French author Alphonse Karr said, “The more things change,
the more they remain the same.”
Well, in France maybe. But for home medical equipment providers
in the U.S. this year, the changes have been monumental, they are
not over — and things will probably never be the same.
Data for HomeCare's annual Forecast Survey were gathered
from mid-August through September. That means respondents answered
our questionnaire before the announcement that CMS would reduce its
dispensing fees for inhalation drugs next year, before the interim
final rule for power mobility took effect, before talk that another
oxygen cut might be looming and before agency officials confirmed
that supplier quality standards would not be finalized until next
spring and accreditors not named until after that.
The unsettling part is that, judging from the survey results,
HME providers were already fretting about the uncertainties for
their businesses in 2006.
In fact, when we asked participants to single out only one thing
as their most pressing business concern, they couldn't, naming
instead cost control, reimbursement cuts and competitive bidding as
a disturbing trio of troubles. And they added a string of
challenges topped by unethical competitors, accreditation, claim
denials and processing time, consumer-direct selling by
manufacturers and simply keeping up with legislative and regulatory
twists and turns.
But reflecting the optimism characteristic of so many HME
owners, their worries don't seem to be hindering buying plans.
Although the kinds of products providers say they will purchase in
2006 have changed little from previous years, more providers
overall told us they will be in the market.
An unprecedented 80 percent said they will purchase nebulizers
and ambulatory aids, and more than 70 percent said they will buy
beds/mattresses/pads, bath safety products, manual wheelchairs and
oxygen concentrators. Rounding out the year's top 10 purchases will
be CPAPs/bi-levels, lift chairs, oxygen conservers and patient
lifts. Providers explain that, because home patients' needs don't
change much, neither do their buying habits as they restock the
items that keep getting ordered.
Recent events in the power mobility sector have had an impact on
purchase intentions, however. In last year's survey, power
wheelchairs and scooters ranked 11th and 12th on providers'
shopping list. This time, these vehicles fell to respective
positions 19 and 20.
While the drop represents only a 2 percent decrease in the
number of providers who said they would purchase this equipment,
the figures mirror industry wariness about changes in Medicare's
mobility policy, confusion over PMD claims and new codes (now on
their third revision) and a lack of confidence in the pricing that
may follow.
Still, 41 percent of providers indicated that, of the mobility
products they carry, power wheelchairs will show the most growth in
2006.
Survey participants were not conflicted at all about another
equipment category. Bariatrics products jumped up six spots on the
list, from No. 19 in 2004 to No. 13, indicating that home care
companies see growth opportunities for equipment and services to
meet the country's obesity epidemic.
Juggling Costs and Cuts
Along with taking advantage of potential in products, providers
say they plan to grow business by adding patients, increasing
retail sales and expanding into new geographic locations. The
demographics look great, they say, with baby boomers getting older
every day. In a sad commentary on Americans' health, one provider
wrote that “an increased number of individuals needing
services — more diabetics, more obesity, more disease”
was having a positive impact on his business.
Increased marketing also plays a part in company growth schemes,
with 23 percent planning more advertising next year and another 23
percent planning to add sales staff.
Providers are even upbeat about some government changes, citing
in particular the move toward mandatory accreditation and CMS'
decision to allow home oximetry testing for qualification of oxygen
patients. And, as a result of Medicare's new mobility policy, 41
percent of respondents said they expect their scooter business to
increase (though 25 percent said they expect their power wheelchair
business to go down).
Providers are also happy with some of the internal adjustments
they have implemented over the past year to boost profitability,
including activity-based costing, upgrades or additions to
software, better hiring practices, improved training programs,
various productivity-focused initiatives and stronger management in
general.
At the same time, HME execs said they are struggling to juggle
reimbursement cuts that took effect this year on oxygen and certain
DME, plus CMS' ASP+6 percent pricing formula for respiratory meds,
against the rising costs of doing business day-to-day. “Our
legislators do not understand the value of home medical care and
what it costs to provide that care in a quality manner,” said
one respondent. “Medicare wants to get our products and
services for nothing. It's impossible for a small business to make
it,” wrote another.
The summer's fuel price run-up took a toll, providers said, as
have costs for information technology, retraining expenses due to
staff turnover, higher salaries and benefits costs for employees
who do stay onboard and increasing freight charges.
Among a laundry list of other factors that have had a negative
influence, providers mentioned fraud and resulting national media
coverage, mounting paperwork, slowed cash flow and legal worries.
“Even companies that are 110 percent compliant are subject to
unfair exposure,” complained one respondent.
Big Bugaboos
Survey participants also expressed tremendous concern with
competition — and not just in the form of competitive
bidding. They listed “800 numbers from the television,”
DME stores in Wal-Mart, competitors that “put out low-quality
products” and hospital-based competition that is
“getting stronger without even trying.”
They penned the names of mass merchandisers, retail drugstore
chains, Internet companies and eBay. Small companies mentioned
growing competition from nationals as well as from fellow
independents down the street, and one respondent said he is having
trouble with companies “that are not Medicare providers who
undercut prices for cash.”
