My Biggest Mistake

We humans will never avoid mistakes, and the pop culture vernacular has expanded to accommodate our myriad blunders with terms such as “epic fail” and “face palm.” Admitting the error is often the first step toward learning, and it is in that spirit that education becomes most powerful.

If you talk to a consultant long enough, you realize quickly that there are no “mistakes” in the land of corporate speak, only “learning opportunities.” By the same token, there are no “problems,” only “challenges.”

HME owners toiling in the school of hard knocks know better. Mistakes happen, and they can be costly.

Cindy Ciardo did not anticipate a five-year headache when a local hospital approached her about opening a women’s health specialty shop. After all, as CEO of Milwaukee-based Knueppel HealthCare Services, Ciardo knew how to run a business — and her reputation for outstanding women’s health services was well earned.

A shop in one of the hospital’s outpatient clinics seemed like a great idea. Women’s services performed onsite at the clinic would surely add up to a good referral stream, and only two people would be needed to staff the store. What could possibly go wrong?

Ciardo signed a five-year lease and began coordinating marketing efforts with the hospital system. “It started out beautifully,” says Ciardo, who also serves as director of vendor relations for Essentially Women, a group purchasing organization. “However, before the first year came to a close, the hospital system discontinued the women’s health specialty programs at that location. So there we were, in a location I did not need, with no easy referral base.”

There wasn’t enough room to expand product offerings, and decor was extremely feminine. “For five years, no matter how hard we tried, we could not get that location in the black,” laments Ciardo. “We celebrated the end of that lease. My colossal mistake was not anticipating the sudden loss of referrals and preparing for that contingency by adding language to the lease that would have allowed my company to get out of the lease should something like that happen.”

Advises Ciardo, “Always think of the worst-case scenario and prepare — no matter how good the prospects.”

Opening a new store with a familiar product line proved perilous for Ciardo, but Black Bear Medical’s Jim Greatorex found that carrying a new product within the walls of an existing shop can also have its pitfalls. The Maine-based provider decided to add uniforms to his retail mix, a move he viewed as a “can’t miss” opportunity.

The year was 1997, and Greatorex purchased an inventory of medical uniforms and scrubs to go under the same roof in his attractive and large Portland flagship store. (The company has additional locations in Bangor, Maine, and Greenland, N.H.) “I knew many others had been successful adding this line, and we thought it would be a great mix,” says Greatorex, a past president of the New England Medical Equipment Dealers Association. “We were especially enthusiastic that it would add to our three favorite kinds of business — cash, check and credit card.”

The most popular uniform shop in town had undergone a management change, and rumblings of unhappy customers only fueled Greatorex’s enthusiasm. Unfortunately, two other uniform shops opened within three months of Black Bear’s big addition.

The other more pressing problem was an unanticipated trend in shopping habits. “We found that uniform shoppers preferred not to shop at a place that was also loaded with DME and its accompanying madness of different transactions happening all at once,” says Greatorex. “We also found that we just weren’t good at selling clothes.”

Black Bear’s hands-on, highly assistive style did not fly when selling garments. As long as customers knew where the changing room was, they generally wanted to be left alone. “It came to a head when one lady tried on a scrub that had a cute animated pig in medical gear as its design,” says Greatorex with a chuckle. “Never tell a woman she looks good in a pig.

Keep Your Eyes on the Prize

“In the end, we had to get rid of $20K worth of merchandise and fixtures for about 30 cents on the dollar by selling to a friendly competitor. We moved on to other product categories that better matched our style.”

Helen A. Kent, RRT, CEO of Progressive Medical, Carlsbad, Calif., admits to her share of mistakes, but she says the biggest was keeping accounts receivable in-house for too long. With all of the changes in coding, policy, regulations and reimbursement, she ultimately found it impossible to run the business while maintaining outstanding service.

One attempt to outsource ended poorly, so back in-house it went. Things improved slightly, but days sales outstanding (DSO) kept rising. When Kent requested more information from her billing staff, she did not get the answers she needed. “Everyone who runs a small business knows that being able to collect on your accounts is the lifeblood of the business,” says Kent. “It’s great to sell a product, but if you cannot collect, all you have done is give away a piece of equipment while you are stuck with an invoice from the seller.”

Kent called around in an attempt to find a billing service that could adequately handle accounts receivable, while also working seamlessly with a business management system, and she ultimately found one. “If it had not been for that call … I would probably be following the same forlorn road, or I would be out of business with all of the cuts in the HME industry,” says Kent.

Outsourcing AR functions also allowed her to eliminate positions for two billing clerks and decrease her payroll. DSO now hovers around 85 to 87, what Kent believes is a good number considering that she bills a large number of E0471 (RADs) and E0601 (CPAP) products — among the most difficult codes to get paid.

“You don’t have to labor in a vacuum,” Kent points out. “Leave your non-core business to the professionals and outsource everything that takes your eye off of the objective. You will have more time to devote to growing and running your business.”

