Finding Opportunities to Succeed in an Uncertain Environment

April 27, 2012

2012 Annual ConferenceMissouri Alliance for Home Care 1

Finding Opportunities to Succeedin an Uncertain Environment

Presented by

Mark Sharp, CPABKD, LLPSpringfield, MOmsharp@bkd.com

Objectives

• Describe the current environment• Provide an overview of how to evaluate an

agency’s financial performance• Identify key drivers for revenues and expenses• Discuss best practices based on evidence-based

benchmarks

2

Finding Opportunities to Succeed in an Uncertain Environment

April 27, 2012

2012 Annual ConferenceMissouri Alliance for Home Care 2

The Environment

• Economy and Medicare in general• Industry profit margins• Influx of new providers• Industry compliance concerns

3

Medicare Home Health – Where Have We Been

4

Year

Change in Medicare Base Rate

Market Basket (Inflation in

Costs)

Loss in Rate Compared to

Market Basket

2008 0.25% 3.00% -2.75%2009 0.15% 2.90% -2.75%2010 1.75% 2.00% -0.25%2011 -5.19% 2.10% -7.29%2012 -2.39% 2.40% -4.79%

Finding Opportunities to Succeed in an Uncertain Environment

April 27, 2012

2012 Annual ConferenceMissouri Alliance for Home Care 3

Medicare Home Health – Where Have We Been

2008 2009 201015.2% 15.3% 15.8%

5

Medicare Home Health – Where Have We Been

2008 2009 201012.5% 13.2% 13.6%

6

Finding Opportunities to Succeed in an Uncertain Environment

April 27, 2012

2012 Annual ConferenceMissouri Alliance for Home Care 4

Medicare Home Health – Where Have We Been

2008 2009 20104.0% 5.3% 4.8%

7

Medicare Home Health – Where Are We Going

8

Year

ForecastedChange in Medicare Base Rate

ForecastedMarket Basket

(Inflation in Costs)

Forecasted Loss in Rate Compared to

Market Basket

2013 -3.00% 2.50% -5.50%2014 0.00% 2.50% -2.50%2015 -1.00% 2.50% -3.50%2016 -1.00% 2.50% -3.50%2017 -1.00% 2.50% -3.50%

Finding Opportunities to Succeed in an Uncertain Environment

April 27, 2012

2012 Annual ConferenceMissouri Alliance for Home Care 5

Your Margin

Can your margins sustain continued reductions or no

increases in Medicare rates?

9

Impact on Margins

Base2010 2011 2012 2013 2014 2015 2016 2017

Rate Change -5.19% -2.39% -3.00% 0.00% -1.00% -1.00% -1.00%

Inflation in Costs 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50%

Payment per episode $2,500 $2,370 $2,313 $2,244 $2,244 $2,222 $2,200 $2,178

Cost per episode $2,100 $2,153 $2,207 $2,262 $2,319 $2,377 $2,436 $2,497

Margin per episode $400 $217 $106 ($18) ($75) $(155) $(236) $(319)

Margin % 16.0% 9.2% 4.6% -0.8% -3.3% -7.0% -10.7% -14.6%

No Efficiency Gains

10

Finding Opportunities to Succeed in an Uncertain Environment

April 27, 2012

2012 Annual ConferenceMissouri Alliance for Home Care 6

Impact on Margins

Base2010 2011 2012 2013 2014 2015 2016 2017

Rate Change -5.19% -2.39% -3.00% 0.00% -1.00% -1.00% -1.00%

Inflation in Costs 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50%

Payment per episode $2,500 $2,370 $2,313 $2,244 $2,244 $2,222 $2,200 $2,178

Cost per episode $2,100 $2,100 $2,100 $2,100 $2,100 $2,100 $2,100 $2,100

Margin per episode $400 $270 $213 $144 $144 $122 $100 $78

Margin % 16.0% 11.4% 9.2% 6.4% 6.4% 5.5% 4.5% 3.6%

Efficiency Gains Offset Inflation in Costs

11

Strategies for Success

• Ensure revenue accuracy OASIS accuracy Episode mix Negotiate fair rates

• Manage costs Episode management Maximize efficiencies

• Front line staff• Back office staff

Reinvent care delivery12

Finding Opportunities to Succeed in an Uncertain Environment

April 27, 2012

2012 Annual ConferenceMissouri Alliance for Home Care 7

Evaluating Your Agency’s Performance

• Start at high level• Benchmark against others• Drill down where off targets/benchmarks• Study reasons behind performance indicators• Consider alternatives

