The home medical industry is struggling to crest a wave called
competitive bidding that will sweep it into a sea change —
and a new future. What does that future look like and, perhaps more
pointedly, what does the new provider look like?
We recently asked members of HomeCare's Editorial Advisory Board,
which includes many of the industry's top thought-leaders, for
their insights. While they don't necessarily agree on every issue,
they are in accord on one fundamental point: No matter what happens
to competitive bidding, the HME industry will never be the same,
and only those providers who accept that and plan accordingly will
have a chance of surviving.
Here are participating Board members' responses to five basic
questions about the shape of things to come:
What is the root of this industry's greatest problems, and how
would you remedy that?
Cara Bachenheimer: Our biggest problems
continue to be Capitol Hill, CMS, the Inspector General and this
belief that there are significant numbers of players in the
legitimate industry that are bad actors. Yes, there are bad actors,
but they are not industry people. The problem is that the
government makes broad policies that hurt the legitimate providers.
We all know a targeted policy would be better. The government
doesn't have an appreciation for the value and what the vast
majority of providers are doing. Turning that around is a long-haul
process.
Jane Bunch: In this industry, we have to learn
to speak up. With the cuts, changes in policy and insurance
companies following Medicare guidelines with competitive bidding
price and policies, as well as Medicaid cutting and going HMO, have
you been to Washington? Have you contacted your representatives?
This is our industry they are taking away from us. Get on your
local radio or newscast and show what you are doing. Change the
minds of everyone.
Alison Cherney: Lack of providers in this
industry having a good image and reputation with payers. Providers
have not proven their value in terms of cost effectiveness in
quantitative terms.
Louis Feuer: The root of our problems is a very
tangled and complex web. We originally allowed our hearts to
dictate our business decisions rather than good business sense. We
described ourselves as medical product providers and we were
service providers. Since we do not manufacture the products we
sell, we should have carefully calculated the costs we incurred
beyond the purchase of the product, i.e. delivery, storage, setup,
maintenance, clinical supervision, billing. We now find ourselves
defending, describing and redefining our place in the industry.
Solutions to these challenges: education, a willingness to alter
your business plan, a willingness to see the value of scrutinizing
your financial reports and business trends, and encouraging the
creation of a real team at work. Yesterday's business plan will not
work.
Sarah Hanna: Lack of business acumen. Many
providers, due to their business practices, have brought on many of
their own challenges. It goes back to education, training and
accepting the state of our industry and the requirements that are
enforced. We can fight to make changes, but until those changes are
a reality, we have to operate within the realm in which we live.
You have to be as disciplined as a military officer and move your
troop forward with strength and confidence. When a department is
working at a loss, then strong management focus needs to be placed
on that area to improve the outcomes.
Miriam Lieber: This industry started as a
cottage industry with providers who opened in their garages after
experiencing poor service when grandma needed a wheelchair.
Further, the margins were so handsome and documentation so minimal
that it was easy to make money.
Many unscrupulous providers were also permitted to easily enter
an industry that is primarily made up of small businesses trying to
do good for their patients/customers.
Now that that era is over, only providers with strong business
skills will remain. Unfortunately, nice guys providing good service
is not enough. Look for continued attrition and survival among
those who think outside the box and who diversify their
business.
What is the HME industry's biggest challenge?
Bachenheimer: Competitive bidding, competitive
bidding, competitive bidding. It's obviously not going away in the
short term. We've got to grapple with it one way or another.
Bunch: The biggest challenge I see is adopting
and embracing change. We have an issue with this in our industry.
Many providers treat aged accounts receivable that are
uncollectable like their children and never write them off, but pay
their personnel to work them regularly, praying for an angel to
come down and pay those claims. Change is key.
Neil Caesar: We have tended to complain about
proposed change and insist on fighting against it. As a
consequence, the industry has established a reputation for being
resistant to solutions rather than for being collaborative. Our
unwillingness to move away from the payment model put in place 15
years ago has cost us a meaningful voice in Congress.
Hanna: It's a toss-up between the many audits
that are occurring and competitive bidding, but I will pick the
audits. HME providers are getting hit from all sides, and it's hard
to prepare for the attack unless the organization has performed
self-audits on their documentation or has hired an independent firm
to audit their files.
Seth Johnson: The biggest challenge in 2011
will be managing through the significant documentation requirements
and audit activities that are continuing to occur on the government
funding side, adjusting to the elimination of the first-month
purchase option for standard power wheelchairs and implementation
of Round 1 competitive bidding, with the process for Round 2
scheduled to begin later in the year.
Lieber: I see the industry's biggest challenge
as a two-part concern: 1) competitive bidding and 2) the audit
epidemic. Competitive bidding will make it difficult for most of
the industry's providers, particularly the smaller providers, to
survive. Contract providers who have the size to leverage/muscle
buying power and reach additional economies of scale will remain
viable and potentially flourish in the business.
The audit craze will also cost many HME providers their
businesses or, minimally, much of their profit. Some have already
had to close. Others have invested additional resources in adding
audit staff. Being hit from all sides with audit requests has
increased costs and expenses, with the only gain being the right to
keep their money.
Shelly Prial: There is one major handicap that
must be eliminated. It is called "lethargy." Lethargy can be fatal
to any business. Now is the time to change.
Cliff Woolard: Working to dispel the negative
image that has been attached to our industry. How do we
obtain/explain reimbursement for the actual services that we
render, rather than for the product we provide? We need to be able
to quantify that we are care providers, not equipment jockeys.
Until we can effectively make that argument, we will continue to
come up short against the payers.