And if combating the negatives and countering competition
doesn't leave HMEs busy enough, getting accredited to prepare for
the biggest bugaboo of them all — competitive bidding —
might. Fifty-five percent of the providers completing this year's
survey said their organizations are not currently accredited. Of
those, 56 percent said they plan to apply within the next 12
months.
The biggest group, 27 percent, said they will post applications
to the Accreditation Commission for Health Care (ACHC), while 24
percent said they will work through the process with the Joint
Commission on Accreditation of Healthcare Organizations (JCAHO) and
20 percent said they have chosen the Community Health Accreditation
Program (CHAP). Another 19 percent said they would apply through
various other accreditors including the recently formed Healthcare
Quality Association on Accreditation (HQAA).
Interestingly, only 49 percent of providers responding to the
survey said they plan to participate in competitive bidding. A
number told us they haven't made any strategy changes and intend to
stay their present course because they are located in rural areas.
“We hope we will not be affected,” was a typical
response.
But the attitudes were different from those of providers who
listed primary locations in one of the country's largest cities
— possible targets on CMS' list for where competitive bidding
could begin — or who classified their operations as
“urban.” With sites unknown and bid products not yet
released by the government, a typical note from this group read
simply, “We need more information.”
In another interesting development, most providers on this
year's survey (82 percent) told us that — despite
reimbursement cuts, policy changes and regulatory red tape —
they do not plan to move away from Medicare as a payer. This is a
marked decrease from 2004 results, in which 37 percent of providers
said they had plans to diversify payer mix to include more managed
care and retail sales.
But apparently, even with Medicare generating an average 41
percent of revenues, two-thirds of providers don't think their
income will suffer because of dependence on the government program:
67 percent expect their company's bottom line to grow in 2006 by a
median increase estimated at 8 percent.
That doesn't mean there won't be some teeth-gnashing and
middle-of-the-night jitters about what the New Year holds for HMEs.
“We're all worrying a lot!!” emphasized one
provider.
Summed up another, “We're just praying we don't get shut
out, [and] continuing to do the best possible job to serve our
patient base.”
2006 Product Shopping List
(Ranked by percentage of HME providers who intend to
purchase)
| 1. | Nebulizers | 80.4% |
| 2. | Ambulatory aids | 80.2 |
| 3. | Beds/mattresses/pads | 79.6 |
| 4. | Bath safety products | 77.7 |
| 5. | Wheelchairs, manual | 72.8 |
| 6. | Oxygen concentrators | 70.8 |
| 7. | CPAPs/bi-levels | 68.2 |
| 8. | Lift chairs | 65.2 |
| 9. | Oxygen conserving devices | 64.3 |
| 10. | Patient lifts | 61.8 |
| 11. | Portable oxygen systems | 59.3 |
| 12. | Pulse oximeters | 54.7 |
| 13. | Bariatrics | 53.8 |
| 14. | Incontinence | 53.7 |
| 15. | (Tie) Compressed gas regulators | 53.1 |
| (Tie) Compression hosiery | 53.1 | |
| 17. | Orthopedic softgoods | 52.8 |
| 18. | Nutrition | 52.2 |
| 19. | Wheelchairs, power | 51.9 |
| 20. | Scooters | 50.3 |
| 21. | Diabetes | 48.7 |
| 22. | Ramps | 45.3 |
| 23. | Support surfaces | 42.8 |
| 24. | Wheelchairs, sport/lightweight | 41.1 |
| 25. | Seating and positioning | 40.3 |
| 26. | Scooter/wheelchair lifts | 39.8 |
| 27. | Wound care | 38.1 |
| 28. | Urological/ostomy | 37.8 |
| 29. | In-home oxygen fill systems | 37.7 |
| 30. | Hot and cold therapy | 36.8 |
| 31. | Orthotics/prosthetics | 32.0 |
| 32. | Liquid oxygen systems | 30.7 |
| 33. | Skin care | 28.6 |
| 34. | Pediatric mobility | 28.0 |
| 35. | Pediatric respiratory | 26.1 |
About Products
How does your company intend to buy most of its products for
2006?
| Direct from manufacturers | 74.4 |
| Through distributors | 45.0 |
| Through buying groups | 31.1 |
Just over half, or 55%, of HME companies responding to the
survey said they are currently affiliated with or plan to affiliate
with a buying group. Other prominent affiliations include those
with home health agencies (39%) and hospitals/physicians (35%).
What are your most important considerations when purchasing
products?
| Price | 83.6 |
| Product quality/reliability | 75.8 |
| Availability/delivery time | 71.4 |
| Maintenance costs/service issues | 51.1 |
| Past experience with manufacturer | 51.1 |
| Manufacturer service/support | 50.0 |
| Customer preferences | 37.8 |
| Brand name | 28.1 |
| Technological/design innovation | 24.2 |
| Referral source preferences | 23.1 |
| Manufacturer financing | 12.2 |
What are your suggestions for stopping or curtailing Medicare
fraud and abuse?
