Every home health agency that bills Medicare files an annual cost report, and those reports are published. They show revenue, operating expenses and visit counts for each agency, which means your full economics and every competitor's are a matter of public record.
Preferred Care took $33,090,387 of net patient revenue in the most recent reporting year against $36,148,779 of operating expenses. That is a loss of $3,058,392 on 164,298 visits.
The obvious explanation would be that you are underpaid. The record says the opposite. You collect $201.40 a visit where the middle comparable Florida agency collects $167.06. The revenue side of your business is performing better than almost anyone's. This review is about the other side, tests six responses, and rejects four.
When an agency of this size loses money, the usual explanation is payer mix or rates. It is worth ruling that out first, because if it were true almost nothing else in this report would matter.
It is not true. Your revenue per visit is 21% above the middle comparable agency in Florida. Whatever your billing, coding and payer mix are doing, they are doing it better than most. The loss is entirely on the cost side.
So the question this report has to answer is narrow: is that cost difference something about the work you do, or something about how you do it? Those have completely different answers, and Part 2 separates them.
The first objection to any comparison like this is that the other agencies are not really comparable. So here is the test, applied before any figure was examined. A Florida agency, with net patient revenue between $13.2m and $82.7m, meaning roughly 40% to 250% of yours, reporting more than 2,000 visits.
Of the 27 agencies that passed, 2 were removed for reporting more than $500 of revenue per visit, which is not a plausible home health figure and almost certainly means their visit counts are misreported: USA Home Health Services at $961 a visit, and Primary Medical Staffing at $3,477 a visit. That leaves 25.
| Measured per visit | Preferred Care | Middle comparable agency | Difference |
|---|---|---|---|
| Net patient revenue | $201.40 | $167.06 | you collect $34.34 more |
| Total operating expenses | $220.02 | $153.18 | you spend $66.84 more |
| What is left on each visit | −$18.61 | +$13.88 | a gap of $32.49 a visit, or $5,338,848 a year |
| Agencies making money | 15 of 25 |
The strongest argument against everything above is that your patients need more expensive care. A visit from a registered nurse costs more than a visit from a home health aide, so an agency doing more skilled nursing should cost more per visit. If that is what is happening here, the cost gap is not a problem at all. It is the shape of your caseload.
We tested this properly rather than eyeballing it. Across the 25 comparable agencies, each additional percentage point of registered-nurse visits raises cost per visit by about $3.05. Applying that relationship to your own nursing mix predicts a cost of $144.93 a visit. You are at $220.02. The mix of work explains none of the gap, and if anything it deepens it.
Each response below was priced against the same public record. Because your revenue per visit is already ahead of the field, every play that works by raising revenue is worth less to you than it would be to almost any other agency on the list.
| Forward play | What the record prices it at | Verdict |
|---|---|---|
| Find where the $66.84 sits, by branch and by clinician, before changing anything | Worth $164,298 a year per dollar removed. The gap is 44% above the middle agency, which is too large to be spread evenly, and nothing public shows which cost line carries it. | Pursue |
| Raise visits per clinician per day | The most likely single cause. Cost per visit rises mechanically when the visit count falls and staffing does not. Testable in a week from your own scheduling data. | Second |
| Re-examine employed against contracted staffing | Could account for a real share of the gap, as Part 5 sets out. But it is a structural decision with consequences for continuity of care, so it is not a first move. | Hold |
| Improve billing, coding or payer mix | You already collect $201.40 a visit against a middle of $167.06. This is the part of your business performing best. Effort here earns less than anywhere else on this list. | Rejected |
| Grow volume to spread fixed costs | You lose $18.61 on every visit today. Until cost per visit falls below revenue per visit, each additional visit makes the loss larger rather than smaller. | Rejected |
| Shift toward more profitable visit types | Your mix is already cheaper than your peers, with more licensed practical nurse visits and fewer registered nurse visits. There is no favourable mix shift left to make. | Rejected |
| Renegotiate Medicare rates | Medicare home health payment is set nationally by formula, not agency by agency, so there is nothing to negotiate. Your rate advantage already comes from case mix and coding rather than from any rate. | Rejected |
The arithmetic is deliberately simple, and it holds your volume and your revenue exactly where they are. The only thing that changes is cost per visit.
| If your cost per visit were | Total operating expenses | Result on today's revenue | Change from today |
|---|---|---|---|
| $220.02, as today | $36,148,779 | −$3,058,392 | your position now |
| $200.00 | $32,859,600 | +$230,787 | a $3.3m swing |
| $180.00 | $29,573,640 | +$3,516,747 | halfway to the middle agency |
| $153.18, the middle agency | $25,167,168 | +$7,923,219 | full parity |
For scale: every $1 you take off cost per visit is worth $164,298 a year at your current volume. That is the number to hold against any proposed change.
