Featured Benchmark: Gross Profit Margin
As of March 31, 2015, the Simione Financial Monitor benchmark for Home Health Gross Profit Margin is 44% and for Hospice Gross Profit Margin is 42%. Gross Profit Margin represents the operating margin for an agency. For comparison purposes Gross Profit Margin is calculated in the Financial Monitor by taking the net payer revenue minus direct service costs. Direct service cost include salaries, benefits, contract, and mileage for direct care staff and any supplies or ancillaries used in direct patient care.
Gross Profit Margin is a critical financial metric for an agency. If an agency's Gross Margin is low they should first look at ways in which they can generate additional revenue. Agencies should look into referral to admission conversion ratios, payer mix, case weight mix and average length of stay. Agencies should also look into creating cost efficiencies in their direct operations through reviews of productivity, better supply or ancillary management, and improved patient coordination to reduce mileage costs. Gross Profit Margin is a great starting point in any financial analysis as it should give the agency a road map to finding opportunities.
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