13

Overall Profitability

• Consists of Revenues (payments) Expenses (costs) Payer mix Program mix

14

SHP Leader MissouriMedian Best 25% Median Best 25%

9.4% 16.6% 4.4% 11.3%

Finding Opportunities to Succeed in an Uncertain Environment

April 27, 2012

2012 Annual ConferenceMissouri Alliance for Home Care 8

Medicare Profitability

• Consists of Revenues (payments) Expenses (costs)

15

SHP Leader MissouriMedian Best 25% Median Best 25%

22.8% 31.7% 9.9% 24.9%

Revenue

• Medicare payments Tied to

• Clinical assessments• Service utilization

• Non-Medicare payments Negotiated rates

16

Finding Opportunities to Succeed in an Uncertain Environment

April 27, 2012

2012 Annual ConferenceMissouri Alliance for Home Care 9

Medicare Payment Per Episode

• Consists of Average case mix weight Episode adjustments Recert rate/episodes per patient

17

SHP Leader MissouriMedian Best 25% Median Best 25%

$3,018 $3,383 $2,462 $2,858

Average Case Mix Weight

• OASIS Accuracy Paint the right picture Team collaboration Clinician training Proper service mix

18

SHP Leader MissouriMedian Best 25% Median Best 25%

1.4185 1.6127 1.3103 1.4828

Finding Opportunities to Succeed in an Uncertain Environment

April 27, 2012

2012 Annual ConferenceMissouri Alliance for Home Care 10

LUPA Episode Adjustments

• Episode Management LUPAs happen, be compliant Proper discharge practices Good clinical outcomes

19

SHP Leader MissouriMedian Best 25% Median Best 25%

9.4% 5.1% 10.9% 7.6%

Episodes per Patient

• Episode Management Proper discharge practices Good clinical outcomes

20

SHP Leader MissouriMedian Best 25% Median Best 25%

1.4 1.8 1.4 1.7

Finding Opportunities to Succeed in an Uncertain Environment

April 27, 2012

2012 Annual ConferenceMissouri Alliance for Home Care 11

Direct Costs

• Related to service delivery Wages and benefits Contract services Travel Medical supplies

• Efficiency is the key Visits per episode Cost per visit

21

Indirect Costs

• Support costs Wages and benefits Contract fees Education Office rent Office equipment Office supplies, postage, etc.

• Administrative and capital

22

Finding Opportunities to Succeed in an Uncertain Environment

April 27, 2012

2012 Annual ConferenceMissouri Alliance for Home Care 12

Direct Cost Per Episode

• Consists of Visits per episode Direct cost per visit Medical supplies

23

SHP Leader MissouriMedian Best 25% Median Best 25%

$1,277 $1,054 $1,245 $1,020

Visits per Episode

• Episode Management Team collaboration Patient participation Manage care by the episode, not the visit Effective use of technology

24

SHP Leader MissouriMedian Best 25% Median Best 25%

16.1 14.0 15.9 13.8

Finding Opportunities to Succeed in an Uncertain Environment

April 27, 2012

2012 Annual ConferenceMissouri Alliance for Home Care 13

Direct Cost per Visit - Nursing

• Consists of Direct labor – wages, benefits and contract Direct travel

25

SHP Leader MissouriMedian Best 25% Median Best 25%

$71.83 $62.04 $88.54 $65.08

Direct Labor as a % of Revenue

• Consists of Wage rates Employee productivity Benefits package Contract rates

26

SHP Leader MissouriMedian Best 25% Median Best 25%

42.6% 35.1% 49.3% 40.2%

Finding Opportunities to Succeed in an Uncertain Environment

April 27, 2012

2012 Annual ConferenceMissouri Alliance for Home Care 14

Hourly Wage Rates - Nursing

• Salary, hourly or per-visit• Market appropriate• Experience mix

27

Region MissouriMedian Best 25% Median Best 25%

$27.69 $26.38 $28.77 $26.83

Nursing Hours per Nursing Visit

• Productivity standards Visits per day/week Caseload

• Accountability• Incentivize

28

SHP Leader MissouriMedian Best 25% Median Best 25%

2.1 1.7 2.5 1.7

Finding Opportunities to Succeed in an Uncertain Environment

April 27, 2012

2012 Annual ConferenceMissouri Alliance for Home Care 15

Benefits as a % of Salaries

• Market appropriate• Shop packages• Full time vs. part time• Use of contract services

