Building a Business Niche by Niche

Jack Palance had it right. In the 1991 comedy “City Slickers,” Palance slowly leaned over to Billy Crystal and divulged his secret to life: one thing.

That may be the secret to business, too, at least for some providers.

In the wake of the Medicare Modernization Act (MMA), HME owners are scrambling to optimize business plans and stay on track for long-term success. According to some industry experts, a good option may well lie in one thing — expanding your business to solve the problems of a specific customer group. In other words, your future could be hiding in one or more of HME’s niche markets.

Specialty — or niche — business has a seductive sound, especially as the respiratory and mobility markets, long the mainstays of home health care, are being tested by regulatory and payer entities. And, say the experts, diversifying a company’s product/service mix can be a counter to expected reimbursement cuts and competitive bidding.

Jack Evans, president of Global Media Marketing, Malibu, Calif., urges providers to diversify in order to prepare for future cuts and to help relieve dependence on Medicare and Medicaid.

“Providers who have diversified and whose businesses consist of a third Medicare-Medicaid, a third private pay or worker’s comp and a third in retail cash sales are the ones who are going to survive all these changes in Medicare and competitive bidding,” he explains. “So, I think you have to diversify, and part of diversifying is finding a niche.”

Wallace Weeks, president of The Weeks Group, a strategy consulting firm in Melbourne, Fla., says providers must consider their own visions and values and examine core competencies to determine whether they should expand into, or focus exclusively on, an HME specialty.

Both Evans and Weeks agree that specialty marketing adds value to HME companies. And both say providers can successfully add niche products and services to their core businesses — but not without careful research and preparation. A market niche must fill a true need, they say, or it won’t remain a profitable niche for long. Providers should survey the local demographics, examine the competition and talk to referral sources about unmet needs.

“You have to find out what the medical needs are for your own community,” says Evans. “Don’t assume there is not an available niche that has not been filled.”

What cannot be underestimated, says Weeks, is competitive intelligence, which allows a company to anticipate market changes and make proactive decisions.

“Competitive intelligence doesn’t just deal with who else is eating in the same trough,” he stresses. “Competitive intelligence deals with staying on top of the regulations, the trends in reimbursement, the trends in devices, new competition and substitutions of [well-established] products.”

Weeks also points out that providers can be niche players in areas that seem to be dominated by national chains. Competition, even on that scale, should not close the door for “a person who uses his or her imagination to build strategies and execute them well,” he says.

Local providers can compete in niche areas, says Evans, by focusing on what has always been key for successful HME companies: education and service.

Building niche business is not for everyone. But for some providers, solving a community’s need can, in turn, be their own solution for success.

On the following pages, manufacturers, suppliers, providers and others discuss the pros and cons of only a few of the specialties in the HME market that providers might consider.

Is There a Rich Niche for You?

Business experts advise considering the following points as you assess the feasibility of entering any niche market that is new territory for your company.

• Determine the exact products and/or services you will provide.
• Define the actual and projected size of the local consumer base.
• Estimate the annual growth rate of the market.
• Gauge the life-cycle stage of the market. For example, is it just beginning or in full growth? Has the market reached maturity or is it in decline?
• Identify the principal entry and exit barriers. For example, will you be discouraged by any necessary clinical requirements or protocols? What kind of financial resources will you need in reserve to meet your obligations if payments aren’t received for a while?
• Investigate the reimbursement realities (payer scope and coverage).
• Analyze the market to determine the number and variety of competitors and, if one is present, the strength of the dominant player. Can you compete successfully?
• Establish the nature of regulatory exposure.
• Figure out the risk-to-reward ratio for diversification, and weigh the consequences of market entry against not expanding into this new product/service specialty.

Providers Can Become the ‘Go-To Guys’ For Incontinence Needs

It’s not a fun topic to discuss. Yet, incontinence affects more than 13 million Americans, according to the National Kidney and Urologic Diseases Information Clearinghouse. For some, it is a temporary disorder, but for many it is a chronic condition that requires the use of incontinence management products such as liners, pads and protective underwear.

Fortunately, more people are becoming comfortable discussing the condition, which means HME providers have an opportunity to meet consumers’ growing demand.

