cartoon of people with financial data
Understand the basics before you jump in
by Jeff Howell

Homecare agencies that venture into the world of Medicaid face new obstacles compared to the Wild West of private pay.

Medicaid has strict guidelines regardless of which state you are billing in and no matter how you are generating invoices and collecting funds. This article explores some key things to evaluate before you make the shift.

What Are the Normal Billing Processes?

Homecare agencies first receive authorizations (otherwise known as an authorization period) that outline the number of units a client can receive. For example, a client may be authorized to receive personal care for monthly recurring visits for up to 112 units or 28 hours (each unit being a quarter of an hour). Another may be authorized to receive one visit per week for two months.

Your billing software for Medicaid should have either a hard or a soft guard against your scheduler accidentally setting up visits outside of the authorization period. Those visits will not be reimbursed by your state Medicaid provider. A soft stop would be an icon or a warning to the scheduler, and a hard stop would not physically allow the scheduler to set up a visit in error.

Rejections & Denials

One of the biggest downfalls of small Medicaid agencies is that denial or rejection rates are typically 20% to 30%.

The difference between the two is that rejections have data that is missing or inaccurate, requiring the agency to go back, correct the data and re-submit those claims. Denials, on the other hand, are simply unpayable (for example, if the client was not Medicaid eligible), and the reimbursement is gone forever. The challenge with denials is that Medicaid reimbursements have a low margin to begin with.

Imagine if 20% of your claims are denied and your $20-per-hour biller is now on the phone for several hours with your state Medicaid department to fix visits that only have a $2 profit margin. Even if they correct nine visits in an hour, you are still losing money, as you had to pay that employee $20 to recover $18 in lost profits.

This is why Medicaid is a challenging service line: The visit requirements are complex enough that there is a high denial rate, but the margins are thin enough that agencies cannot afford to make any errors.

Sources of Medicaid Denials

Two common factors in denials are scheduler error at the point of scheduling and caregiver error when documenting the visits.

The first can be solved by use of the hard stops previously mentioned, or, if your system of record only has a soft stop, then look at stronger training and adherence to the soft stops for new schedulers, with a supervisor overseeing shift compliance.

The second typically has to do with caregivers not accurately logging the activities of daily living (ADLs) before clocking out of a visit. In this case, be sure that your mobile app has the same hard stop functionality—that is, that it doesn’t allow the caregivers to clock out without accurately documenting the visit.

For rural visits, some apps have an offline mode, which requires more training for your caregivers. A common complaint in the industry is that offline mode for apps
can be unreliable, so your compliance specialist should be on the lookout for issues with this function and any resulting documentation errors.

For agencies that are still using paper for documentation, slow turnaround time from caregivers can create enough of a lag to create cash flow issues. Caregivers not producing documentation and time sheets quickly enough means agency owners still have to run billing and catch up on those visits in the next cycle. Mobile apps take away this burden with real-time documentation of visits, as well as time and attendance.

The Benefit of Clearinghouses

For agencies that have—or want to have—more volume, clearinghouses like Waystar and Availity can improve denial and rejection numbers down to 2% to 3%. They mix manual work with artificial intelligence to provide a report on which claims need to be fixed before completing a real billing run. In other words, they are a practice run for your billing team, so when they run the real billing cycle, the claims will be clean. Most modern systems of record will have a direct integration to a clearinghouse so that your billing team can stay in their normal environment while getting feedback from the clearinghouse.

Most clearinghouses work on a per-claim basis with volume discounts, so the price is substantial for smaller agencies—about $0.25 per claim on a visit that has a $2 margin. And while they are expensive for smaller agencies, clearinghouses virtually eliminate the need for the role of the biller who is constantly fixing faulty claims, and allow for an agency to have their revenue cycle essentially outsourced to the experts so they can focus on other matters.

Electronic Visit Verification

Electronic visit verification (EVV) has been mandated by the Cures Act to ensure that Medicaid agencies are capturing clock ins and clock outs for every Medicaid visit electronically, with a goal of reducing fraudulently documented home visits. While this is a good practice for private pay, it is not mandated, so agencies moving from private pay into Medicaid need to be sure they pick a software provider that is compliant with their state’s requirements.

Each state approaches EVV software differently. A “closed” system means the software used to clock into and out of visits is mandated by the state, but the software is free. An “open” state means an agency’s choice of software vendors is open as long as the data from the provider’s chosen system can integrate with the state’s aggregator.

Closed states have tried to ensure that all providers can remain EVV compliant without any additional cost, but the mobile app may not be the same vendor that agencies are currently using to run their business. In those cases, agencies must either rely on their existing software provider to integrate with the state system or have caregivers clock in and out twice.

Open states have adopted the philosophy that home health agencies should have choice about what software they wish to use to run their business. As long as the data rolls up to the state Medicaid level, the state is not getting involved in software vendor selection.

In either case, a mobile app will be required to capture visit details, so if you are running your business on paper in private pay, a software upgrade and training will be required to bill Medicaid—with the EVV deadline for Medicare around the corner in 2023, as well.


Mobile apps and the elimination of paper are now table stakes in Medicaid billing for home health. As more software agencies develop hard stops to eliminate accidental scheduling of nonreimburseable Medicaid visits, agencies can rest assured that rejections are on the decline. This leaves user error at the point of care with caregivers as the main area of focus for agencies to thrive in the low-margin, high-volume game of Medicaid billing.

If you can run a highly compliant home health agency and achieve enough volume to introduce a clearinghouse, you will have risen to the top of the Medicaid market.

Jeff Howell is the director of growth at Alayacare, an end-to-end homecare software platform that has powered over 1 billion homecare visits. In his spare time, Howell is the host of the Home Health 360 Podcast, where he speaks with leaders in homecare from across the globe.