29

SHP Leader MissouriMedian Best 25% Median Best 25%

17.2% 14.5% 18.6% 14.2%

Transportation as a % of Revenue

• Mileage, zone payment or fleet• GPS technology• Market appropriate

30

SHP Leader MissouriMedian Best 25% Median Best 25%

2.3% 0.7% 2.9% 1.7%

Finding Opportunities to Succeed in an Uncertain Environment

April 27, 2012

2012 Annual ConferenceMissouri Alliance for Home Care 16

Medical Supply Cost Per Episode

• Supply management• Secure storage

31

SHP Leader MissouriMedian Best 25% Median Best 25%

$35 $17 $30 $7

Indirect Cost per Episode

• Consists Administrative costs Capital costs

32

SHP Leader MissouriMedian Best 25% Median Best 25%

$838 $548 $676 $418

Finding Opportunities to Succeed in an Uncertain Environment

April 27, 2012

2012 Annual ConferenceMissouri Alliance for Home Care 17

Administrative Costs as a % of Revenue

• Consists of Indirect labor – wages, benefits and contract Employee productivity Back office management

33

SHP Leader MissouriMedian Best 25% Median Best 25%

32.1% 24.8% 31.9% 27.7%

Administrative Hours per Visit

• Productivity standards• Accountability• Incentivize

34

SHP Leader MissouriMedian Best 25% Median Best 25%

1.1 0.8 1.1 0.9

Finding Opportunities to Succeed in an Uncertain Environment

April 27, 2012

2012 Annual ConferenceMissouri Alliance for Home Care 18

Capital Costs as a % of Revenue

• Appropriate space• Proper equipment/technology utilization

35

SHP Leader MissouriMedian Best 25% Median Best 25%

2.8% 1.8% 3.3% 2.1%

Summary

• Managing financial performance critical in current environment

• Study current state of your revenues and expenses

• Drill down to identify revenue accuracy and cost reduction opportunities

• Nothing is off the table• Reinvent your operations

36

Finding Opportunities to Succeed in an Uncertain Environment

April 27, 2012

2012 Annual ConferenceMissouri Alliance for Home Care 19

4/23/2012

2010 Medicare Home Health Operations Dashboard ReportPeer Group Data1 State Data1 National Data1

All Missouri All United StatesMedicare Certified Medicare Certified

Measure Agencies Agencies

Lower Upper Lower Upper Lower UpperQuartile Median Quartile Quartile Median Quartile Quartile Median Quartile

Number of Agencies Total agencies in peer group data: 71 Total agencies in state data: 161 Total agencies in national data: 9,415Service Delivery Dashboards

Total home health visits 14,933 21,445 37,769 3,660 7,009 14,321 4,736 10,222 21,145 Total visits for other services4 - - - - - - - - - Total net patient revenue4 2,419,146$ 4,591,637$ 8,390,642$ 895,927$ 1,666,987$ 3,445,994$ 759,246$ 1,615,741$ 3,503,957$ Total Medicare episodes 610 1,082 1,699 189 331 665 179 385 809 Total Medicare home health revenue 1,700,590$ 2,729,136$ 4,427,432$ 426,783$ 817,574$ 1,582,032$ 470,282$ 1,035,316$ 2,218,939$ Total home health unduplicated patients4 528 1,036 1,644 163 285 829 119 274 674 Total unduplicated patients for other services4 - - - - - - - - - Payer mix, measured on total visits

Medicare 60.9% 76.8% 93.8% 65.9% 78.5% 87.3% 62.3% 85.3% 99.7%Other 6.3% 23.2% 39.1% 12.7% 21.5% 34.1% 0.3% 14.7% 37.7%

Payer mix, measured on unduplicated patients4

Medicare 54.0% 71.8% 95.2% 61.9% 77.4% 88.0% 60.9% 85.3% 100.0%Other 4.9% 28.2% 46.0% 12.0% 22.6% 38.1% 0.0% 14.7% 39.1%

