Where beach balls mix with rollators — and business is hot!
by Susanne Hopkins

If there's a bright spot in the home medical equipment sector in
Naples, Fla., it could well be Sunshine Respiratory & Medical
Supply.

It's not even a teenager yet, but the 11-year-old company is
pulling down $25 million in annual revenue from its five retail
pharmacies, including two locations that focus on HME. And it's
doing that by combining beach balls and flip-flops, stamps and
packages, ice cream and sodas with prescription drugs and oxygen
concentrators.

Not your usual recipe for an HME provider, but then, Sunshine
doesn't subscribe to a universal approach to doing business.

"We started Sunshine Pharmacy with a vision to get back to the
old-fashioned neighborhood pharmacy feel in our retail stores,"
says owner and pharmacist Del Parrish in a video on the company's
website.

That means responding to particular needs in the individual
locations where Sunshine, which opened in February 1999, now has
pharmacies and HME businesses.

"The fact that we are independently owned and operated gives us
the flexibility to meet the customer's needs on a more personal
level," says Ken Maxwell, the company's vice president of sales and
marketing. While the core business is the same, each location is
tailored to its particular locale. "You don't have that
cookie-cutter style," Maxwell says.

The company polled the communities in each location to create
its neighborhood-specific stores. At three of Sunshine's branches,
for example, you can buy postage stamps or mail packages at the
U.S. Postal Service or UPS locations inside.

"One of our locations is next to several residential
communities, so having a post office there is a favor. People can
come in and do any sort of pharmacy business they need and do any
medical equipment business they need [at the same time]," Maxwell
says.

At the GoldShore location just a block from the beach, you can
stock up on suntan lotion, flip-flops and beach towels. Another
location carries sodas, water and ice cream.

"You wouldn't drive across town to get an ice cream bar, but if
you're in the neighborhood pharmacy or DME, you'll pick one up,"
Maxwell says. "It helps get people in the door."

Come On In

Getting people in the door. Sunshine believes that is going to
become even more critical as the HME sector gets squeezed by such
forces as competitive bidding, audits and rapidly declining
reimbursement.

"HME is not something people think about until they have a need
for it," Maxwell says. "The more variety you have, the more reason
you have to bring people into your store, and they'll tell others,
'I remember seeing that at Sunshine when I was there.'"

Sunshine is actually made up of three divisions —
pharmacy, respiratory and medical supply — but there is a
unique quality to each store. "This all came about by the belief
that to be successful and profitable, you have to adapt to your
environment," Maxwell says. That's what got Sunshine into the HME
business in the first place.

"A few years ago," Maxwell recounts, "we saw that the changes
being made to Medicare's Part D coverage would have a significant
impact on our bottom line. Plus, as a pharmacy, customers came in
all the time looking for various HME items. So instead of turning
these customers away, the decision was made to expand into the HME
business"

Sunshine opened one location as a test, and when that proved a
success, it purchased a competitor, giving it two key HME
locations. The company is looking to open even more stores in the
near future, Maxwell says.

Even the HME locations aren't the same, however. Sunshine's
major HME shop, known as Sunshine Medical @ Palm, is directly
across the street from a major hospital and next door to a private
medical center.

"It's a high-traffic location, so we've made it very
retail-friendly," says Maxwell. "We remodeled the interior to make
more open space, added a mobility section, four patient fitting
rooms and more display space. Instead of customers looking at
thumbnail pictures of an item on the Internet, they can come in,
pick it up, look at it, test it (if appropriate) and then decide if
it's what they want, all the while getting advice from qualified,
professional staff."

Sunshine goes beyond basic HME, Maxwell says. "We do a lot of
wound care, a lot of rehab and mobility and we carry a lot of DME
items that people don't usually think about," he says. "The typical
customer, when they think of DME — if they think of it at all
— thinks of wheelchairs, oxygen, hospital beds. But when they
come into the Palm store, they walk around and say, 'Wow, I didn't
know you carried all this."

