Do you Budget?

Do you prepare an annual operating budget for your home health agency (HHA)?

Most do not, to their own detriment. Preparing an annual operating budget is a basic operational and financial fundamental for any organization in any industry, including home health (HH). But a majority of HHAs do not, and have never prepared an annual operating budget for their agency.

Why? The list is numerous, if not reasonable:

• Have never done one before
• There are no HH budget software programs out in the market
• Agency does not know how to prepare a viable, industry-specific budget
• The HHA has prepared a budget in the past, but did not see any value in the work
• They have never reached out to subject matter experts (SMEs) to inquire about budgeting in HH

Any agency that does not produce an operating budget for each operating period is doing the agency a disservice and not positioning itself for success.

Does this mean an HHA cannot be successful if it does not prepare an operating budget each year?

No. It does not mean this at all. 1,000s of HHAs are successful each year that do not produce an operating budget. But, with all the cuts from CMS (in Medicare), and the low reimbursement rates from the non-Medicare payors, fewer and fewer non-budgeting HHAs are finding success each year.

Budgeting in Home Health

Budgeting in HH can be challenging, especially if you are trying to create your own budget from scratch. Where do you begin? What level of detail should you have? What do we do with the budget during the budgeted period? How does a budget position us for success? These are but a few of the questions one considers when contemplating preparing their first budget.

Historically, I have always advocated for a full, detailed budget when an HHA is considering implementing one. However, most HHAs chose not to create/prepare a budget. They choose not to deal with the work involved in preparing a full, detailed budget (and I have budget models that I complete for clients, but they must provide me with the requisite information, which does take some time to pull together). A full, detailed budget does take time to prepare, review, adjust, complete, and get approved. I recommend starting four months before the end of the year for those doing their first or second full, detailed budget. It is better to have plenty of time to complete, and four months provides that time. I recommend starting three months before the end of the year for HHAs that have completed full, detailed budgets in the prior two years.

Preparing a budget for the upcoming year will provide an HHA with a level of management information and support that does not exist without one. Anyone I have ever prepared a budget for who actively used the budget to manage their operational results during the budgeted period has been amazed by the information it provides and the value it brings to the HHA. Yet resistance to budgeting among those who have never budgeted is high. So, how to overcome this resistance?

The Starter Budget

I believe I was misguided in my persistence in preparing a full, detailed budget for everyone, even those preparing their first budget. I do not doubt that many budgets were never done because of that persistence. I see the value that a budget provides; therefore, I pushed for budgets that provided maximum value. And, since no budget was done, the agency never saw the value that existed. I should have been more open to lower-level (less detailed) budgets for those new to budgeting. Even a lower-level, less detailed budget will provide management with value for managing the budgeted period; not as much as a full-detailed budget, but value nonetheless that would assist management during the budgeted period, and could lead to more detailed budgets with greater assistance in future periods.

The Starter Budget is built on much less detail. It therefore provides less data/information for comparison to the agency’s actual operating results for the budgeted period. However, it will still provide data and information that management would not have without the budget. So, it may not have the full, detailed budget’s value, but it does have value nonetheless, and it will cost significantly less than the full-detailed budget. And it will help management determine the budget level they want for the subsequent year.

Planning Ahead

Whereas I recommend three to four month’s lead time for completing the full-detailed budget (start in Sept or Oct for a calendar year budget), this starter budget can be completed in an hour or so. If you have the requisite information handy, you can complete it in under 30 minutes.

If you would like to obtain a Starter Budget for the upcoming year, please contact us at IFS for Home Health to discuss your options. We have discounted rates good through the end of the year (12/31/25), which we will honor if paid by mid-January.

With budgeting, it is always best to complete your budget before the start of the budget year, but it is still better to complete it during the budget year than not to prepare a budget at all.

Conclusion

Although I would always recommend a full-detailed budget for an HHA, especially any HHA with annual revenues over $1.5 million, I would recommend a Starter Budget rather than no budget to get a feel for the value that a budget can provide your organization during the budgeted period and better help position your agency for success in the future.