Visits per Medicare episode (all episodes)Skilled nursing 7.1 8.1 9.4 6.5 7.9 9.2 7.0 8.5 11.1 Physical therapy 3.5 4.6 6.2 3.7 4.7 6.1 2.9 4.3 6.1 Occupational therapy 0.6 1.1 1.8 0.3 0.7 1.4 0.2 0.6 1.3 Speech therapy 0.1 0.1 0.2 0.0 0.1 0.2 - 0.1 0.2 Medical social services 0.1 0.1 0.2 - 0.0 0.1 - 0.1 0.2 Home health aide 0.8 1.5 2.8 0.9 1.7 2.6 0.9 2.1 4.2

Total visits per episode 14.0 16.1 18.6 13.8 15.9 17.9 14.6 17.5 21.5 Total therapy visits per episode 4.3 5.8 8.1 4.5 5.6 7.5 3.5 5.3 7.7

Skilled nursing 7.7 8.7 10.3 6.9 8.5 9.9 7.7 9.1 11.8 Physical therapy 3.8 5.1 6.7 4.1 5.2 6.4 3.1 4.8 6.7 Occupational therapy 0.7 1.2 2.0 0.3 0.8 1.6 0.2 0.7 1.5 Speech therapy 0.1 0.1 0.3 0.0 0.1 0.2 - 0.1 0.2 Medical social services 0.1 0.1 0.2 - 0.0 0.1 - 0.1 0.2 Home health aide 0.9 1.8 3.1 1.1 1.8 2.9 1.0 2.3 4.6

Total visits per episode 15.5 17.7 20.0 15.5 17.4 19.8 16.1 19.0 22.9 Total therapy visits per episode 5.0 6.4 8.7 4.9 6.4 8.2 3.8 5.9 8.4

Visits per Medicare LUPA episode 2.6 2.7 2.8 2.6 2.7 2.9 2.5 2.7 2.9

Health Care Group | www.bkd.com Questions? Contact Mark Sharp at msharp@bkd.com.

1 of 7

2010 SHP Benchmark Leaders

Visits per Medicare full episode (including outliers)

4/23/2012

2010 Medicare Home Health Operations Dashboard ReportPeer Group Data1 State Data1 National Data1

All Missouri All United StatesMedicare Certified Medicare Certified

Measure Agencies Agencies

Lower Upper Lower Upper Lower UpperQuartile Median Quartile Quartile Median Quartile Quartile Median Quartile

2010 SHP Benchmark Leaders

Service Delivery Dashboards (Continued)Number of episodes per Medicare patient 1.2 1.4 1.8 1.3 1.4 1.7 1.3 1.6 2.3 Estimated number of hours per visit

Direct nursing service (based on SN visits) 1.7 2.1 2.6 1.7 2.5 3.2 1.3 2.0 2.7 Home health aide service (based on HHA visits) 1.2 1.7 2.2 1.1 1.8 2.5 1.1 1.6 2.3 Administrative staff 0.8 1.1 1.5 0.9 1.1 1.8 0.9 1.2 1.8 Total staff 2.5 3.2 3.6 2.7 3.4 4.6 2.4 3.1 4.2

Estimated number of visits per day per FTE5

Direct nursing service 3.4 4.2 5.3 2.6 3.5 5.1 3.2 4.5 6.7 Physical therapy service 4.5 5.6 7.2 4.5 6.0 7.8 4.5 6.1 8.6 Occupational therapy service 3.9 5.3 6.7 3.8 5.8 7.3 3.9 5.7 8.3 Speech therapy service 3.0 5.6 6.8 3.1 5.0 7.2 3.4 5.2 7.6 Medical social services 1.4 3.2 6.1 1.3 2.2 5.1 1.1 2.8 5.9 Home health aide service 3.9 4.9 6.7 3.4 4.8 7.6 3.8 5.4 7.8

Operating DashboardsCost Per VisitSkilled nursing

Salaries4 47.97$ 55.40$ 73.56$ 48.46$ 60.94$ 78.90$ 34.56$ 51.04$ 67.71$ Employee benefits4 6.87 8.74 11.80 6.08 10.77 19.76 1.93 6.28 10.99 Contract services4 - - 0.13 - - 0.65 - - 1.63

Total labor 57.39 69.98 92.57 58.58 83.98 107.62 47.46 65.16 88.96 Transportation - 3.61 5.67 - 5.33 7.67 - - 4.59 Other direct costs - - - - - - - - -