We tested the discipline mix and it argues against the defence rather than for it. But the discipline of the clinician is a crude measure of how ill a patient is. Two registered-nurse visits can differ enormously in length, travel and complexity, and none of that appears in the cost report. If your referral sources send materially more complex patients, some of the gap is real work rather than waste. That would show in your own episode-level data and in nothing we can see.
An agency that employs its clinicians carries benefits, overheads and idle time that an agency using contractors does not. The two models produce very different cost-per-visit figures for identical care, and the cost report does not reliably separate them. If most of your peer group contracts and you employ, part of the gap is a structural choice rather than an inefficiency, and it is one with real advantages in continuity and quality.
Cost per visit is total cost divided by visits. It rises just as fast when the numerator is normal and the denominator is small. An agency staffed for more visits than it currently performs will show exactly this pattern, and the answer would be scheduling and density rather than anything to do with pay rates or purchasing. This is the explanation we would look at first, and it is answerable from your own scheduling data in a week.
The standard explanation for an agency losing money against comparable agencies is Medicare Advantage. MA patients run deeply negative margins for home health while traditional Medicare runs slightly positive, so an agency heavy in MA can look inefficient when it is really being paid less by somebody else's contract.
That is not your situation. The same cost reports carry traditional Medicare visits separately from total visits, and yours are 64.0% of the total against a peer median of 42.0%. You carry LESS Medicare Advantage exposure than the agencies you are being compared against, not more.
This is the first thing to look at, because it is the most likely explanation and the cheapest to check. Take total visits by branch and divide by clinical staff actually working. If one branch is materially below the others, you have found a large part of $66.84 without touching anyone's pay.
Split the same $36.1m the way the cost report cannot: by location and by kind of clinician. A gap this size is rarely spread evenly across an organisation. Until it is split, any cost decision is being made blind.
In home health the largest hidden cost is usually paid time that is not a visit: driving, documentation and gaps between appointments. Neither appears anywhere in a cost report. If your clinicians cover more ground per visit than your peers, that alone can produce a difference of this size.
If weeks 1 to 6 show utilisation and travel are in line, the gap is in what you pay for staff, supplies or overhead, and that becomes the next question. Doing it in this order matters, because reducing pay rates in a market with a clinician shortage is the one move that is genuinely hard to reverse.
We are Scalable OS. We work with public records: Medicare cost reports, provider files and quality records. From those we reconstruct from them what is actually happening inside a business and the market around it. Then we send that to the business, unsolicited, before there is any relationship at all.
The reason is straightforward. The analysis in this document is the kind that normally arrives after a retainer, a discovery phase and a scoping call, which means most agency owners never see it at any point in their working lives. It is not expensive to produce, because the underlying records are public and free. It is that nobody has a reason to produce it for you until you are already a client. We would rather demonstrate the work than describe it.
There is a second reason, and it is the one that decided the shape of this document: nothing in it was requested. A search engine or an assistant answers the question you thought to ask. This report exists to raise the ones nobody inside your business has had a reason to ask, because your own cost report is filed once a year, read by nobody, and never placed next to anyone else's.
That is also the limit of it. A cost report shows what a visit cost. It never shows why. Four things would turn this from a diagnosis into a plan, and all four are reports you can already run:
Send us The figures below. Each one is an input to a number this report could not compute from the public record: total visits by discipline for the last full year; direct visit cost per discipline, wages, benefits, mileage and contract staff separated; visits per clinician per day, by discipline and by branch; share of visits delivered by contract staff rather than employed clinicians. and we will send back this same review rebuilt on your actual numbers: