Home health agencies run on thin margins and fast-moving operations, yet many owners make decisions from financial statements that are late, incomplete, or built on the wrong basis. These are the problems we see most often.
1. Books kept on a cash basis
When revenue is recorded only when payments arrive, and expenses only when they're paid, a month's results reflect timing rather than performance. Accrual-basis reporting, which records revenue when care is delivered and expenses when they're incurred, gives a truer picture. Your CPA can help you decide which basis fits your agency.
2. Unbilled and unrecorded revenue
Visits that have been delivered but not yet billed, often because of EVV exceptions or authorization issues, don't appear in revenue at all. Tracking unbilled visits separately keeps them from being forgotten.
3. Payroll recorded when paid, not when earned
Caregiver wages earned at the end of a month but paid in the next one belong to the month they were earned. Without accrued payroll, labor cost swings from month to month for no operational reason.
4. All payers lumped together
Medicare, Medicaid and managed long-term care plans, commercial insurance, and private pay each have different rates, rules, and payment timing. Revenue, receivables, and margins reported by payer show where the agency actually makes money.
5. Medicare timing that doesn't fit a calendar month
Under Medicare's Patient-Driven Groupings Model, home health payment is based on 30-day periods of care, which rarely line up with month-end. Agencies serving Medicare patients need a consistent method for recognizing revenue on periods that are still in progress.
6. Operating systems that never tie to the books
If the agency management system, EVV, payroll, and general ledger aren't reconciled to each other, errors in any of them flow straight into the financial statements. Our article on EVV and payroll reconciliation explains how to close that gap.
7. No operating measures
Financial statements explain what happened. A few operating measures explain why, such as revenue per visit, labor cost per visit, labor as a share of revenue, and days in accounts receivable.
What a reliable monthly package includes
- A profit and loss statement by payer or service line
- A balance sheet with receivables reconciled to the billing system
- A cash flow summary and a short-term cash forecast
- A one-page set of operating measures
- Budget-to-actual comparisons with explanations for large differences
Our accounting and bookkeeping team produces this kind of package, and our fractional CFOs help agency owners use it. See how we support home health agencies.