Total direct care costs 62.04 71.83 96.78 65.08 88.54 114.51 49.44 68.31 93.61 Indirect agency costs 38.24 55.43 73.09 30.31 47.99 64.25 38.39 57.10 84.06

Total agency cost per visit 110.93 139.28 162.27 111.34 136.32 167.84 102.43 130.98 168.46 Provider-based overhead costs3 35.98 45.56 78.65 41.13 65.24 78.64 34.57 49.98 70.99

Total cost per visit 117.45$ 142.19$ 166.42$ 118.90$ 152.92$ 207.47$ 105.28$ 136.17$ 178.91$

Health Care Group | www.bkd.com Questions? Contact Mark Sharp at msharp@bkd.com.

2 of 7

4/23/2012

2010 Medicare Home Health Operations Dashboard ReportPeer Group Data1 State Data1 National Data1

All Missouri All United StatesMedicare Certified Medicare Certified

Measure Agencies Agencies

Lower Upper Lower Upper Lower UpperQuartile Median Quartile Quartile Median Quartile Quartile Median Quartile

2010 SHP Benchmark Leaders

Operating Dashboards (Continued)Cost Per Visit (Continued )Physical therapy

Salaries4 15.01$ 44.11$ 61.71$ -$ 31.43$ 56.02$ -$ 3.89$ 55.83$ Employee benefits4 0.76 6.21 9.49 - 3.45 11.00 - - 7.74 Contract services4 2.37 16.70 58.60 2.30 25.03 62.93 5.05 52.25 78.40

Total labor 63.96 75.20 85.69 58.56 69.89 82.07 65.33 78.83 93.09 Transportation - 1.16 3.41 - 1.74 6.17 - - 2.43 Other direct costs - - - - - - - - -

Total direct care costs 65.86 76.44 88.04 61.42 73.56 87.67 67.03 80.63 95.26 Indirect agency costs 39.53 53.60 72.87 21.36 38.02 60.01 40.97 66.19 106.28

Total agency cost per visit 109.69 134.17 156.33 93.14 117.25 148.74 118.75 150.92 195.61 Provider-based overhead costs3 18.92 42.97 55.45 27.74 38.85 53.03 26.65 38.68 53.70

Total cost per visit 112.74$ 140.40$ 169.40$ 98.98$ 130.22$ 160.71$ 124.13$ 155.59$ 200.49$ Occupational therapy

Salaries4 0.93$ 44.44$ 63.72$ -$ 25.00$ 61.03$ -$ -$ 57.47$ Employee benefits4 - 5.76 10.19 - - 10.76 - - 7.76 Contract services4 - 11.14 38.13 0.41 31.58 59.94 - 46.15 75.71

Total labor 64.12 73.48 88.68 57.12 70.30 93.93 60.77 76.16 91.53 Transportation - 0.80 3.53 - - 6.52 - - 2.41 Other direct costs - - - - - - - - -

Total direct care costs 65.10 74.74 88.68 59.91 75.59 99.59 62.23 78.23 94.42 Indirect agency costs 35.82 54.07 76.66 23.98 42.71 65.83 42.33 67.60 108.48

Total agency cost per visit 101.04 134.49 171.00 88.77 126.51 160.10 117.21 148.54 192.72 Provider-based overhead costs3 21.41 41.95 64.56 30.76 39.32 64.66 26.39 39.56 56.41

Total cost per visit 109.82$ 138.63$ 171.00$ 99.08$ 133.82$ 180.55$ 121.73$ 153.42$ 198.96$

Health Care Group | www.bkd.com Questions? Contact Mark Sharp at msharp@bkd.com.

3 of 7

4/23/2012

2010 Medicare Home Health Operations Dashboard ReportPeer Group Data1 State Data1 National Data1

All Missouri All United StatesMedicare Certified Medicare Certified

Measure Agencies Agencies

Lower Upper Lower Upper Lower UpperQuartile Median Quartile Quartile Median Quartile Quartile Median Quartile

2010 SHP Benchmark Leaders

Operating Dashboards (Continued)Cost Per Visit (Continued )Speech therapy

Salaries4 -$ 21.02$ 68.81$ -$ -$ 58.98$ -$ -$ 59.99$ Employee benefits4 - 0.07 9.84 - - 9.56 - - 7.75 Contract services4 - 38.09 65.07 - 50.61 71.14 - 51.21 80.00

