Provider Profiles

Part of the Picture

Bluegrass Oxygen gets new digs and prepares for growth.

When Mike Marnhout looks into the murky future for the home
medical equipment industry, one thing is clear: His company will be
a part of it.

He fully recognizes that it will not look the same, but Bluegrass
Oxygen
, based in Lexington, Ky., will still be in the HME
picture, he says firmly. In fact, Marnhout says, he plans to
grow.

Grow? In this environment where, it seems, HME is the target of
relentless reimbursement cuts, ever-stiffer regulations and
calamitous projects such as competitive bidding, which threatens to
shut down massive numbers of HME providers altogether?

“There's always an opportunity in life and in
business,” Marnhout says. “You do what you can with
those opportunities.”

It's a philosophy that has paid off for Marnhout, who has been
in the business for 29 years and who started Bluegrass 13 years
ago. In addition to headquarters in Lexington, Bluegrass Oxygen has
five other locations and boasts 47 employees.

“We cover about 122 counties and six states —
Kentucky, Indiana, Ohio, West Virginia, Virginia and
Tennessee,” Marnhout says.

Evidence of his faith in the future is Bluegrass' new $1
million, 18,000-sq.-ft. administrative hub. The company, which
formerly had housed its billing and administrative functions in two
rented buildings, moved into its new home June 1. The new nerve
center also serves as a central warehouse and an intake center,
Marnhout says.

And he's got even bigger plans.

“We're going to have our own repair center for oxygen
concentrators. I've got the room to do it. And we are looking at
doing all of our own refills,” the Bluegrass president and
CEO says. “We're buying a truck and we're doing it. You've
got to streamline.”

The Writing on the Wall

If all this sounds a bit too enthusiastic in this glum and
often-frightening HME era, make no mistake. Marnhout might revel in
the notion that his new headquarters is three minutes from his home
and five minutes from the golf course, but he's a serious provider
with keen business instincts. He knows very well the threats to
this industry and the perilous positions in which some providers
find themselves.

When he talks about taking advantage of opportunities, Marnhout
recognizes that some are not in a position to do that. “Some
[companies] can't because they are so heavily loaded with Medicare,
and it crushed them,” he says. “Fortunately, we are big
enough to absorb this.”

Not that his business has not been hurt.

“We lost almost 500 Medicare patients in January,”
Marnhout says, referring to the effects of the 36-month oxygen
rental cap that was implemented Jan. 1. “I knew it was going
to happen with the cuts and the cuts and the cuts.”

Five years ago, he saw the writing on the wall and started
making changes. He began the hunt for a location that could house
all of the company's administrative and billing work and reduce
costs. He finally found it early this year. The place required some
work; the parking lot needed new asphalt, the interior and exterior
needed sprucing up.

To pay for it, Marnhout got a bank loan for 50 percent of the
cost, put up 10 percent of his own money and applied for a Small
Business Administration loan to cover the other 40 percent. His
good credit allowed the SBA application to sail through, and it was
approved in four days, he says.

“It took us two months,” Marnhout says about the
renovation, which also included new software and communication
systems. Already, it is paying off.

Each location used to purchase its own supplies. Now, says
Marnhout, “We're able to buy in bulk and get it out to the
offices instead of their waiting. You can have scheduled deliveries
for everything from office supplies to equipment.”

Buying in bulk allows him to get cheaper prices on goods and pay
less, if anything at all, in shipping costs, he says. The result is
that Marnhout expects to realize a savings of at least “a
couple of hundred thousand dollars in the first year.”

As well, he says, “All the shipping comes in here. It's
extremely convenient. We've got the loading docks for the big
trucks. That's always been a nightmare before. This has worked out
very well.”

His new communications system is also a money-saver. Marnhout
got rid of his former telephone system and now uses local companies
to provide his phone service. It's not only easier (“If I
want to call one of my other locations, I just need to punch in
four numbers,” he says) it is also on track to save him
$50,000 to $60,000 a year “easily.”

He's also sold on the company's new Brightree software system.
It has allowed Bluegrass' new headquarters to function as a central
intake center, he says, and that lessens the possibility of
mistakes in input. Best of all, he says, it has positioned
Bluegrass for the future.

“We've been planning this for a long time,” he says.
“With all the changes that are coming, this gives us an
opportunity to grow.”

While oxygen accounts for 70 percent of the company's revenues
(with 60 percent of its business from Medicare), Bluegrass handles
all other DME except power wheelchairs and it doesn't do infusion
— yet.



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