“The market is expanding, and there is more awareness of the products that are available,” says Al Ercol, SCA Personal Care’s national director of sales. He says the Philadelphia-based company is seeing 20 percent growth in the home care market for incontinence products.

But in a retail environment saturated with superstores and grocery store chains that offer incontinence products, can HME providers become specialty suppliers? You bet, says Invacare Supply Group’s Greg Bosco.

Director of merchandising and marketing for the Holliston, Mass., company, Bosco says incontinence is one of its fastest-growing markets. He notes that consumers — both patients and their caregivers — may choose an HME provider over a mass retailer for incontinence needs because of privacy concerns.

“I do think there’s something to be said for going into a store specializing in health care to buy these products versus walking through Wal-Mart with your bag of Depends,” he says. “For that reason, we supply our products in discreet packaging so that if it’s left on the customer’s front porch in a home delivery … people just see a cardboard box; they don’t see a cardboard box that screams ‘diapers’ on it.”

Ercol says home care providers should consider specializing in incontinence supplies because consumers are looking for assistance and expertise in understanding the options available to manage the condition. “This is also true for caregivers who need to understand what options are available as well as the total effect an incontinent person will have on the whole family,” he explains.

“There is a huge opportunity, because if you are a provider and are willing to educate and bring the caregiver or the consumer up to speed on this topic, you become the expert, and then the point person for them to come back to.”

When thinking about incontinence as a specialty, Ercol says, providers must:

• Look at demographics to determine inventory needs;
• Position themselves as the experts;
• Offer samples and coupons;
• Be competitive with pricing;
• Offer products that are not available through mass retailers.

In this niche market, HME providers can give customers the education and help they need to determine the most appropriate products for the incontinence issues they face — in a discreet setting that the big box stores simply can’t offer.

Specializing in Supplies Encourages Repeat Sales at Kohll’s

Kohll’s Pharmacy & Homecare, a full-service pharmacy and HME company in Omaha, Neb., has created a system that encourages repeat sales, customer loyalty and confidence from its referral sources. With its future order division, the company has devised a system to provide customers with niche-market supplies including diabetes, incontinence, ostomy and nutritional products on an ongoing basis — all with a personal touch.

The idea, according to Laurie Brown, marketing manager of the 55-year- old company, is to ensure patients never run out of supplies and are not inconvenienced by coming into the store to pick up the products.

“For those who need products every month, we call them at week three to see how they are doing on their supplies,” she explains. If all is going well and there are no problems or changes in the customer’s situation, Kohll’s has the products delivered to the customer straight from the manufacturer or supplier.

The future order division employs six people, three of whom are on the phone continually. “Generally, they make outbound calls 75 percent of the time,” Brown says.

The personal touch is effective. Brown says customers consider the relationship a friendship, which provides a sense of comfort for caregivers and physicians alike. “Physicians really like that aspect because it’s just one more set of eyes … keeping a lookout on their patients and making sure that everything is going as well as it can be,” she says.

From a business standpoint, Kohll’s future order division makes great sense. By placing customers on a regular delivery schedule, employees are able to assist additional clients. It also saves space in the stock area since most of the products can be drop-shipped to customers’ homes. Additionally, since Kohll’s is a full-scale pharmacy and medical equipment provider, the future orders staff can also market to customers for their prescription business and other HME needs.

Louis and Leona Kohll began serving the Omaha community in 1948 with only one employee — their son, Marvin. Today, the company employs 175 people at seven locations and is led by Marvin and his three sons — Louis, Jr., Justin and David.

Service is what distinguished the business 55 years ago, and it continues to be a cornerstone of the company’s success. “At Kohll’s, the whole customer-oriented philosophy is not only evident in our future orders division, it’s throughout the whole company,” emphasizes Brown. “If our patients have any questions or concerns, we want to let them know they can come to us, because we are the experts in the field.”

Although the success is exciting, Kohll’s continues to raise the bar. Plans are under way to expand the future orders division to a regional, and then national, operation. In the meantime, the company will continue to concentrate on servicing its customers. “We not only want them to be happy but we want them to be as healthy and independent as long as possible,” Brown says.

