Medtrade Spring 2009: We’ll Manage the Changes, Providers Say

LAS VEGAS — Three main issues were on the agenda and on
providers’ minds as HME stakeholders gathered at the Las Vegas
Convention Center for Medtrade Spring, March 24-26: the
36-month oxygen cap, the 9.5 percent cut and the revived threat of
competitive bidding.

Facing the reimbursement challenges is tough, some providers
said, but they also said they plan to move their businesses forward
— albeit in very different ways.

Cliff Woolard, president/CEO of Home Med-Equip in Concord,
Calif., opened a retail location two years ago that is now in full
swing, and he is planning more. “It’s a great revenue source,”
Woolard said at the Las Vegas expo. But Woolard, who attended the
show with his brother John and cousin Joel, both also involved in
the family business, said the company began preparing for the
reimbursement cuts several years ago.

“In 2004, we began to look at alternative oxygen systems from
the standpoint of reducing delivery costs,” he said. “At that point
we were heavily leveraged in liquid oxygen. That was our
predominant ambulatory oxygen system, so we began the process of
evaluating different types of oxygen systems that were out there.”
The company settled on a home filling system, and “when the cap
came along, it just proved we had made the right decision in going
with the non-delivery method,” Woolard said.

He has now converted 90 percent of the company’s oxygen
customers to non-delivery, “so we didn’t take a huge hit,” Woolard
said. “The amount our company was impacted by the cap was less than
10 percent.”

Even so, he said, “it’s tough to lose 10 percent of your revenue
at the start of the year plus take a 9.5 percent cut plus have the
Medicare deductibles. January might possibly have been one of the
worst cash flow months in the history of the business, but we made
it through and here we are getting ready to start April.”

That’s the good news, Woolard said. The bad news is “there are
still other issues related to the cap,” the biggest being how to
maintain service to patients who move. And if the cap should be cut
further — to 18 months or under — “we probably cannot
be in the oxygen business. It’s just that simple,” Woolard said,
although he noted the company has diversified its income through
other DME and enteral business.

Laura Hafford of Texas DME in Cleburne, Texas, related what some
might call a drastic approach in dealing with both the oxygen cap
and competitive bidding.

Hafford’s company bid in Round One but didn’t win. “When we saw
how all that played out, we decided then we were going to
streamline our company and focus on the things we do the best,”
said Hafford, explaining the company now concentrates on complex
rehab and non-Medicare disposable supply. “Oxygen wasn’t something
we wanted to continue in making our company leaner,” she said,
pointing to the possibility of a Round One rebid.

The company is now in the process of downsizing, from three
locations to one and from 40 employees to 18. “If you have an
efficiently run company there is a lot of opportunity for growth,”
Hafford said, “but if you are not run efficiently, you can’t
grow.”

For his company to absorb the 9.5 percent cut, complex rehab
provider Tim Pederson, CEO of WestMed Rehab in Rapid City,
South Dakota, turned that lemon into lemonade.

“Maybe this won’t be the popular thing to say, but the 9.5
percent cut made us a better business,” Pederson said. “It forced
us to do things that we wanted to do in the past to maximize
efficiency but we didn’t want to go through the pain [to do]. Now
that we’ve done those things, we are a much better business.”

As an example, WestMed enacted purchasing formularies for
complex rehab and products. “In each product and accessory code we
have one or two options for our clinicians to use to fill orders,
whereas in the past they could choose anything they wanted,”
Pederson said. “Because we simplified that, limiting the variables
by limiting choice has streamlined our entire order intake process
and our fulfillment process.

“Now,” he continued, “our patient service representatives have
fewer balls to juggle when they are creating a chart for these
individuals. My clinicians can spec out a product, put it on a
formulary sheet printout, mark the proper boxes, put the patient’s
name on there and then turn it over to customer service and let
them input all the orders. Before, my well-paid clinicians were
doing administrative drudgery work instead of being productive in
what they do. So [the cut] actually made us a better business and a
much more effective provider of complex rehab.”

The formulary initiative has been so successful, in fact, that
Pederson said he may do the same thing to streamline his company’s
respiratory and prosthetics sectors.

Still others are looking to get into the HME business despite
the industry’s circumstances.

Jeff Parenteau, owner of Sunshine Senior Care in Denton, Md.,
was scoping out both Medtrade Spring’s educational sessions and the
variety of products on the show floor. “We’re already providing
in-home care, from companion care through end-of-life. We’re in a
very rural area, and many of our clients are asking us for
equipment and supplies and we just end up sending them somewhere
else,” Parenteau explained.

“Whenever there are changes in the industry, it may be a
negative for people who have already been in the business for 20
years. But if you’re just starting out, there may be opportunities
there if you set yourself up to work under the new conditions
versus the old conditions.”

Consultant Wallace Weeks of Weeks Group also noted an interest in the
industry from “sophisticated money,” or private equity investors,
who were walking the show. “It bodes well for the industry. I think
it means they recognize things can be done differently,” Weeks
said.

“From time to time, providers are probably going to have to
adjust their business to new models that will come into this
industry, but the world seems to recognize that the demand is not
going away.”