Rob Brant, general manager of City Medical Services, North Miami Beach, Fla., got fed up with paying 6 percent a year to a billing agency, so he brought all billing functions in-house. The effort led to a large expense for software, plus a new employee at $40,000 a year.

“The new billing software was problematic,” says Brant. “After we finally got the billing under control, the billing manager’s husband got a job out of state and she left. I ended up coming back to my outside billing company on my hands and knees begging them to take me back. The owner explained that his staff of 60 would never call in sick, take a vacation or move.”

(After this article was prepared, Brant decided to close his company as a result of Round 1 competitive bidding. For more on his situation, read “PAOC Speakers Give CMS Another View of Competitive Bidding.”)

Cash Flow Is King

Mistakes that slow down cash flow are particularly problematic, and in today’s economic climate — which includes competitive bidding — those errors can be downright calamitous.

Tom Ryan, president and CEO of Homecare Concepts, Farmingdale, N.Y., once forgot that “happiness is positive cash flow,” and the lapse haunted him for a long time.

In the early days, Ryan explains that HME providers had more long-term capital leases to help during periods of growth. As businesses matured, they could pay more toward the lease as cash flow improved.

“My reluctance to pay those leases and rates again, and the decision I made to avoid them, was one of my biggest business mistakes,” confesses Ryan, a past chairman of AAHomecare. “I decided to be aggressive in the OGPE (oxygen generating portable equipment) market, replacing 80 percent of my oxygen patients to the new high-capital, low-service technology, while at the same time having all new starts go to this newer technology.

“I wanted to be known as the new technology company. I believed this would become a differentiating point, and my market share would increase accordingly.”

Market share did increase, but not as much as anticipated. Ryan’s aggressiveness toward the conversions, combined with the decision to take 0 percent financing 12-month leases, ultimately ran him into trouble.

These days, Ryan has a simple tool that generates a monthly cash flow projection spreadsheet. If he had had this technology sooner, he thinks he might have averted a lot of headaches. “This tool would have given me clear warning that the debt service coverage on all these short-term leases would soon be choking my ability to pay off receivables, and I would have seen that my accounts payable would grow, leading to cash flow deficits,” says Ryan.

“The difference in a longer-term lease with terms would have been clear as viewed on my cash flow projector, because the savings in interest was insignificant, and the drain on cash flow was very significant. I could have used this calculator to warn me to slow down the aggressive conversion and increase the terms.”

Through means including personal cash infusion, loans and retro vendor leases, Ryan is again seeing positive cash flow. “My cash flow projector is now projected out for at least four to five months ahead, and updated monthly for the actual cash flow deficit or surplus,” he says. “I am happy to say that happiness is positive cash flow once again.”

Ryan may have moved too vigorously in his conversion to OGPE, but mistakes can also result from failing to act. Paul Ondrusek, western regional manager for member services organization The MED Group, Lubbock, Texas, has seen providers miss opportunities because they failed to be proactive.

“It is more important than ever that we operate efficiently and minimize mistakes, but we can’t be paralyzed by the fear of making one of those mistakes,” says Ondrusek. “That’s why networking with other successful business owners who are willing to share their experience and knowledge is becoming more valuable every day.”

Good Bargains and Bad Bargains

Peter Czapla, owner of Wetumpka, Ala.-based Quality Home Healthcare, can’t resist a good bargain. After 20 years in the home care world, however, he knows that a “good bargain” can often be a contradiction in terms.

Lured by discount specials, Czapla has received his share of damaged, low-quality goods. “All the money I thought I was saving by buying the special discount was lost in repairs and service calls,” says Czapla. “More importantly, we had customers that were not happy about their wheelchairs breaking continuously. We would continue to repair it, and that was a big cost to the company.”

With reimbursement decreasing every couple of years, Czapla admits that he still gets the urge to buy low-cost goods, thinking that this time things may be different.

“There were some Christmas specials a few months ago that I bought only to find out once again that the quality was not there,” says Czapla. “Stay with the good manufacturers that provide good equipment and stand behind it. Price is not everything. At the end of the day, you are going to end up with an unhappy customer, and that is something that none of us can afford.”

Fortunately, bargain-hunting can sometimes pay off with lower prices and even better results. When it comes to posting jobs, Alicia Correa, RN, BSN, MBA, decided to give Monster.com a try instead of using the local newspaper. Monster charged less, ran the ad longer and yielded more qualified candidates.

As president and CEO of Bexar Care Home Medical in San Antonio, Correa admits to a few hasty hires in the past while trying to get a warm body in the door. Using the local paper, she once hired a woman who simply could not grasp how to deal with customers on the phone. “It turned into a disaster,” says Correa. “She would not ask basic things such as name, number or even what hospital. I had to remind her to get details and sound alive on the phone.”

