Retail HME Can Be Route to Success

ATLANTA — As Round 1 of competitive bidding leaves the HME
landscape littered with casualties, as audits cripple revenues and
the futures of both Medicare and Medicaid become increasingly
uncertain, providers are looking to move out of their comfort zones
and find new ways of doing business. For some, that means opening
the door to retail.

“More and more [HME companies] are expanding into retail, some
in a desperate, last-minute stab to stay alive, others as part of
an orchestrated strategic plan to diversify their revenue stream,”
said Jack Evans of Malibu, Calif.-based Global Media Marketing.
“Retail is not the only answer, but it is one viable option to help
decrease [Medicare-Medicaid] dependency.”

Evans, a longtime industry consultant, recently formed the
Alliance for Retail HomeCare, an organization that offers
regular webinars on both basic and advanced retail solutions and
allows providers to connect and share ideas via online forums.

“Every week, I get two to three new members,” Evans said. “The
majority have multiple locations. They are running retail spokes
off the main hub store.”

However, while cash sales look attractive to providers
beleaguered by stalled reimbursement and declining revenues, retail
is not for everyone, Evans cautioned.

“A lot of people don’t make it,” he said candidly. “You have to
have the right location, the right staffing, the right management,
and you have to advertise.” Evans said most HME providers spend an
average of 5 percent of their revenue on advertising; retail HME
providers spend 15 percent or more.

In addition, he said, “HMEs cannot afford to compete on price
with marts and chains, as their acquisition cost is often what the
latter sell at retail, so they need to first shop these other
channels locally and make sure they will stock different brands
than those big-box operations.”

A retail operation is very different from a traditional HME
model, he said.

“The number one mistake HME [companies] make when they expand
into retail is that they simply create a showroom in their current
location,” Evans said. “Most traditional reimbursement-driven
[providers] are located in industrial or commercial areas where
they can have large warehouses at low rates. They deliver 90
percent of the products to customers. But when they transition into
retail, this location becomes a destination that is difficult to
find and not convenient.”

If such a provider is going to run a successful retail
operation, it must open a second location, a “strictly retail
showroom” that is at least 1,000 square feet and is visible and
accessible, Evans said. Good candidates for a retail showroom: a
shopping mall, a location on a busy retail street or a store near a
medical office building or hospital.

There needs to be a change of mindset, too, Evans said.
Providers can’t just move their back-office employees onto the
showroom floor and expect sales to flourish.

“They need retail salespeople in order to be successful in
selling HME retail,” Evans said, noting that insurance intake,
verification and documentation specialists do not naturally spend
time with customers to determine their medical conditions and daily
physical issues, then demonstrate the various products that might
improve their quality of life. A retail salesperson does that,
resulting in multiple sales as customers buy the main product and
ancillary items as well.

“Hire by attitude and train them on HME,” Evans advised.

Ideally, the retail sector will grow to at least 30 percent of
the business, while managed care and Medicare-Medicaid revenues
comprise about one-third of the pie each.

“If you have 30 percent retail, you can have a viable business,”
Evans said. “I find that HME providers that have a minimum of 30
percent retail are profitable because they are now focusing on
Medi/Medi patients as retail sales opportunities, and every patient
is now a customer who leaves with one or two add-on related cash
items.”

For more of Evans’ advice on retail HME, see his “Retail 101” columns.