that requires an understanding of how expertise, technology, and strategic planning come together. In this spirit, we at Walters always strive to offer our readers the best practices in areas such as robust internal controls, software, and getting the most out of outside expertise. This is, in our opinion, one way to help readers (and clients) best tackle an increasingly competitive landscape. As hospice agencies are only growing in import in the country, and with many financial and regulatory uncertainties presenting themselves, we welcome your thoughts as to the best ways to cover the areas of most importance to you.
