Shelley Ackerman, PT, DPT (CareStitch)

Victoria Kuklina CPA, CGA (FinHealth Inc)

Where Did the Profits Go? Uncovering Hidden Profit Leaks in Home Healthcare

Shelley Ackerman: Hi everyone, I'm Shelley Ackerman, co-founder and COO of CareStitch, and we're thrilled to welcome you to today's webinar "Where did the profits go? Uncovering hidden Profit Leaks in Home Healthcare". Home health agencies are under more pressure than ever from staffing shortages to shrinking margins. Today's session is all about uncovering what's quietly draining profitability in our agencies and how to reclaim those margins. To help us dig into this, I'm joined by our fantastic guest, Victoria Kuklina, co-founder and CEO of FinHealth.

Victoria helped scale Florida's largest privately owned home health agency, Pinnacle Home Care, from 17 million to over 200 million. Named CFO of the year by the Tampa Bay Business Journal, Victoria brings expertise in uncovering hidden margin drains that silently chip away at your EBITDA today. She's bringing that expertise to all of us. Victoria, thank you for being here and we're so glad to have you.

Victoria Kuklina: Thank you for having me, Shelley. I'm really thrilled to be here today.

Shelley: Awesome. So, to begin, we're going to start with our introductions. CareStitch's mission is to stitch together the gaps created by operational inefficiencies in home health to lower the cost of healthcare. We're empowering agencies to deliver better care at lower cost by simplifying scheduling and increasing teams efficiency.

Victoria: And FinHealth Inc is a newly created company in 2025 with a mission statement to help make healthcare companies healthy one company at a time. And our value proposition is to help improve companies EBITDA capacity, strategy, quality of care by improving and maintaining their financial health.

So I'm going to first talk about my personal why. I'm a physical therapist with over 10 years of experience in home health care, both as a clinician and more personally as a family member who helped care for my grandmother. That experience opened my eyes to how critical home health is and how much the way an agency operates shapes experience for everyone involved. When operations break down, it doesn't just stay internal. Clinicians feel it, patients and families notice, care quality suffers. And when margins run thin, we risk more than just burnout - we risk limiting access to care altogether. That is why I'm passionate about improving how home health agencies function because when operations work, care improves, clinicians are supported and sustainability follows. But I know that I'm not the only one with a story. Victoria, what's your personal why?

Victoria: Thank you for starting with that because I think that this is really important, Shelley, when we get a chance to talk about our personal why. And I absolutely love yours and mine similar to yours. I was also driven by my grandmother. Unfortunately, she didn't have access to health care. And when I took my sabbatical after exiting Pinnacle in November, I was thinking about what is my purpose and what I can do to contribute to society. And unfortunately, my grandmother was going through not having access to care. And that propelled me into thinking that my life's work really is home health and home care agencies, how I can help the overall industry as a whole because I've got some knowledge and I think that I can make an impact by helping the industry improving their EBITDA so they can increase capacity and so we don't have any grandmother or grandfather left behind.

Shelley: I know you mentioned this on our previous conversations that your grandmother's in or was in Ukraine, right?

Victoria: Yes. Yes. And unfortunately by being in Ukraine, they didn't have home care and hopefully when everything settles and the people start living a normal life, they will be able to start home care. But home care is such an important component of taking care of our loved ones especially during their life, at the end of their life, where you want to give them as much as you can but we also have our lives that we need to be working and we have our families and home care becomes such an important component by just plugging in and making people a lot more comfortable. Unfortunately when people don't have access it just scares me thinking that in the US in the next 20 years the demand and the increasing population will triple. So we need to be prepared to increase our capacity so we don't have a grandmother or grandfather left behind here in the United States. So we just need to increase our capacity and be ready for it.

Shelley: So let's take a quick look at where we are as an industry. Margins have been tightening for years and today the average bottom line sits at just 8.2%. Recent legislation is adding more strain. MedPac has recommended a 7% cut to Medicare rates and the big beautiful bill includes a 4% reduction. So, we're not just talking about incremental adjustments. There are significant hits that could deeply affect agency's sustainability. You may have felt this firsthand. Margins are tighter than ever. EBITDA is shrinking across the industry despite growing demand and rising revenues. This disconnect is frustrating and it's what today's session is all about. Victoria, what are your thoughts on this?