Total labor 59.65 76.60 98.98 58.49 74.42 98.84 62.11 80.00 100.00 Transportation - - 5.03 - - 7.43 - - 2.33 Other direct costs - - - - - - - - -

Total direct care costs 59.65 77.90 101.24 63.28 75.89 105.28 64.44 81.98 102.58 Indirect agency costs 37.92 58.86 85.43 25.89 44.54 76.32 42.13 68.76 108.42

Total agency cost per visit 98.84 128.75 196.37 93.95 131.21 174.28 118.20 155.00 204.27 Provider-based overhead costs3 25.20 31.02 52.78 28.29 43.92 65.86 26.07 40.04 57.09

Total cost per visit 103.96$ 131.96$ 196.37$ 104.86$ 144.73$ 195.51$ 123.00$ 160.37$ 209.35$ Medical social services

Salaries4 8.00$ 60.93$ 89.28$ 29.65$ 74.00$ 98.02$ -$ 36.48$ 80.55$ Employee benefits4 - 9.45 14.60 0.57 9.91 21.49 - 0.40 12.38 Contract services4 - - 35.84 - - 7.45 - - 75.00

Total labor 68.87 88.56 119.29 68.53 95.34 154.85 66.32 85.72 125.00 Transportation - 3.63 7.86 - 2.89 9.65 - - 4.80 Other direct costs - - - - - - - - -

Total direct care costs 71.87 95.39 142.77 73.83 104.41 173.76 69.20 89.06 130.00 Indirect agency costs 53.57 81.13 130.49 41.91 72.31 115.03 54.11 88.35 142.72

Total agency cost per visit 131.30 176.11 299.23 131.27 187.71 273.28 135.51 187.57 263.91 Provider-based overhead costs3 51.06 71.84 112.71 39.21 93.38 173.01 39.97 68.78 117.01

Total cost per visit 146.23$ 188.80$ 299.23$ 134.83$ 192.81$ 299.00$ 139.26$ 191.36$ 271.85$

Health Care Group | www.bkd.com Questions? Contact Mark Sharp at msharp@bkd.com.

4 of 7

4/23/2012

2010 Medicare Home Health Operations Dashboard ReportPeer Group Data1 State Data1 National Data1

All Missouri All United StatesMedicare Certified Medicare Certified

Measure Agencies Agencies

Lower Upper Lower Upper Lower UpperQuartile Median Quartile Quartile Median Quartile Quartile Median Quartile

2010 SHP Benchmark Leaders

Operating Dashboards (Continued)Cost Per Visit (Continued )Home health aide

Salaries4 15.92$ 20.27$ 27.55$ 14.96$ 22.44$ 31.54$ 13.10$ 19.58$ 27.04$ Employee benefits4 2.31 3.06 6.20 2.09 3.59 6.13 0.15 2.45 4.37 Contract services4 - - - - - - - - -

Total labor 18.98 24.97 36.81 21.05 29.39 43.96 18.00 25.13 35.46 Transportation - 3.59 5.32 - 3.56 7.17 - - 4.27 Other direct costs - - - - - - - - -

Total direct care costs 23.91 28.65 38.69 24.60 33.87 51.46 20.07 27.67 38.61 Indirect agency costs 15.10 21.31 31.52 9.90 20.40 30.77 14.95 24.19 38.90

Total agency cost per visit 42.47 53.80 65.63 40.28 57.87 76.99 40.00 54.08 75.53 Provider-based overhead costs3 6.47 15.03 27.62 15.51 24.55 31.91 11.93 18.81 27.81

Total cost per visit 42.47$ 55.41$ 72.81$ 42.55$ 63.36$ 89.93$ 41.12$ 56.21$ 79.09$ Overall agency cost per visit (all disciplines) 104.98$ 128.14$ 156.84$ 114.14$ 139.84$ 169.21$ 100.76$ 129.75$ 165.77$ Medical Supplies

Non-routine medical supplies 1.32$ 2.62$ 4.12$ 1.35$ 2.64$ 4.54$ 0.95$ 2.20$ 4.08$ Medicare Episode PaymentsEstimated average case-mix weight2 1.2549 1.4185 1.6127 1.1944 1.3103 1.4828 1.1531 1.3151 1.5306 Average payment ratio2 1.1321 1.2866 1.4847 1.0542 1.1644 1.3390 1.0721 1.2283 1.4354 Medicare episode mix by payment type

