Almost One Month In: Change Is HME’s New Mantra

ATLANTA — After years of trying to fend off debilitating
Medicare reimbursement cuts, HME providers have, as of Jan. 1,
found themselves in a new reality. CMS’ dreaded competitive bidding project has
kicked in and the first-month purchase option for power wheelchairs
has been eliminated. It’s a new home medical equipment world
— and that world is still emerging.

“The new reality is still evolving and probably will continue to
do so for several years,” predicted Neil Caesar of the Health Law
Center in Greenville, S.C. “But it clearly focuses on lower profit
margins, higher volume bundling and requires a more aggressive
approach to finding ways to hold down costs, which certainly may
require holding back certain services.”

“You have to rethink your position in the market,” added Barry
Johnson, president of Duncanville-based Texas Home Medical, which
operates in the Dallas-Ft. Worth competitive bidding area. “We’ve
had people reducing staff and laying off people. Some people have
been giving away oxygen patients.”

The way it was before is not the way it is now, and those who
are slow to respond may become casualties of change, stakeholders
say.

“I think there has been a kind of cordiality among suppliers.
It’s a gentleman’s game and at the end of the day, there was enough
business to go around,” Caesar said. “But I don’t know if
competitive bidding and the economic realities and the reshaping of
regulatory attitudes will allow that.

“I think there are going to be a number of players, especially
players who are big enough, who will attempt domination in certain
markets. Smaller suppliers who don’t address it proactively may
well find themselves without much in the way of referrals.”

Johnson said his area has already seen national providers buying
up a spate of smaller counterparts. Also, he said, companies that
won a majority of bids in the nine CBAs have been aggressively
soliciting business from referral sources, effectively shutting out
the singe-contract winners.

“It appears that the social workers and discharge planners are
opting for the easy way out and are contacting just the bid winners
that won multiple contracts,” Johnson said.

The intense competition doesn’t surprise Caesar. “I think the
new reality will be far more competitive than the market has been,”
he said. “Competitive bidding and other pressures will drive
competitors to seek referral loyalty and customer loyalty more
aggressively than before. Large companies will try to penetrate new
markets and dominate existing markets.”

In fact, Caesar said, with the advent of competitive bidding,
the industry has been focused almost entirely on “access problems,
transition problems and problems with some of the contract winners
perhaps not being able to do the job. But what people haven’t
focused on is the reaction of savvy businesspeople to those
problems. If you’re got the bucks and the presence, the reaction of
those companies is going to be ‘We’ll fix it for you, come to us.
We have four or five or six of the categories, so come to us.’ The
industry has been so focused on looking to Washington and
Baltimore, they haven’t looked over their shoulders at the
competition.”

Such a business climate will require providers to be extremely
savvy in running their companies. Some providers have said they are
cutting back on services, limiting product choice and restructuring
their businesses to accommodate the new reality.

“We may well be heading over the next several years toward a
… model where full service is made available for additional
reimbursement to those beneficiaries whose conditions warrant the
extra service,” Caesar suggested. “This is perhaps not the model
any caring supplier would wish would be in place, but it may well
be the model that costs require be in place.”

It is incumbent upon providers to become sophisticated business
owners, added

Louis Feuer, president of Florida-based Dynamic Seminars &
Consulting. “[We must] understand every detail of our business,
embrace the technology available to help us while ensuring we do
not sacrifice our reputation,” he said. “Although not an easy task,
it is imperative if we are to survive continued government
scrutiny.”

There is one constant in the changing HME world: demographics.
No matter what, baby boomers are coming on strong into their senior
years — 8,640 of them per day, according to AARP. That means
there will always be a demand for HME and a need for someone to
provide it.

“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,” Caesar
said. “A company that can demonstrate to referral sources,
collaborative partners, payers and customers that they offer
superior value will earn loyalty and increased opportunities. The
need for suppliers to recognize and then embrace the business
reality of this market and the market that is revealing itself
… is something they need to do now and act on now.

“Washington will do what Washington will do,” Caesar continued.
“But meanwhile, market share is up for grabs and, when the dust
settles, there’s not going to be a reset button on market
share.”

For more thoughts on the industry’s future, see “Conjuring
Up a New Future” in HomeCare’s January issue.