Victoria: This is the reality. This is the reality that we live in. Unfortunately, we have to learn how to deal with it as it's constantly coming at us with new news that we need to cover. And many agencies don't even realize that their profits are shrinking because they are accounting their records by cash. And cash accounting doesn't give you a true profitability picture. And in many agencies, they see their revenue growing because the demand is growing, but their bottom line is not. So, what we're going to look at is to see where all of those profits are leaking and how we can close the gaps in order for us to improve profitability. In turn, that will increase the capacity so we can take care of more patients.

Shelley: So, the realities of running a home health care agency. Let's be honest, this industry is tough. Agencies are dealing with staffing shortages, high turnover, labor costs, and tight compliance standards. It's a daily balancing act. These pressures are hitting our systems on all sides: operationally, financially, and clinically. So, what can we do realistically to improve our margins? That brings us to our next slide. Victoria, how do we bridge the gap?

Victoria: I love how you framed it because really it is a gap for us to bridge. All of this is possible. It's not impossible at all because we do have a lot of low hanging fruit in our industry. So we don't need to overhaul the whole business. We just need to close those gaps because it unfortunately becomes death by a thousand cuts and we need to identify all of them and close them so we can handle the changes. Margin loss doesn't come from one big area. It does come from many small ones happening every day.

So let's talk about the top 10 margin leaks and how you can identify them and start closing them one by one. I would love to start with FinHealth's top 10 Threats and I would love to start from the least important one. They're all important, but there are 10 of them. And we'll go down to the most important one. So, please hang in with me as we go through those.

Number 10 is going to be your payer mix. And I know that this is a favorite subject for home care is controlling the mix. But I will tell you that with FinHealth Inc and I highly recommend for everybody to make sure that they're able to dig in the data and figure out what is your specific payer margin by payer. So you really have to go payer by payer to identify what is your total mix margin and what is each payer giving you as a final margin to the payment.

Number nine is going to be denials and adjustments. Those hit us every day and we just have to deal with them and unfortunately they do get into reducing your revenue or they turn into your bad debt. So they have to be looked at claim by claim. And I highly recommend doing the denials and adjustments analysis by bucket. So that way you can go to your payer and actually have a conversation with them and instead of looking at it claim by claim, speak to them in the buckets language so that way they can pay you what you're owed. At the end of the day, sometimes we have to fight for to get paid for what we are owed. And knowing your data is basically having that ammunition as you go into your conversation with your payers.

Number eight is cash flow illusions. As I've mentioned before, many home care agencies are measuring their profits or P&L by cash. While it's good to know, it's very important to know what your cash is, but you also it's very important to know what your accrual accounting showing you in terms of your profit, what revenue you brought in this month and what expenses you paid to take care of that revenue in this specific months. And only then when we have that information, we can manage it accurately and effectively.

Number seven is unbilled leakage. Unfortunately, our beautiful home care industry has to deal with a concept of unbilled AR. And this is a really hard one because we are dependent on physicians to sign our plan of cares and orders. And we cannot bill until those are signed. And if we are dealing with that challenge, that means that we have to have a process in place that collects those orders timely so you can bill timely and get cash in timely. And the typical day sales outstanding gets extended by that amount of time that you need to take in order to get your orders in place. And while you're getting those orders in place and your revenue is sitting there uncollected, a lot of adjustments and revenue gets lost because you're not collecting it fast enough. And a lot of agencies do not have that tracking of the claims that may be lost due to untimely order collections or billing or the adjustments that go into it. So, it's important to track your orders and your claims from the inception of the plan of care.

Number six, scenario building blind spots. As I've mentioned before, with all of these changes coming our way, scenario planning is really important. So you could see what impact is going to happen to your P&L if those percentages are going to be hitting our revenue. And so for example, if it's a 4% hit to the Medicare and if your business is generating 50% from Medicare, that means that 2% is going to hit your bottom line directly. So it's important to know how those scenarios are going to impact your business. So scenario planning becomes a really important tool for in order for you to know what you need to do to handle those changes.