Unadjusted episodes 83.7% 87.2% 90.7% 82.5% 85.8% 90.2% 83.1% 87.8% 92.2%LUPA episodes 5.1% 9.4% 12.0% 7.6% 10.9% 14.1% 3.3% 6.8% 11.4%PEP episodes 1.3% 2.1% 3.0% 1.3% 2.1% 2.7% 1.0% 1.9% 3.2%Outlier episodes 0.2% 0.5% 2.3% 0.0% 0.4% 1.5% 0.0% 0.8% 3.7%

Average payment per episode by payment typeUnadjusted episodes 2,907.69$ 3,366.06$ 3,603.66$ 2,443.05$ 2,750.43$ 3,126.30$ 2,552.62$ 3,004.20$ 3,495.32$ LUPA episodes 299.70 334.17 384.22 290.65 314.00 343.16 290.11 326.47 369.73 PEP episodes 996.77 1,269.89 1,511.62 795.74 1,099.81 1,341.54 953.42 1,221.09 1,555.94 Outlier episodes 3,135.44 3,790.00 5,539.93 2,506.95 2,972.00 3,530.50 2,997.50 3,887.67 5,761.07

Health Care Group | www.bkd.com Questions? Contact Mark Sharp at msharp@bkd.com.

5 of 7

4/23/2012

2010 Medicare Home Health Operations Dashboard ReportPeer Group Data1 State Data1 National Data1

All Missouri All United StatesMedicare Certified Medicare Certified

Measure Agencies Agencies

Lower Upper Lower Upper Lower UpperQuartile Median Quartile Quartile Median Quartile Quartile Median Quartile

2010 SHP Benchmark Leaders

Operating Dashboards (Continued)Medicare Episode ProfitabilityAverage payment per episode 2,629$ 3,018$ 3,383$ 2,172$ 2,462$ 2,858$ 2,363$ 2,797$ 3,288$ Direct costs per episode

Salaries4 614 797 1,061 619 762 973 530 749 1,009 Employee benefits4 94 127 175 87 141 239 50 102 169 Contract services4 46 144 287 31 137 352 54 222 477

Total labor 984 1,189 1,363 921 1,148 1,383 891 1,144 1,436 Transportation 24 55 75 5 71 106 - 19 70 Other direct costs - - 1 - - - - - - Nonroutine supplies - 17 35 - 7 30 - 8 28

Total direct care costs per episode 1,054 1,277 1,468 1,020 1,245 1,531 1,014 1,256 1,547 Direct profit (loss) per episode 1,329 1,676 2,053 839 1,175 1,566 1,116 1,513 1,913 Direct profit (loss) margin per episode 50.8% 58.1% 63.7% 36.3% 48.3% 59.9% 45.4% 55.6% 63.1%Indirect agency costs per episode 548 838 1,243 418 676 1,048 684 1,037 1,589

Total agency cost per episode 1,873 2,237 2,553 1,657 2,002 2,398 1,857 2,325 2,941 488 809 1,002 122 509 805 45 454 825

17.9% 25.5% 32.9% 5.1% 19.8% 32.1% 1.6% 16.9% 29.3%Provider-based overhead costs per episode3 358 635 833 489 721 923 473 662 890 Total costs per episode 2,023 2,309 2,613 1,895 2,246 2,650 1,970 2,418 3,013

Overall profit (loss) per episode 352 681 995 (218) 298 644 (64) 373 765 Profit (loss) margin per episode 14.1% 22.8% 31.7% -9.3% 9.9% 24.9% -2.4% 13.6% 26.8%

Health Care Group | www.bkd.com Questions? Contact Mark Sharp at msharp@bkd.com.