Incontinence Affects

• An estimated 35 percent of women 65 years or older and 10 percent of women younger than age 65
• An estimated 22 percent of men 65 years or older and 1.5 percent of men younger than age 65
• And, it is estimated that 30 to 50 percent of institutionalized adults 65 years or older have urinary incontinence

Source: Obstetrics and Gynecology, 2001

Pediatric Focus Yields Great Rewards, But They May Not Be Financial

Doing business in the pediatric mobility and medical equipment market may, at times, seem like an uphill battle. Providers face a highly variable reimbursement system and the frustrations of ensuring each young client has exactly what he or she needs. But the niche can be rewarding as providers join a comprehensive care team of clinicians, family members, teachers and payers to improve children’s lives.

Carving out a specialty in pediatrics, according to Steve Scribner, vice president of Snug Seat, demands one thing — you have to love kids. As he describes it, the equipment used by children can be likened to building blocks. “This is not rehabilitation,” explains Scribner, who has worked with the Matthews, N.C., supplier of children’s special needs products for five years. “It is ‘habilitation.’ You are not restoring ability; you are broadening their world with new skills and independence.”

“You really need to have a sense of caring and a sense of desire to help children and their families deal with the situation they’re in,” says Kris Wohnsen, vice president of R.E.A.L. Design, a Centerville, Mass.-based manufacturer of pediatric seating and positioning products. If a provider generally offers geriatric products and wants to get into pediatrics “just for more business, that’s not a good reason,” she adds.

The specialty demands a lot from providers. Just the equipment itself requires a vast knowledge base. In the mobility arena, the National Registry of Rehabilitation Technology Suppliers (NRRTS) certification and the Rehabilitation and Engineering Society of North America’s (RESNA) assistive technology supplier (ATS) or assistive technology practitioner (ATP) designations are industry standards.

This means that carving out a successful pediatric niche almost certainly will require additional training for staff-and could mean hiring more qualified employees.

And an unprecedented variety of pediatrics products on the market requires that providers have ever-broadening expertise. “There are a myriad of products out there. It can be overwhelming. The provider almost has to be an encyclopedia,” Wohnsen says. “But that is also a good thing, because today there are a lot more needs being met.”

Many pediatric providers entered the business through a personal experience, says Wohnsen. Perhaps they or someone they know raised a disabled child.

But once they enter the field, providers must take on a new profession they didn’t see coming: fund-raiser. One of the specialty’s challenges, says Scribner, involves investigating and locating funding for products that are not covered by Medicaid or commercial insurance.

Wohnsen adds that parents are struggling to find funding. “There’s a lot of new red tape and procedure involved to try to get reimbursement for the equipment,” she notes, adding that providers must be sensitive to families in those situations. For that very reason, a pediatric provider shouldn’t stop at Medicaid and other conventional funding sources.

Corporations and other organizations — for-profit and nonprofit, public and private — offer funding alternatives for parents with children in need. Organizations like the Ronald McDonald House, community hospitals and the Shriners have picked up funding where Medicaid stopped. But it’s often left to the pediatric provider to help find those organizations, Wohnsen explains.

Because funding is volatile and inconsistent from state to state, it creates additional challenges for companies that operate across borders. And according to Foster Davis, national sales manager for Simi Valley, Calif.-based Freedom Designs, the tighter it gets, the more difficult it will be for providers to continue the service that is expected.

But pediatric specialty providers are a rare breed. It is not love of money that drives them.

“They believe in what they’re doing,” says Davis. “They believe they are doing a great service for very needy people.”

Both Davis and Scribner say the emotional rewards from specializing in the pediatric market are enormous, especially the feeling that occurs when a child’s life has been changed for the better.

“It’s a good feeling to help a kid and make [his or her] life more accessible — it feels right,” says Davis. But he points out that’s not the sort of thing that can be put into a business model.

“[Pediatrics] is not something to go into if you think you’re going to make a fortune.”

In HomeCare‘s annual Forecast Survey (December 2003), 30 percent of responding providers said they plan to buy pediatric mobility products in 2004, while 28 percent said they intend to purchase pediatric respiratory products this year.