Number five is accrual accounting errors. Because of the timeliness and billing time frame that it takes for us to get our cash in the door. The accrual accounting becomes a very important aspect of managing your business. You need to know what your revenue was that you have earned, not received in cash, in that specific month. And because we deal with episodes, that 30-day episode needs to be split for your P&L accurately. So like for example 25 days it goes into January and five days goes into February and so you need to take your claim and you need to split it accordingly and do that on a monthly basis tracking each claim one by one and this process because it is very time consuming and because it deals with big data it's very prone to errors and so by the end of the year if we get to you know audit time and our auditors look at the numbers and if we either had the wrong formula or we weren't doing it right, you have a year end adjustment. But really that adjustment becomes history because you didn't have that information timely to manage the business. It really doesn't do anything for you. It doesn't help you. However, if you do that accrual accounting properly and you close the months with that most accurate information, you have a chance to make an impact to your year. You have a chance to make an impact to how your business is operating as it flows on a monthly basis.

Number four, I'm sure this one is very important to you, Shelley, overtime and miscellaneous time creep. So this really hits our margins with people, you know, working as a PRN and as full-timers and contractors. We have a lot of different labor classes and they have to be managed on their in their own buckets. So overtime creep becomes an issue because we are trying to take care of our patients with whatever cost that there is. You need to put a full-timer to go and see a patient and then you need to make sure that your full-timers are properly loaded with your visits and the miscellaneous cost also creeps on you because you just want to take care of your patient. So technology becomes our best friend in managing the overtime and miscellaneous creep. You want to make sure that your full-timers are fully loaded and only then you use PRNs. You don't want to use PRNs when your full-timers are sitting at home waiting for work. You know something like this that's very logical but because we're dealing with high volume with big data it becomes very very hard for us to manage those little details and that's why technology becomes our best friend.

Number three for us is vendor cost creep. And this is something that is addressing the full P&L, not just the gross profit margins. I believe that when it comes to a senior leadership team managing their operations, they also need to manage their vendors. And there's always going to be a relationship between one manager or director or leader of the company and a vendor. So they should own what the cost is and what's the spend so you have a group of people a number of people managing your vendors, managing your P&L. And those costs will be creeping up. So we have to have that kind of a management by detail by vendor. So you are aware that vendor cost is either going up or you can control it. And just having that detail at your fingertips will give you the power to manage.

Number two workforce gaps. And because we are dealing with a very big range of cost in our workforce between the full-timers and the PRNs and between RNs, LPNs, PTs, PTAs, we want to make sure that we're optimizing our workforce and you're using the right discipline clinician to do the right visit so you can control the visit costs. And so these workforce gaps although they are always there it's very hard to control it and it's impossible to control it if you do not see it. So having that visibility to what your mix is and to how your visits are being fulfilled is going to help you manage your margins.

And now we're down to the most important one which is managing your KPIs and aligning your KPIs to your leadership team. The saying is when everything is important nothing is important or when you what you don't measure you can't improve. So when we are misaligning KPIs or not having enough KPIs in the right hands, then the business kind of becomes a chaos and people are just doing the best they can in what they're working on. But putting the right KPI into the right hands and giving it to the right person to manage and when you have a number of those people rowing in the same direction, that's how you get the lift. You get the lift from everybody rowing in the same direction and knowing what their targets are as well as they need to be reported. Those numbers and those KPIs should be in front of the management's eyes on a monthly basis so they know how well they're doing in attaining those goals for the company and for themselves as well for the bonuses calculations and aligning them to the overall company's mission. Once you have those in place, you would see that the business is growing and rowing in the right direction and the speed picks up.

Shelley: Perfect. That's awesome. So, you know, the good news is every one of these is fixable, right? You don't need a new business model and to revamp your entire company. You just need visibility and a plan to act on it.

Victoria: Absolutely.

Shelley: So, here's where the real power comes in. Aligning operations and financial strategy. At CareStitch, we help optimize your clinical workforce. Think an increase in productivity, visibility, and collaboration. FinHealth Inc provides the financial intelligence to track and engineer margins. Together that means more visits, more capacity, and more stability, and that stability is the foundation for our growth. So now that we've looked at how CareStitch and FinHealth works together to protect margins, let's zoom in on how CareStitch alone redefines operational efficiency across your agency and then we'll transition over to FinHealth Inc and how they optimize financial health for agencies.

CareStitch isn't just about adding more features. It's about removing the friction that's holding your team back. Here are four tangible results agencies see when they implement CareStitch. Let's start with an increase in a scheduler's work capacity. With intelligent automation and simplified workflows, our platform helps your scheduling team handle more visits in less time with less stress. Next is a decrease in mileage expenses. With the smart routing and real-time optimization, agencies are cutting down on unnecessary travel, reducing fuel costs and mileage reimbursements significantly.

