Home Health Agencies Save by Leasing Vehicles, Using Fleet Management

From Home Health Line, Sept. 23, 2013

By: Josh Poltilove

Rather than reimbursing clinicians for miles driven, consider leasing cars, but avoiding the hassles that come with it, by hiring a company to manage your fleet.

By leasing cars through Enterprise since 2008, ADORAY Home Health and Hospice in Baldwin, Wis., has saved more than $10,000, says Mary Troftgruben, the agency’s executive director. The agency is expected tosave about $400 per vehicle this year.

ADORAY pays Enterprise about $350 a month for each of its seven vehicles, and those costs include insurance, gasoline and maintenance. When comparing those costs to the amount of money the agency would have paid those seven employees for mileage, the agency saves a total of $2,800 per year, Troftgruben says.

Despite any potential cost savings, ADORAY wouldn’t lease vehicles without having an outside agency manage the fleet.

Managing vehicles is “a business in and of itself,” Troftgruben says. “It’s not a business ADORAY is interested in operating.” She’s pleased with her agency’s relationship with the rental company.

Enterprise tracks ADORAY’s employee mileage, giving “wonderful reports on usage,” Troftgruben
says. The company also keeps all the leased vehicles’ service records, emails ADORAY employees when it’s time for maintenance such as oil changes, obtains titles and plates and handles selling the vehicles when the time comes, says Mike Niemuth, an Enterprise sales manager for Wisconsin.

Do a cost analysis based on mileage

The amount an agency can save will vary based on several factors, including how much agencies have been reimbursing clinicians for mileage driven in their own cars. Seven of ADORAY’s clinicians drive leased vehicles and it pays other clinicians 47 cents a mile for personal vehicle use on the job.

IRS’ mileage reimbursement rate for 2013 is 56.5 cents per mile for business travel, and agencies that have been paying that rate will save more than ADORAY has if they lease vehicles instead, Troftgruben says.

Typically, agencies using Enterprise for fleet management save 20% to 30% when compared to those reimbursing at the IRS rate, Niemuth claims, although he declines to provide details.

Recognizing rising IRS reimbursement rates and
a changing health care industry, Enterprise started focusing on fleet management for home health agencies and hospices in 2008, Niemuth says. At least eight home health agencies or hospices in Wisconsin alone use Enterprise for fleet management.

“A lot of agencies have saved a whole bunch of money” through using fleet management instead of paying the IRS rate to reimburse for mileage,” says Pat

Laff of Laff Associates in Hilton Head Island, S.C.

There are other benefits, too: letting employees drive company cars is good for recruitment and retention, and since the leased cars are newer vehicles, they rarely incur issues resulting in lost employee productivity, Niemuth says.

The money agencies charge to employees for driving leased cars for personal use generally helps offsets depreciation, he adds.

Before you lease

Before your agency leases cars and hires a fleet management program, consider the following:

• Set a minimum number of driving miles. Ask for volunteers and gauge interest. ADORAY first considers the number of business miles the applicant drives per year; the agency wants to make sure it is profitable to lease the car. (ADORAY would have had to spend $470 per employee, paying them 47 cents
a mile to drive 1,000 miles in a month. Instead, the agency only pays Enterprise $350 a month per car, a savings of $120.)

At ADORAY, clinicians under consideration must drive a minimum of 9,000 business miles a year although the agency prefers that clinicians drive at least 10,000 and at least half do. When the agency started leasing vehicles, one part-time employee was only driving 6,000 to 7,000 miles a year. That turned out to be a losing proposition for the agency, which gave her “adequate notice” that it would reclaim the vehicle and she needed another vehicle for personal use, Troftgruben says.

• Set clear rules about who will get the cars and why. The agency takes into account the employee’s tenure at the agency. Clinicians are also given greater consideration if they want the cars for personal and business use, Troftgruben says. Although it’s not clear why, the agency reports that it pays
out less for business mileage on leased cars when clinicians use cars for business and personal use as opposed to just business use.

Agencies that clearly specify which types of employees get leased cars will protect themselves from potential Equal Employment Opportunity Commission complaints, says attorney Robert Markette with Hall, Render, Killian, Heath & Lyman in Indianapolis. For example, making it clear that you only give cars to nurses will protect you if a non-nurse files a complaint.

• Set a minimum usage period. ADORAY tells employees that they should commit to driving the vehicles for at least a year. It’s a hassle to switch drivers any sooner because it requires an insurance transfer, but the agency is willing do so if another clinician is willing to take on the vehicle, Troftgruben says. At the very least, the agency asks for clinicians to provide one or two months’ notice if they no longer can or want to drive the leased car.

• Decide what to do with the newest cars. If ADORAY adds a new car to its fleet, it gives first dibs to employees who already are driving one of the older vehicles to encourage them to stay in the program, Troftgruben says.

• Get references from the program. Call agencies that already have been leasing cars and using a fleet management program and ask them questions about their policies so you cover all your bases.

• Discourage staff from using personal cars and leased cars on the job. Employees might say they want to drive their personal car because it’s raining outside and they don’t want to switch over to the company car. But ADORAY tells them no. It makes no sense for agencies to pay mileage to employees who have the option to drive company cars, Troftgruben says. One exception might be if employees own 4-wheel drive vehicles and ask permission to drive them in heavy snow, she says.

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