A Family HME Business Embraces Retail Alternatives

In 2004, the leaders at Seeley Medical in Andover, Ohio, saw the writing on the wall, and the message was clear. “It became evident to us that we were playing on a field we couldn’t win,” recalls Joe Petrolla, president of the 51 year-old HME company. “We were playing in an entitlement program, and legislators and the Centers for Medicare & Medicaid Services [CMS] didn’t understand our business. The HME model that everyone grew up with was done. We said we are going to start re-engineering our business.” Seeley Medical began scrutinizing and rethinking its business practices. It installed a new database that allowed smoother, swifter communication with vendors and third-party payers. It began looking into possible acquisitions. Nine years later, the company has diversified, is debt free, boasts a strong cash flow and has wrested its future away from the government’s hold. How did Seeley Medical manage this during a time in which competitive bidding was enacted, reimbursement rates plunged, rampant audits over provider payments, government restrictions tightened and HME companies closed at record rates? The answer: Unwavering resolve.

Pride of Place

When the Seeley family opened Seeley Medical in 1962, patients paid cash for their oxygen. Family owned and operated businesses held pride of place in the American economic picture. The landscape has changed in five decades. Medicare and insurance now fund most HME companies, and family-run businesses have largely disappeared from the American scene. At Seeley Medical, the goal has been to remain a regional, independent, family-owned business. Ann LaCute, the daughter of the Seeleys, along with her husband Mario, purchased the business in the 1980s. Their son, Anthony—an attorney with a master’s degree in business administration—is vice president of sales and operations and the heir apparent. There is firm resolve to keep this company in the family, which means continuing change for the Seeleys. Petrolla says that while the traditional HME items—hospital beds, respiratory, wheelchairs—are still key, the core business is now supplemented by a brisk business in drop-shipped softgoods and a diversified business model that includes two pharmacies. One is an institutional and retail pharmacy. The other is a compounding and specialty pharmacy. The company also has extended its reach through acquisitions, and it now has eight locations servicing northeast Ohio, western Pennsylvania and northern West Virginia. Seeley Medical has also invested in Drund, a Web-based operating system that allows smaller companies to use “cloud” computing to share, store and edit documents. There are more plans in the works to grow the business, Petrolla says. The idea is to stick to Seeley’s core intent yet remain nimble enough to take advantage of other opportunities. So far, that has not included embracing retail, which many providers see as the salvation of the HME sector. While Seeley Medical does do some retail, Petrolla says he does not believe it is a natural fit for his company. “We are not necessarily designed or built for retail,” he says. An HME store is not a regular destination for browsers, he adds. The products cater less to wants than to needs and retail demands extensive—and expensive—marketing. In HME, this is somewhat restricted by the government. Seeley Medical took the road less traveled, diversifying instead into areas that have some synergies with HME, such as pharmacy, and also into sectors unrelated to HME but with similar values. “Our new strategy was that we were still committed to taking care of our patients, but we were more focused on running a successful business,” Petrolla says of the decision to go that route. “We really don’t trust the government and CMS to do the right thing. As a result, our future is in our hands.”

Helping People Succeed

To ensure that the future is a good one, Seeley Medical puts money and time into building a staff that is responsive and efficient. “We have to have highly trained individuals who can make adjustments when we need to make adjustments,” Petrolla says. Every one of Seeley Medical’s more than 100 staff members is involved in the company’s ongoing development program (see story in HomeCare, May 2013). From the day a new employee arrives, he or she is equipped through the company’s ASK for Action training program to perform at a high level. This program begins with learning how to establish goals both personally and professionally. “We tell them you have to work smart and hard,” Petrolla says. “We have them write down their goals.” Petrolla wants to guard against placidity, and encourages ongoing training. “Good is the enemy of great,” he says, quoting from Jim Collins’ book Good to Great. “It’s easy to get satisfied with good. We’re striving to be great. And it’s a day in, day out process. We are motivated to be the best we can possibly be.” Still, the company steers clear of the notion of perfection. “We don’t let anyone strive for perfection, because nobody is perfect. We have them strive for excellence,” Petrolla says. He describes Seeley Medical as a “no-excuse kind of company.” Employees who make mistakes take responsibility for them. The idea is to create an environment that empowers people to make mistakes on the way to producing superior work. “We try to modify their behavioral pathways in a way that they end up doing more than they thought they could do,” says Petrolla, who believes that “your most valuable resource is your human resource.” “Our belief system is that you are put on this earth for a lot of reasons, and one of the main reasons is to help other people succeed.” Companies must invest in their employees, he says. “You have to spend the time and have the equipment or you won’t have a shot.” Seeley Medical wants a shot, not only in the new businesses it adds to its portfolio, but also in the HME world. The company, which was awarded seven competitive bidding contracts in the Cleveland and Pittsburgh competitive bidding areas and another three in the Cincinnati CBA, is firmly entrenched in HME. The firm’s top executives are active in the industry and in fighting for its survival. Petrolla sits on the board of the Ohio Association of Medical Equipment Suppliers, the National Home Oxygen Patients Association and works with state and federal legislators on HME-related legislation. Mario LaCute is the former chair of the American Association for Homecare, where he remains on the board and is also a former president of OAMES. Anthony LaCute regularly lobbies on behalf of the industry in Washington, D.C.

Meeting Challenges

No one at Seeley Medical is counting on government gurus to do right and play fair. “We won’t sit around and wait for them to fix competitive bidding,” Petrolla says. “CMS has proved time and time again that they refuse to learn our business,” he continues. The result is that CMS acknowledges little to no value from HME providers and constantly whittles away at the Medicare benefit. “The biggest challenge is always trying to change on the fly, deal with the rules, the price reductions, the costs,” Petrolla says. That may never change, but Seeley Medical will. Petrolla says it will continue to diversify, to add compatible businesses, improve efficiencies and to do excellent work. “We know that what we do is valuable, we know there is a need,” Petrolla says. “We believe that some form of the core system will remain.” Go to www.seeleymedical.com.