The company also carries lift chairs, scooters, reachers, other
aids to daily living and boots. Here, Naples' wealthy demograpic
plays a hand in product mix. Its downtown GoldShore location,
Maxwell confirms, carries more retail power mobility, and it's not
uncommon for customers to walk in and buy two lift chairs at once
because they want a matching pair. "It's million-dollar clientele,"
he says.

With 25 competitors within 10 miles in the Naples area, being a
diversified company with diversified locations has paid off,
Maxwell says.

"It has given us an edge over our competitors," he believes.
"Being in Florida, we have a lot of competition. Some of our
competitors only do respiratory, some only do DME, some do
Medicare, some don't do Medicare. At Sunshine, you can get all
these services with one company. It makes our company more of a
one-stop-shop."

Stay Awhile

Frankly, Sunshine is banking that its diversification of
business and products within each location will help it
survive.

"All this is a result of innovative thinking — staying
ahead of the game to meet the challenges of the industry and meet
the changing needs of our customers at the same time," Maxwell
says. "It has paid off by affording us tremendous growth in the
face of increasing regulations, reimbursement cuts, slow economy
and competition."

Sodas, beach balls and reachers might not seem important in the
grand scheme of things, he acknowledges. "If you think of them as
little things, it's insignificant. But when you look at the big
picture and you look at your bottom line, that's when you see the
payoff."

Will it be enough in the face of the big game-changer, namely,
competitive bidding? Maxwell believes Sunshine, which will be in
Round 2, is nimble enough to change as needed. The makeup of the
HME division's revenue is currently about 48 percent Medicare, 27
percent private insurance and 25 percent private pay, but that is
likely to fluctuate.

"The current HME industry is very complex and is in a state of
panic. Medicare is making deep cuts, and many HME owners are
wondering if they'll be able to stay in business," Maxwell says.
"We feel our approach will not only help us survive the current
environment but ultimately help us gain market share, expand
services and, therefore, maintain and even increase profits."

That won't come about simply by cutting costs, he says.
"Companies are looking to streamline operations, cut costs wherever
possible," Maxwell says. "You don't want to cut your costs to the
point of cutting your services. If you cut your services or how
things are provided, you are cutting your wick at both ends.

"You also want to look for ways to bring in new revenue, and
that's where this diversification comes in," he continues. "This is
why each of our locations is slightly different. Each store brings
in additional revenue by providing items unique to their locale.
This is also why we've expanded into our various services. Each
service is different yet [they comlement] each other, and the
company as a whole prospers."

There's no doom and gloom at Sunshine, even with formidable
challenges facing the industry. Says Maxwell, "We are already
looking for a third HME location. The decision right now to expand
with the economy the way it is and impending Medicare cuts is a big
decision, a big financial decision. And it is one a lot of
companies are not going to make. Without looking at the future and
without being proactive, they are just going to let these problems
hit them in the face.

"If you can see it coming at you and you react, the impact is
going to be less significant on your bottom line."

Bright Ideas for Success

What does it take to make it in today's home medical
equipment environment? The key element, according to Ken Maxwell of
Sunshine Respiratory & Medical Supply, is quality
employees.

"First, hire the best, most qualified people Then, make sure
that everyone knows they are valued and each one is a critical
component to the overall success of the business," Maxwell says.
"When your employees feel they are needed, valued and appreciated,
they do their best."

It is especially important to have a competent billing staff, he
says. "You can do all the business in the world on the front end,
but if you can't collect for it on the back end, you're digging
yourself into a hole."

Here are some other guidelines that are working for Sunshine,
according to Maxwell.

  • Don't panic! Make sure your business plan is
    solid and that you continue meeting your patients' and referral
    sources' needs.

  • Don't be afraid to change your approach. What
    worked 10 years ago may not work today. What worked five years ago
    may not work today. What worked yesterday may not work today.

  • Make sure you're documenting and billing
    everything as accurately as possible.

  • Don't just cut back; look for ways to expand your
    revenue.
    Ask yourself, "What else do my customers
    want?"