Beefing Up Your Bottom Line

This last year in the HME industry has been anything but business as usual. Rather, it has been a constant roller coaster with Medicare: new CMS contractors (DME MACs), implementation of the Deficit Reduction Act, pending legislation on oxygen and power wheelchairs, the Office of Inspector General’s latest demonstration project, a surety bond requirement and the onset of round-one competitive bidding.

Without exception, every HME provider has had to think long and hard about their scope of business, both today and in the future. Although the future may seem uncertain at best, there is no time but the present to focus on what is within your control. For many providers, this means turning to internal operations in an effort to become more profitable.

In looking for ways to streamline processes, many providers have implemented steps — several of them relatively simple adjustments — that have made a dramatic, positive impact on their bottom line. Some of these changes are highlighted here, along with their direct savings to the business.

• Electronic Billing and Eligibility Simply checking Medicare and other insurance eligibility online has saved one small HME company a minimum of four hours per day over the last year. This has allowed the company to increase business and reduce front-end errors without adding personnel. In fact, business has increased by 30 percent without adding staff.
• Electronic Billing to All Payers The most tangible benefit this year for one medium-sized HME company was fully implementing electronic billing to all payers, including Medicare, Medicaid and private insurance plans. The company noticed a dramatic reduction of paper claims that would otherwise cost thousands to print, sort, copy, mail and file. This one thing alone saved a full-time equivalent employee in addition to copier and printer wear and tear, postage, etc. The company also handled an increase in revenue with no noticeable change in process flow.
• Document Imaging Many providers have implemented document imaging over the past year or two. The change is less intrusive than you might expect, and the benefits far outweigh the time required to implement. Four months after implementing document imaging, one large HME was able to reduce staff by four employees and shave 12 days off their DSO. Another company saved two employees, increased revenue by $100,000 per month and improved efficiencies. A small HME company was able to save one employee after adding document imaging and scanning.
• Training One rural, mid-sized, full-line HME company decided to focus attention on operational efficiency through the intake process. The company did this by developing an in-house training manual. Further, management gave the intake team explicit guidelines, training them on how to take a clean order. They also implemented individual online training complete with tests. Another key was to train the total team continually on Medicare and insurance requirements so that when the delivery ticket was confirmed, the information was complete and accurate. The outcome of this four-tier training program was a savings of 40 days off of this company’s DSO — from 85 to 45!
• Personnel A few companies have achieved success by hiring experienced and qualified employees. (They were also willing to pay more than the average HME company to get a more responsible individual.) Similar to the training mentioned above, these companies provided formal and informal training and tracked performance on an ongoing basis. They used evaluation tools to examine productivity and quality of performance. In addition, they conducted observations and used satisfaction surveys from customers and referral sources. Finally, where possible, they offered a commission structure for their employees that resulted in a significant increase in cash collections and qualified orders. Imagine getting paid for all of your oxygen concentrators the first time around! All in all, with this type of structure, these businesses were able to improve on employee retention and operational efficiency, such as complete and accurate orders to clean claims and quicker turnaround time. Specifically, among the outcomes one of these companies achieved was fewer oxygen “switchouts;” oxygen attrition dropped from a 3 percent loss per year to less than 1 percent. Additionally, the company realized a 22-day drop in DSO.

• Accountability Measures As is evident by monitoring and tracking personnel, each department and its staff should have specific performance targets. For example, the accounts receivable department should be measured by the number of dollars collected, old and new. For the intake department, you should know the number of orders that result in payment. According to one mid-sized HME company, sharing such results helps staff feel a sense of ownership and gives them perspective on the bigger picture. After consistently using accountability measures, this company reduced its accounts receivable by $100,000 in less than a quarter and grew revenue by $50,000. Allowing employees to participate in goal-planning — and then holding them responsible for the expectations that they help develop — should generate desired results. Moreover, everyone will know these objectives and how their performance will be measured so that they can easily self-evaluate. For one company, these outcomes are published weekly by department and used in individual annual performance evaluations. Daily revenue, number of orders, billing and accounts receivable information as well as cash collected are also listed as a daily snapshot on the company’s home page. This helps both employees and management keep a current pulse on performance.
• Revenue per Patient In another HME business, a small provider focuses on similar performance metrics. However, this company also examines revenue per customer. They attempt to maximize revenue for each customer by using a reward program to encourage staff to identify other medical equipment and supplies that could benefit the patient. They hire and train staff accordingly. Cross-selling and marrying reimbursable products with non-reimbursable products helped drive this effective revenue growth. The results have shown a 30 percent increase in non-reimbursable sales as well as a 20 percent increase in reimbursable products through consultative selling.
• Inventory Control For a small HME company, focusing on inventory by limiting its product lines was the key operations initiative this year. This, in turn, helped with gross margins, lowered inventory and helped improve productivity for the sales team. Product selection was based on return on investment as well as margins. Once the products were selected, the inventory was closely watched so that it would stay below a certain level. This, of course, was done through a solid inventory software solution. Further, the company limited product offerings so buyers could negotiate better pricing and payment terms with vendors. The inventory turnover improved from two to three turns to six to seven turns. By using a formulary type approach to purchasing, the company saved 20 percent over the previous year’s purchases as revenue grew by more than 30 percent.

As you can see from these case scenarios, many of the initiatives used to improve operational efficiencies come from automation. From data-tracking to document imaging, electronic billing, inventory management and more, the key is that the more you computerize and automate, the more productivity you will gain.

Well-trained staff, coupled with technology, enables an HME business to operate more efficiently, thereby allowing it to grow and flourish. Regardless of the disconcerting regulatory changes impacting the industry, stay ahead of the curve by implementing one measurable change at a time, and quantify the results.

As illustrated here, your peers have done so, and the operational impact was compelling. I’m certain these companies are currently working on additional goals and achievements. Now it’s your turn!

Miriam Lieber is president of Lieber Consulting, Sherman Oaks, Calif., specializing in operations management and reimbursement for the HME industry. She can be reached at 818/789-0670 or by e-mail at [email protected].