It could be that Monster.com users are a bit more tech-savvy than newspaper browsers, but whatever the reason, Correa says, she will stick with Monster. “It was only $100, and Monster ran the ad for two weeks,” says Correa. “In the local paper, I was paying $300 for one Sunday. The overall caliber of people who emailed their resume from Monster was better than the newspaper respondents who faxed their resume.”

With labor such a large expense in any business, bringing in less-than-ideal employees can lead to long-term miseries. Especially in the industry’s current environment, combining the wrong person with a culture that is focused on cost reduction can make things worse.

“The biggest mistake is not finding the right individual to establish internal controls,” says Les DeFelice, CEO of DeFeliceCare in Wheeling, W.V. “Without a strong person in that role, it is impossible to establish a culture of cost reduction while growing your company. I started in 1995, and it wasn’t really until 2007 that I had strength in that area.

“It doesn’t matter what your revenues are,” DeFelice reminds, “it is how much your profit is.”

The Lessons They Learned

Have a Plan B

“Always think of the worst-case scenario and prepare — no matter how good the prospects.”

— Cindy Ciardo, Knueppel HealthCare Services

Make sure new product lines are a good fit

“We found that we just weren’t good at selling clothes.”

— Jim Greatorex, Black Bear Medical

Check out outsourcing

“You don’t have to labor in a vacuum. Leave your non-core business to the professionals and outsource everything that takes your eye off of the objective.”

— Helen Kent, Progressive Medical

Don’t risk unhappy customers

“Stay with the good manufacturers that provide good equipment and stand behind it. Price is not everything.”

— Peter Czapla, Quality Home Healthcare

Explore alternatives

“The overall caliber of people who e-mailed their resume from Monster was better than the newspaper respondents who faxed their resume.”

— Alicia Correa, Bexar Care Home Medical

Put the right people in the right jobs

“The biggest mistake is not finding the right individual to establish internal controls.”

— Les DeFelice, DeFeliceCare

All About Priorities

According to health care attorney Clay Stribling of HC Comply, Amarillo, Texas, one of providers’ most common mistakes today is not empowering company compliance officers. With the pace and ferocity of Medicare audits on the increase, the best way to get prepared is to build what Stribling calls the “triangle of compliance” through internal audits that identify any vulnerabilities, taking corrective action to fix them and training staff to make sure the fixes hold.

“Your compliance officer needs to be empowered,” says Stribling, because it takes both time and money to develop an internal audit program. How effective that program is in helping you fend off audits probably depends on “how many hats” your compliance officer/internal audit coordinator wears, he notes. If that employee also happens to be your company’s billing manager and safety coordinator, that doesn’t leave much time to focus on internal auditing.

HomeCare: What is the most common compliance mistake that you see in your role as a consultant?

Stribling: The largest mistake is failing to provide adequate resources to your compliance function. Your compliance function requires time and money to be effective. Way too many companies appoint an employee as the compliance officer and then say compliance is this person’s second priority while their other job is the first priority. This leaves the employee with too little time to devote to chart auditing, training and compliance review.

HomeCare: Does devoting more resources inevitably increase costs?

Stribling: Most often, a company is already using a relatively high-cost employee to tend to compliance, someone such as a billing manager or HR manager. Hire a part-time employee that’s inexpensive to do a small portion of that person’s job, perhaps to serve as a chart-auditing assistant. Or bring some assistance to other functions that don’t require a premium employee.

That should free up some time to devote more attention to compliance. I understand there are financial restrictions, and you can’t just wave a magic wand and have enough money to spend on this process. By being creative, reassigning some employees and moving other duties to less expensive employees, I think you can — at a pretty small cost — allocate resources the right way.

For a relatively small cost, you can improve the efficiency of your employee on the compliance function by getting him the right training. Send him to a seminar on health care compliance. There are some great organizations such as the Health Care Compliance Association. By sending your employee, time spent on the learning curve goes down.

HomeCare: Should home care providers outsource for compliance services?

Stribling: It depends on the organization. Ultimately, you don’t want to depend on an outside service long-term. For a lot of companies, it’s a great one-time solution to bring in somebody to help the compliance officer get up to speed, and help him or her understand a little more about day-to-day job functions. What you’re really looking for is a resource to make that compliance person better, not to service your compliance function forever. The ultimate goal is to bring that in-house, and make your in-house personnel as effective and professional as possible.

HomeCare: How would you characterize the current climate of CMS audits?

Stribling: In a word — hostile. Auditors start with a heavy bias toward denial of claims, particularly the RAC auditors who have a financial incentive to deny claims. I don’t think that any of the audit groups are any more prone to payment of claims, and you can look at the claims denial rates in different regions and see. Denial rates in some regions are 85 to 90 percent on some products. On the back end, a huge percentage of those denied claims are getting overturned on appeal. From an initial claims standpoint, it’s a hostile environment for suppliers.

Effective May 16, HC Comply will become a new division of The van Halem Group as Clay Stribling departs to become president and CEO of the Amarillo Area Foundation, a reigonal charitable organization.