Staying Focused on Children Works Best for This Tennessee Provider

A love for children and the joy received in helping them obtain mobility and independence are what drives employees at Henley Medical-and the reason why owner Thomas Henley created the company 16 years ago.

Henley, who holds a bachelor’s degee in psychology and a master’s in special education, began his career as a special education teacher and then became the principal of a school for children with special needs. According to Randy Roark, who handles marketing for the Chattanooga, Tenn.-based provider, these experiences taught Henley that children are “not just small adults.”

During the past 13 years, the company has grown in reputation and size. With nine employees, all of the staff members directly involved in client care are certified as assistive technology suppliers (ATS) by the Rehabilitation Engineering and Assistive Technology Society of North America (RESNA) and are members of the National Registry of Rehabilitation Technology Suppliers (NRRTS).

Its location in Chattanooga presents a unique situation for the company. Henley Medical’s clients come both from Tennessee and nearby Georgia, which means it has to navigate reimbursement for two different state Medicaid programs. The company’s locale also includes some prestigious neighbors in the disability community. Chattanooga is home to the Orange Grove Center, a nationally recognized educational and vocational facility for developmentally disabled children and adults, as well as the editor of Exceptional Parent magazine, a consumer publication for families of children with disabilities.

“There are a lot more clinical resources for people with disabilities than may be typically expected for a town this size,” Roark says.

The pediatric provider’s success can be attributed to a commitment to remain true to its mission. For Henley and his staff, this means a continued concentration on the disabled pediatric population. By keeping that focus in the forefront, the company can streamline its marketing efforts toward clinicians and referral sources. Often, this means turning down business, but Roark emphasizes this is necessary to ensure the patients who need them most can be served — even though it can be frustrating.

“Once you start narrowing your primary focus, there are people you would like to be able to do something for who fall outside of that focus, and you really wish you could help them,” he says.

But staying on track by serving the complete needs of a specific customer group has worked best for both the company and its patients.

Women’s Health Market Requires Compassionate Touch, Full Commitment

When approached with a combination of good business sense and a strong dose of compassion, women’s health care can be a lucrative specialty.

The market encompasses post-mastectomy products such as breast prostheses, wigs and lingerie to breastfeeding pumps, supplies and compression hosiery. Even though these products address varied needs, their common denominator is that women prefer to purchase them in an intimate, non-threatening setting.

In the United States, more than 200,000 new cases of breast cancer are detected each year, according to the American Cancer Society. Although many women elect to have reconstructive surgery, approximately one-third choose to be fitted with a breast prosthesis.

Those women, say experts, want the experience to be as emotionally painless as possible. First and foremost, that means a pretty, feminine environment with knowledgeable and caring salespeople.

“It is not a pleasant thing to go through, so the environment has to be very special,” says Mimi San Pedro, president of ContourMed, Little Rock, Ark. “It is also critical to have salespeople who are compassionate because it is difficult for the survivor to go through [something like this and stay] upbeat about it.”

Aside from providing the appropriate atmosphere, providers of post-mastectomy products must remain committed to a complete inventory. Unlike customers for some HME products, women who come in to purchase breast prostheses expect to be fitted for the right one and wear it out that day, says Judi Simon, president of Waco, Texas-based Capital Marketing Technologies.

For that reason, providers must have extensive product knowledge and deliver it with understanding.

“There are many innovative products that are being introduced in the marketplace that address a lot of the issues survivors face,” says San Pedro. “Manufacturers in recent years have been doing an excellent job of listening to the consumers, addressing those issues and coming up with products that will fit their lifestyle better.”

A “complete inventory” of these products isn’t as financially burdensome as it sounds. “Retailers often believe they have to have a huge range of breast forms in stock,” explains Simon, “when in reality, they can have a minimal amount [of certain products] because we know through sales history what they’re going to need and what 90 percent of women would wear based on historical data.”

Providers who want to specialize in women’s health should also consider lines outside post-mastectomy products to complement their offerings. And they must understand their individual market to be successful.

“If you are in a retirement area, you probably do not need to focus on breastfeeding, but if you’re in a small town that is 50 miles away from a major metropolitan area, you would want to have some breastfeeding supplies, wigs and surgical hose,” Simon explains.