What do you see as the future of the industry?
Caesar: The new reality is still evolving and
probably will continue to do so for several years. But it clearly
focuses on lower profit margins and higher volume bundling. We may
well be heading over the next several years toward a model where
full service is available for additional reimbursement to those
beneficiaries whose conditions warrant the extra service.
Mary Ellen Conway: I think that we will see
Medicaid HMOs in most states and for those who have discretionary
income, paying cash for their items because they want them and they
don't want to be limited to what Medicare does and doesn't pay for.
I anticipate that more and more providers in urban areas will
decide to no longer participate with Medicare. I know we will see
many manufacturers selling directly to the customer, both for their
survival and for the convenience of customers who cannot get those
products in their local market.
Hanna: It looks like consolidation and
going-out-of-business sales may be in the crystal ball unless we as
an industry can band together and get reform legislation moving
forward. Only the strong and efficient will survive.
Feuer: Our customer base will continue to grow
and our business model may need to be altered. The future will be
bright for those with expanded, retail-based creative marketing
campaigns and the ability and drive to reach out to new
customers.
Colette Weil: The industry will go through
another life-threatening shakedown with competitive bidding,
audits, paperwork hoops and more. Consolidation of providers, cuts
in service, product quality deterioration and reports on providers
seem inevitable. Continued losses of good community providers is
also inevitable.
Woolard: On the one hand, I see the aging
demographic and people's desire to be cared for at home, but I also
see that third-party payers are going to be paying less and less
for the services we provide.
How will providers have to change to survive?
Bachenheimer: We need to find ways to be more
efficient, deliver services more effectively. Obviously, the
companies that are doing better are the ones that have been doing
this for several years.
Bunch: They will have to collect their accounts
receivable and work their denials as soon as they hit the door. If
you do not have an AR and collections department on top of things
and productivity is not where it should be, you will not
survive.
Caesar: Home care suppliers must figure out how
to offer value that makes organizations eager to deal with them and
to treat them as equals. The only way this will happen is when
suppliers or a network of suppliers can make it easier or safer or
more marketable for the organizations to work with them or to
choose them instead of other options.
Cherney: It is really Marketing 101. Pricing
strategies are shifting dramatically, and what needs to shift are
products and services, distribution (place) strategies and then
promotional strategies. Companies that get these in balance will
have a bright future.
Conway: Providers will have to understand that
they are a retail business just like those in the shopping malls,
and be savvy with marketing, advertising, customer service and
social media.
Hanna: Providers need to become more focused on
their business and operational practices. By streamlining and
increasing efficiencies within their workflow, costs will decrease
and will assist in handling the reimbursement cuts associated with
competitive bidding. There are some costs involved in becoming
efficient, but purchasing technology and providing effective
education will lead to fewer errors and decreased denials. Proper
training will assist in compliant paperwork completion, which will
lead to confidence when an audit request is received.
Lieber: Providers will need to diversify their
payer mix. Some have already done so by enhancing their retail
presence, and others have taken on more hospice and other contract
business. I predict that providers will be left no choice but to
obtain and solidify documentation prior to dispensing product. All
providers will have to work harder and smarter regardless of their
purchasing power. Their market share will likely grow if they
market and use their position well. Regardless, many providers will
exit the market (by selling or closing) as a result of competitive
bidding.
Prial: Being so dependent on third-party
reimbursements has prevented too many providers from looking around
for other opportunities. Providers should build over-the-counter
cash sales, become marketers and aggressively seek new products and
ideas. In that fashion, the third-party business can be maintained
and the company built around it so that Medicare or Medicaid is not
more than 20 percent of annual sales. Really successful providers
have all done this.
Weil: For the past three years, we have been
seeing the transition and mobilization of businesses. They have
decreased their reliance on Medicare and Medicaid, made staff cuts,
expanded cash sales riding on reimbursement products, created new
service components to commercial business sectors, affiliated with
other organizations, built online presences and unrelated online
businesses, built retail businesses and migrated to niche
businesses. They have analyzed their core competencies, established
diverse advisory boards for guidance and moved judiciously into new
sectors. They have increased their professional visibility, stature
and position in their communities. They are not leaving their
businesses to Medicare's definition of who they are.
Woolard: Know your costs and don't settle for
anything less than an acceptable margin. You may have a much
smaller business and you still may not survive, but why give it
away?
Are there some bright spots and, if so, what are they?
Bunch: The number of baby boomers we have today
is huge. Someone has to be there to take care of them. Why not you?
They tend to upgrade and spend the money for what they want, not
just what is medically needed. Use that advance beneficiary notice.
Take that cash, check, [payment] by phone, credit card. You don't
have to wait 90 days for your money.
Caesar: For those people who know how, or will
learn how, to thrive in a market with more competition and lower
profit margins, the demand for home care services will continue to
grow exponentially. The opportunity for substantial market
penetration will be available in many markets for those suppliers
who can see the future — and then seize the future.
Conway: Some of the "dead wood" companies that
were doing a very poor job are out of the business, making room for
providers who are on the ball.
Johnson: I see tremendous opportunity for those
who are able to adapt and become even more efficient. With 78
million baby boomers — 8,640 people turning 65 every day
— that demographic change alone, which is expected to
continue over the next 18 years, brings a tremendous increase in
the market for home medical equipment providers.
Lieber: Patients will start to accept the fact
that they will have to pay more out of pocket to get what they
need/want. Fraudulent suppliers will find it more difficult to
participate in the industry. While they won't disappear in total,
they will diminish significantly.