6 of 7

Profit (loss) per episode based on total agency costsProfit (loss) margin per episode based on total agency costs

4/23/2012

2010 Medicare Home Health Operations Dashboard ReportPeer Group Data1 State Data1 National Data1

All Missouri All United StatesMedicare Certified Medicare Certified

Measure Agencies Agencies

Lower Upper Lower Upper Lower UpperQuartile Median Quartile Quartile Median Quartile Quartile Median Quartile

2010 SHP Benchmark Leaders

Operating Dashboards (Continued)Gross profit (loss) margin4 39.0% 52.0% 60.0% 29.5% 41.0% 53.8% 39.0% 52.0% 61.0%Agency profit (loss) margin4 3.9% 9.4% 16.6% -1.5% 4.4% 11.3% -1.4% 4.8% 13.6%Salaries as a % of total costs4 53.1% 59.9% 66.2% 51.7% 57.2% 64.8% 47.7% 57.3% 65.2%Salaries as a % of total revenue4 43.7% 53.2% 60.8% 47.6% 55.0% 65.3% 42.6% 53.1% 63.3%Employee benefits as a % of total salaries4 14.5% 17.2% 20.2% 14.2% 18.6% 26.2% 11.1% 15.3% 20.0%

62.4% 69.2% 77.9% 63.1% 70.9% 78.3% 54.8% 66.5% 75.5%51.5% 62.0% 72.1% 56.6% 65.6% 79.8% 45.9% 59.7% 71.9%2.8% 7.7% 12.5% 1.8% 4.9% 9.9% 3.1% 9.9% 20.5%2.1% 6.0% 11.7% 1.9% 5.5% 10.9% 3.0% 9.7% 19.9%

74.7% 81.1% 85.6% 74.5% 82.7% 87.4% 72.4% 80.0% 85.8%62.1% 71.7% 76.4% 64.8% 73.3% 83.5% 62.6% 73.1% 82.7%40.8% 51.7% 59.2% 44.2% 51.6% 60.1% 39.4% 50.5% 62.7%35.1% 42.6% 54.3% 40.2% 49.3% 61.5% 36.3% 46.2% 60.3%21.0% 27.2% 33.9% 14.9% 22.1% 29.1% 19.5% 27.6% 38.6%16.4% 21.9% 32.1% 15.7% 21.6% 30.0% 17.1% 26.2% 38.7%2.0% 2.9% 3.8% 2.1% 4.0% 5.5% 0.0% 1.9% 3.8%0.7% 2.3% 3.2% 1.7% 2.9% 4.4% 0.0% 1.5% 3.2%

12.5% 16.9% 22.9% 7.1% 13.6% 22.9% 11.9% 17.9% 26.0%10.5% 15.3% 20.8% 11.9% 17.4% 25.8% 12.4% 18.2% 26.3%30.0% 37.3% 48.4% 25.2% 31.5% 40.0% 30.0% 39.5% 48.8%24.8% 32.1% 42.5% 27.7% 31.9% 40.4% 28.3% 38.4% 48.2%

Capital & plant costs as a % of total cost4 2.5% 3.2% 4.0% 2.4% 3.4% 5.3% 2.1% 3.3% 5.0%Capital & plant costs as a % of total revenue4 1.8% 2.8% 3.6% 2.1% 3.3% 5.5% 1.9% 3.1% 4.8%Days in accounts receivable4 37.9 49.1 76.6 43.2 66.4 97.2 36.4 51.3 75.0 Current ratio4 1.7 3.0 5.9 0.9 2.0 5.8 1.0 1.9 4.7 Quick ratio4 1.3 2.3 3.3 0.8 1.6 3.2 0.9 1.6 3.7 Return on equity4 2.1% 14.5% 56.0% 0.1% 12.2% 44.7% -1.9% 20.0% 87.2%Return on assets4 1.8% 13.3% 42.2% -1.4% 8.9% 25.7% -2.7% 11.5% 55.4%

1Data compiled using all Medicare cost reports available from CMS with fiscal years ending in 2010.2Estimated based on payment rates effective for the location of the agency rather than service area.3Dashboard indicator only applies to hospital-based agencies, and accounts for costs allocated to the agency from the provider.4Dashboard indicator only includes freestanding agencies as hospital-based agency data is not available from CMS data sets.5Estimated based on 230 work days per year.

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Total salaries & employee benefits as a % of total costs4

Administrative & general costs as a % of total revenue4

Purchased services as a % of total revenue4

Transportation as a % of total revenue4

Administrative & general costs as a % of total cost

Other costs as a % of total costs

Total labor as a % of total revenue4Total labor as a % of total costs

Purchased services as a % of total costs4

Other costs as a % of total revenue4

Transportation as a % of total costs

Total salaries & employee benefits as a % of total revenue4

Direct labor as a % of total costs4

Direct labor as a % of total revenue4

Indirect labor as a % of total costs4

Indirect labor as a % of total revenue4