She recommends talking to hospital personnel and case managers to determine the market’s needs. For example, if you decide to carry wigs for women going through chemotherapy treatment, you should know the target age group of your potential customers, which could determine whether you need to supply more long- or short-haired wigs. This type of specialized knowledge can reduce excessive inventory and create happier customers.

“The consumer we have today is a knowledgeable consumer,” Simon stresses, advising providers to be prepared to answer their questions. As in other areas, a strong community presence can contribute to a provider’s success in women’s health. Simon advises holding open houses and informing organizations such as the American Cancer Society of the products and services an HME provider offers.

Choosing to specialize in women’s health can be a rewarding experience when providers focus on treating their customers with respect. “It goes back to service,” says Simon. “When you get into specialty shops, service is key.”

Barbara Graves’ Personalized Service Meets Women’s Needs

Like many women who specialize in post-mastectomy products, Barbara Graves got into the business because cancer touched her in a personal way. In 1973, the same year she opened a lingerie store in Little Rock, Ark., a friend was diagnosed with breast cancer. When her friend could not find a prosthesis, Graves added a post-mastectomy department to her store. More than 30 years and 5,000 square feet later, Barbara Graves Intimate Fashions has grown into a specialty shop featuring lingerie, swimwear, loungewear and a complete mastectomy department.

Graves has focused on personalized service — a must when it comes to working with breast-cancer survivors. “We recognized many, many years ago that when a lady woke up on a Monday morning, for example, and decided that this was the day to be fitted with a breast prosthesis, she did not want to have to make an appointment, and she did not want to have to wait one to three weeks to special-order one,” explains Graves. “She wanted immediate gratification, and we feel that to provide that is our mission.”

Beyond providing superior service, Graves remains committed to the community. Her business was one of the original sponsors for the Susan G. Komen Race for the Cure fund-raiser 10 years ago, and for the past six, it has won the event’s small-business division with up to 650 team members participating in the event.

Although there are challenges to operating this type of business according to Graves, mostly inventory-related, she continues to think ahead by seeking out innovative manufacturers and suppliers.

Keeping her eyes open for new products and new opportunities remains an essential element of Graves’ success — and keeps her efforts centered on the reason why she entered this specialty niche: to help women in need.

Based on 2004 estimates from the American Cancer Society, breast cancer will account for 32 percent of new female cancer cases this year.

Diabetes Market Can Be Lucrative, but Consider With Caution

When you look at the numbers, it appears that specializing in products used for diabetes care and management is a home run. According to the National Diabetes Information Clearinghouse, 18.2 million people — 6.3 percent of the population — have diabetes. Of these, more than 5.2 million are undiagnosed. But tough competition leaves room only for providers who are ready for the challenge.

“The market for diabetes supplies is growing rapidly,” says Wallace Weeks, president of The Weeks Group, Melbourne, Fla. “I don’t know that it is a good choice for everyone, but it’s a good choice for those who will bring the discipline and build a business machine for services.”

On the other hand, Weeks says, entering the diabetes niche — which he projects will maintain steady growth to 2008 — does present a new level of risk. He urges providers to consider the market carefully before jumping in.

But the numbers are tempting, and providers are looking at the increases in repeat business and retail sales that the burgeoning number of diabetes customers can mean.

“If you have a diabetes patient, you will have repeat sales because you will need to continue selling them test strips,” says Lynne Brown, director of U.S. sales and marketing for HDI Diagnostics, Fort Lauderdale, Fla. “You will also have loyalty for other products. If a person with diabetes is walking into an HME or an independent pharmacist, he may come in for test strips, but he also needs foot care, eye care and different medications and medical supplies, so that’s a great source of revenue in addition to that made from the meter and test strips alone.”

Greg Bosco, director of merchandising and marketing for Invacare Supply Group, Holliston, Mass., adds that providers can be profitable in this area by helping these patients live happier, healthier lives. To be a true niche player in the diabetes market, Bosco says, “You must make sure you have the right products and make sure that you are offering your customers the entire healthy life program. That is how you can not only be valuable to your patients but also make some additional money.”