Staying the Course

At a time when most in the home medical equipment industry admit their view of the future for their companies is cloudy, Bruce H. Callahan has a clear vision — and perhaps one secret to success for privately held HME providers.

Callahan is the president of Ultra Care, a 14-year-old company with three branches that is based in Melrose Park, Ill., a suburb of Chicago. With everyone else in the industry, he has suffered deep reimbursement cuts, fickle health maintenance organization fee schedules, hold-ups in payments, increasing governmental red tape and a host of other current and looming threats to the HME business.

Still, within the last two years, Ultra Care’s revenue has grown from $10 million a year to more than $30 million this year — and it looks to keep on growing.

What’s the secret?

“We’ve stayed the course of a one-stop shop,” says Callahan, whose company offers respiratory care, durable medical equipment, infusion therapy and supplies. “In some years, we weren’t as profitable. But over the years, we’ve grown and become very profitable.”

Even with severe cuts in respiratory medications and competitive bidding on the horizon, Callahan does not foresee changing his business model.

“I don’t anticipate doing anything any different from a business philosophy now than what I have done in the past. We seek to improve our business model every day; we look at ways to be more productive with people, we look at systems to bring more efficiencies to every process we do, from taking an order to delivering it. If you focus on that full time, your business is going to improve every day.”

Bigger Is Better

And in Callahan’s mind, bigger is better. In the last two years, Ultra Care has made two acquisitions that have helped the HME stay the course, with plans to continue that pattern.

“We want to get bigger,” he says. “We feel that with today’s market, with respiratory cuts and so on, the bigger we get the more economies of scale we will be able to achieve … We are over twice as large as we were two years ago. We have created lots of synergies. Getting bigger is a philosophy that is going to benefit us a few years down the road.”

Growth should put the company in a good spot with competitive bidding set to go nationwide in a few years, Callahan says. “The bigger companies will have the advantage. I will have more resources to offer more services and [better] prices. I may have the chance to win more product lines than someone else.”

Already, he says, size — Ultra Care is among the largest privately held HME providers in the country and the largest home respiratory and infusion company in Illinois — is paying off in purchasing power and in being able to be a single source for end-users. Being big can also serve as a shield against reimbursement cuts, Callahan says.

“Forty percent of our business is respiratory,” he notes, “but only 10 percent is nebulizer medications. The big cut that is going to come is going to sting, but it’s not going to cut because it is such a small piece of our overall model.”

He says Ultra Care, while it might not take new patients on respiratory medication, will continue to provide those medications to its existing customers. “We think it is important to service our customers,” he explains. “We think it is important to keep our customers because it costs so much to get them.”

He notes that the highest paid employees in his company are the salespeople. Then there are the costs of delivering equipment, training the end-user on how to use the device, setting up the billing. Such expenditures are not money well spent if you lose the customer.

“It’s tough to replace them,” Callahan says, adding that Ultra Care keeps records on how many new patients it takes on every month and how many it loses. “We are at the size where we have a lot of new patients coming on board every month, a lot leaving us. You want to keep the difference between the two as positive as possible.”

Right the First Time

As keen as he is on retaining customers, Callahan is also focused on keeping his referral sources. “They want a company they can depend on,” he says. So equipment — the right equipment — is delivered as agreed upon. Patients are trained in its use. It is serviced promptly. Callahan doesn’t ever want a referral source to get a complaint from an end-user that Ultra Care didn’t carry through as promised.

The idea, he says, is to “get everything right the first time.”

“If you can get that new order entered into the computer system accurately the first time, in theory, you may never have to touch that computer file again,” he says. “In theory, an order is generated, given to the dispatcher, every delivery is delivered properly. And because you don’t give the delivery department the wrong information, the bill is going to be accurate, and, nine times out of 10, it is going to get paid without your [accounts receivable] department having to touch it.

“The key in our industry is to get paid,” he adds. “The goal of the insurance company is to not pay it the first time. So we have to have everything accurate so they can’t not pay it.”

To make that possible, Callahan keeps his eye on technology. The company invested in a new routing system that has improved productivity 15 to 20 percent, he says. “As much as you can make systems efficient, people can do their jobs well and take on more and do better,” he says.

People count a lot at Ultra Care. “I still think every company starts with their people,” Callahan says. He believes in creating “a stimulating, productive environment in your company … so when people go home, they can say how great a place it is to work there.”

And that, he says, “puts your company well on the way to [being successful].”

Five Tips for Success

Here are five of Bruce Callahan’s guiding principles for business success:

1. Find a way to analyze how much things cost. “You don’t have to be able to drill down to the penny, but you have to be able to evaluate product lines. If you can focus on growing the business that you are making a large profit on, you’ll benefit.”
2. Find a way to differentiate yourself from the competition. “Try to become superior in some area and use that to your advantage in the marketplace … The worst thing you can do is be just like [another HME]. That doesn’t give someone a decision to make. Give them criteria to make a decision.”
3. Look over every product line at least once a year and work on improving your purchasing efficiencies.
4. Make sure you are outfitting the end-user with what he or she needs. Is it time for a new mask for a continuous positive airway pressure device? Does the person need a wheelchair seating system?
5. Plan for the future, and work your plan. “I think there are still companies out there that are unsure what their plan is. They don’t have anything written down. If it is written down, everyone knows what is going on and they’re on the same page.”