Since the CMS/OIG crackdown on fraud and abuse of Medicare's
power mobility benefit, which began with Operation Wheeler Dealer
in December of 2003, many providers have said they're frustrated
that only a few bad apples have spoiled the industry's reputation
— both with consumers and Congress. This year, we asked
providers for their own ideas on how they would curb Medicare fraud
and abuse. Their suggestions span a range of solutions and reflect
how deeply some providers feel about this industry sore
spot.
“Accreditation”
“Actually get rid of the people committing the
act”
“Assign a task force of DME dealers to help police their
peers”
“Better computer tracking systems”
“Bigger fines”
“Controls for physicians”
“Cracking down when they are caught. Many people have their
fingers slapped and then move on to do it again”
“DMERCs should have straightforward questions for
equipment”
“Do something about what is reported”
“Encourage patients to report, because Medicare doesn't take
suppliers seriously”
“Have Medicare hire more fraud investigators”
“Have the government hire employees with a brain. Fraud
happens right under their noses”
“Hire American Express to process claims. They watch
fraud”
“Keep the [power mobility device] CMN”
“Make doctors more responsible for signing forms”
“Make it very difficult to receive a provider
number”
“Make Medicare regs understandable”
“Penalize NSC/DMERCs for giving supplier numbers to crooks
and for paying crooks”
“Prior authorizations for many products”
“Prosecute and put in jail”
“Spot-checking claims with beneficiaries”
“The DMERCs play a role in identifying fraud and should be
more accountable to help stop it”
“Vigilance”
“Wake up, CMS”
How are you adjusting strategy to prepare for competitive
bidding and other coming changes?
Of providers responding to HomeCare's survey, 75 percent told
us they have no plans to leave HME now, in the next few years or
anytime in the future. But only half — 49 percent —
said they intend to participate in Medicare competitive bidding for
DME. A representative sample of the ways these companies say they
are preparing to remain profitable, whether they enter the
impending bid program or not, follows.
“Accreditation”
“Becoming more efficient”
“By growing”
“Cash products, commercial accounts”
“Cutting costs anywhere possible”
“Doing more with [fewer] employees”
“Diversification”
“Dropping unprofitable lines”
“Expansion”
“Going retail”
“Hard work”
“Hiring a marketing person”
“Implemented new billing and inventory software”
“Larger percentage of private pay”
“Looking for lower-cost product that has the same
quality”
“Looking to increase managed care”
“Making changes in product lines”
“More repairs”
“Moved to larger building with more showroom”
“Moving away from Medicare”
“Moving more to specialty items”
“No longer doing unprofitable business”
“Quality employees”
“Reading as much as we can about previous bids”
“Reducing delivery”
“Strategic alliance”
“Streamline vendors and inventory”
“Supplying only items not covered by competitive
bidding”
“Support DME companies that are bidding”
“Taking a wait-and-see attitude while trying to keep
informed”
“Too soon to tell. No one knows what to expect”
“We are in a small rural area. We hope we will not be
affected”
“Vigilance”
“Whatever it takes”
About the Future
Which best describes your plans to stay in business?
| I have no plans to leave the business | 73.9 |
| I plan to stay in business through 2006 | 5.8 |
| I plan to stay in business through 2007 | 3.6 |
| I plan to stay in business through 2009 | 9.7 |
| No answer | 7.0 |
What are the biggest challenges facing your HME company?
| Competitive bidding | 55.0% |
| Government reimbursement cuts | 44.2 |
| Unethical competitors | 36.1 |
| Accreditation | 30.3 |
| Claims denials | 29.7 |
| Claims processing/payment time | 28.1 |
| Manufacturers selling direct to consumers | 24.2 |
| Paperwork/administrative activities | 24.7 |
| Keeping up with legislation/regulation | 21.9 |
| Staff issues | 19.4 |
| Local HME competition | 18.9 |
| HMEs in Wal-Mart | 16.9 |
How do you plan to grow your business?
| Adding patients | 67.2 |
| Increasing retail business | 38.1 |
| Entering new product areas | 33.9 |
| Expanding into another geographic area | 31.1 |
| More advertising | 23.1 |
| Increasing sales staff | 22.5 |
| Changing product mix | 17.8 |
| Opening a new location in your area | 16.9 |
| Acquisition | 14.7 |
| Specializing business | 14.2 |
| Expanding your showroom | 13.9 |
| Changing payer mix | 11.7 |
About This Survey
Data were collected Aug. 18 through Sept. 30, 2005. Percentages
are based on responses from 360 companies. Not all respondents
answered every question, and some totals may add to more than 100
percent due to multiple responses. Survey methodology conforms to
accepted marketing research methods, practices and procedures. For
a complete copy of HomeCare's 2006 Forecast Survey, visit
our Web site at www.homecaremag.com and click on the button titled
“Purchase Exclusive HomeCare Research.”