Then we have reduce operational costs. By eliminating manual bottlenecks, repetitive communication loops and outdated processes, agencies are reducing operational overhead without compromising quality of care. And perhaps most importantly, improve employee satisfaction. When scheduling is intuitive, drive time is reasonable, and communication just works, your team is more satisfied and more likely to stay. And as we all know, retention is one of the best margin protectors there is. So let's transition over here to zooming in on FinHealth's approach.

Victoria: I love all of that, Shelley. You know, all of those items that you have mentioned have a direct impact on the cost and saving those for example on your mileage or just increasing the capacity has a tremendous impact on the P&L on the margins. And this is where FinHealth comes in. We deal with big data and our big data is really something that creates an enormous amount of information which then we are able to create into the story for a specific company that we work with. And our approach is not to just measure EBITDA but we're engineering it for you. We use real time revenue and margin by payer reconciliations. This gives us a chance to make sure that we can optimize your revenue and knowledge is power and we know exactly which payers we need to push on in order to improve our either adjustments or improve on the reimbursement rate. We also stress the importance of accrual accounting. We provide reconciliations by claim which means that if you're losing on a claim either on the adjustments or on the timeliness of it we will know exactly which claim which client and we know what to do in order for us to optimize that reimbursement and turn it into cash.

We are really good with scenario planning. We use the models to create an ability for us to look into the future. We create a crystal ball with our scenario planning. So whatever that impact is going to be on our reimbursement rate 4%-7% somewhere in between or hopefully less we will be able to know what the impact is going to be to the bottom line when it does go into effect and before it does go into effect we're going to recommend strategies around your overall P&L performance in order for us to optimize the operations and increase your operational excellence so we can take care of these changes that are coming our way. We also stress out the importance of that performance tracking and the KPIs alignment having those KPIs in front of us front line and center on a monthly basis and to see how we're doing on performing and as well as having these conversations if something is not performing. Do we need to change the KPI? Do we need to change who owns this KPI? All of these discussions go into a really important aspect of managing our business on a month-to-month basis.

Clinical workforce cost optimization and this is also really important for us to improve on the margins. We look at your workforce ratios, RN to LPN, PT to PTA, and we also recommend on which visits need to be taken care of by who in order for us to optimize margins. Now, we're dealing with big data here. So, in the amount of information that we're crunching, it sometimes takes hours for us to process, but at the end of the day, we give you only actionable dashboards that you can improve on your performance by just pushing on those little levers.

Overhead and cost optimization that goes into your vendor management. We do evaluate the company and we compare it to what the industry norms are and what the peers around you are performing as well to the best of our ability to get that information and our job is to basically go out there and find all of this KPI benchmarking levels so we can give you a recommendation and just that takes a lot of work because in our industry that information is not that readily available but having that information when we're managing the business, it really makes a big impact when you know how you compare to the industry and how you compare to your peers. +

And KPI tracking and benchmarking, as I've mentioned before, that's something that's really important. We benchmark your KPIs and we track it as well. So, at the end of the day, we give you actionable dashboard. We become your financial intelligence team. We crunch the data, you run the business. We give you the details, the devil is in the details. We just give you what is actionable. And if you go out into your business and you make those recommendations live, you will see an immediate impact to your EBITDA.

At the end of the day, margin improvement isn't about cutting costs. We didn't mention anything about cutting costs when we were going through our list. It's about aligning decisions with your big data.

Shelley: I love that. So, we've shared a lot of information and now I'd love to ask you a few questions, Victoria, that I've heard others in the industry ask. How do you balance paying clinicians competitively with keeping the agency profitable?

Victoria: That's a good question. It does connect to everything that we discussed. Just like you know the reimbursement cuts that are coming our way, they are hitting our P&L. We are dealing with increasing labor costs. They're hitting us every year. Every time we look at our labor cost, we know that it has increased from the year before. So this is something that constantly needs to be reviewed as well as all of the other optimizing levers need to be improved. But the first and foremost, I think the lowest hanging fruit in managing your labor cost is to reduce your mileage. As you've mentioned that's what CareStitch does and optimize routing because that cost is buried in the cost of labor you know when we look at our gross profit margins and in a lot of cases we don't really measure it so it's just the total labor cost but reducing those you can reduce your labor cost and manage your margins.

Shelley: Absolutely that is definitely one of the things we do here at CareStitch you know and without a tool like CareStitch that helps with optimizing your scheduling. It's very difficult to manage, right?

Victoria: Absolutely.

Shelley: So my next question is what financial and operational benefits come from reducing clinician turnover?

Victoria: Well, turnover is an invisible cost because it doesn't have a line item on our P&L. It's like a ghost cost, but you know that it's there. So when you measure the cost of turnover there are different type of measurements that I've seen but it could be as high as half of the annual cost of the clinician or you know whoever you're measuring. So that turnover cost is buried in all of your expenses that's on your onboarding on your training and talent acquisition. So that cost really adds up and by reducing your turnover cost you will improve on the overall cost of the organization and you will improve on your margin and not only that if your turnover is decreased you know that you have your clinicians that are loyal and I'm not just talking about clinicians it could be all of the employees it's just clinicians are the biggest you know workforce the biggest body in our P&L. Having your employees being loyal and reducing your turnover that also improves on the overall operational excellence because you are not losing the knowledge that leaves with them. And people that stay in the company for a longer time they can just you it's like continuation of care. They're continuing to take care of the company and no time is lost on onboarding and learning about the company. So there's a lot of cost that goes into the turnover cost.

Shelley: Absolutely. I say it takes two to tango, right? You have the office staff and you have the clinicians out of field. When that's you know there's high turnover, it just creates chaos.

Victoria: Yeah. And unfortunately our industry is dealing with a 50% turnover. That's half of your workforce that could be completely turned and all of that knowledge lives with them. You know, it's just it should we should be feeling some amount of sadness with them leaving all with all of that knowledge, you know, because at the end of the day, what's your company? Your companies are people and we're all made the company is made out of all the people. So if you have loyal people that have been with a company for a long time, it's just such a beautiful atmosphere around to be with and then also attracts other people that also kind of like to stay long with the company.

Shelley: Yep. And I mean obviously without streamlined operations then you know your clinicians, your office staff, they're all getting hit by this.

Victoria: Yes. And when we are using technology and especially we're dealing with clinicians being our biggest workforce and they're always out in the car driving and by optimizing their routes or optimizing their communication between the teams or with the patient, we're making their life easier. That's that will reduce the turnover you know 100% when you make clinicians happy.

Shelley: Absolutely. I know for a fact. So my next question, what should an owner look for in a tech partner to ensure ROI?

Victoria: And I love that question because we have technology coming from all ends now, which is great because we are in the age of technology and AI. So we are going to be investing in technology. You know in order for us to get better, in order for us to be optimized, we need to bring in new technology to do that. But we always have to measure the ROI, return on the investment of the new technology coming in. There's going to be a spend. You know, how much money you're going to need to spend on the new technology. And we need to pause before signing anything and do an analysis of what will it provide as a benefit. So you can weigh the cost and the benefits. And I would put everything into a spreadsheet. And sometimes we even have to weigh in the positives of something that cannot be measured in dollars. But if you know that you're optimizing operations, you still need to find a way to put a number to it. For example, reducing turnover. That's one of them. You should know what the cost of your turnover is for your company. And if you're reducing your turnover, you can calculate what that benefit is. And then you'll have you've got your costs, you've got your benefits. What is the cost versus the benefit? And you know if you can double your benefit from the cost that means that from the 100% of the cost 50% of the benefit will fall to your bottom line. So if you just use you know that simple math like this you know double the benefit should be double of the investment then I think you'll be safe. But what's really important is to calculate those costs when you're doing the ROI calculation.

Shelley: So at CareStitch we say that you can't manage what you can't measure and you can't grow what you don't control. That is what aligning operations and finance is all about.

Victoria: And at FinHealth we believe that future belongs to companies that don't just track EBITDA, they engineer it. Let's change the industry one agency at a time.

Shelley: Yes, let's Victoria, thank you so much for being here with us today.

Victoria: Thank you for having me, Shelley.

Shelley: Absolutely. If this sparked any ideas, questions, or curiosity, let's connect. We'd love to hear how your organization is navigating today's margin challenges and how we might support you.

Shelley Ackerman’s LinkedIn:  https://www.linkedin.com/in/shelleyackerman/

Victoria Kuklina’s LinkedIn:  https://www.linkedin.com/in/vkuklina/