Along with the plummeting temperatures that ushered in the New
Year across much of the nation, home medical equipment providers
told HomeCare they’re worried about a deep freeze of their
own in 2010.
Most taking part in the magazine’s annual Forecast Survey said
they had jumped through the latest regulatory hoops, with more than
90 percent becoming accredited and obtaining surety bonds. And
despite the regulatory headaches, a still-dull economy and HME’s
toughening market, providers’ product intentions remain strong for
the year.
But unrelenting reimbursement woes, the forward march of
competitive bidding and potential threats under health reform could
worsen business conditions dramatically, some said.
The python-like squeeze has already taken a toll on some HME
companies. Seventy percent of survey participants said rival
businesses in their local markets had closed within the past year.
The bright side for those remaining is that they picked up market
share. “Our goal is to be among the survivors,” one provider said.
“As weaker businesses fail, we will do our best to capture their
market share.”
Seventy-two percent are confident they could handle the influx
of patients even if half or more of their competitors go under, as
CMS has estimated could happen with competitive bidding.
To keep their companies in the right half of that scenario, the
vast majority (84 percent) said they had adopted new technologies
and/or business practices: Half said they now use DME-specific
software of some kind, 41 percent use document imaging and 30
percent use GPS/routing software. To deal with the 36-month oxygen
cap and the 9.5 percent DME cut, providers said they had increased
efficiency (57 percent), changed their oxygen delivery model (35
percent) and/or changed their product mix (30 percent).
As for the cap, respondents said it has had some dire effects
— not the least of them on patients — but the majority
(59 percent) said they are coping. Another quarter (24 percent),
however, said they don’t know how much longer they can continue in
the Medicare oxygen business. A whopping 89 percent consider CMS’
recently announced payments for oxygen maintenance and service to
be inadequate.
“CMS does not fully understand the service and delivery needed
to adequately provide the care needed for these fragile patients,”
one provider commented. Added another, “CMS should read the
standards manuals of the accrediting bodies. If CMS wants this
level of patient care, they should pay for it.”
Then there are the day-to-day speed bumps. Providers complained
CMS’ recent PECOS requirement, for example, is “another damaging
move by CMS … another hurdle to make things more difficult to
provide much needed services … another poorly planned
implementation … another waste of taxpayers’ time …
another way for Medicare to get rid of us.”
In aggregate, providers estimated only a third of their
referring physicians were registered in the system by mid-December.
“Again, the DME industry is carrying the burden of holding
physicians’ hands and making sure they do what Medicare wants,” a
frustrated respondent wrote. “Another rule, another barrier to
overcome.”
But overcoming competitive bidding is another matter, and
providers said it remains their biggest concern. In fact, 75
percent of those taking part in the survey said they had contacted
their federal legislators about H.R. 3790, Florida Rep. Kendrick
Meek’s bill to stop the program juggernaut. That’s the largest
percentage of HME providers ever reporting political involvement in
HomeCare’s history of surveying on legislative issues.
Will it be enough? Providers said they’re not sure, with many
noting they will continue to fight the program because they are
just plain scared about their prospects if bidding is implemented.
“Reduced reimbursement can usually be dealt with; exclusion from
any participation is fatal,” stated one. “If I don’t have patients,
I don’t have a business,” said another.
As for the Round 1 rebid of the current program, scheduled to be
implemented in January 2011, 19 percent of the providers in the
survey said they were bidding. Of those, respondents bid in an
average six categories, 42 percent bid in non-local areas and 20
percent bid in categories they don’t currently provide. On average,
these providers said they bid 9 percent below current
allowables.
These Round 1 bidders also had some advice for others
considering a bid in Round 2: “Be careful,” warned one. “Three
years is a long time.” Cautioned a second, “Don’t lowball your bid.
Know your limits since no amount of volume can make up for zero
profit margins.” And yet a third, “Pray for H.R. 3790.”
Simply “staying in business” was another top concern registered
by providers, whose thoughts about the future ranged from positive
to positively grim:
“I believe that our company is diverse enough to survive.”
“We are very innovative and flexible as a company. If there is
an industry when the dust settles, we will be there.”
“I’m gonna keep on doing what we do best, and that’s giving our
patients the best service possible. I believe once the competitive
bidding repeal happens, we all will be OK.”
“My patients don’t seem to understand the dire circumstance that
[both of us] face. I no longer have the cash flow to provide the
service that has always put the patient first.”
“The combination of health reform and competitive bidding will
deeply impact this industry and my business negatively. Ultimately,
patients will receive [fewer] benefits, less quality of care, poor
quality of products. In turn they will have less independence to
stay in the home environment, end up in hospitals and state-run
home facilities and ultimately cost the country more than the
current system.”
“While remaining optimistic that we are in charge of our own
destiny and our business, the reality is CMS is leading the charge
and all other payers will follow. So much is still up in the air,
including competitive bidding. That one program and the intention
to go national by 2016 will seriously affect our industry, our
company and our patient base.”
“Once competitive bidding hits my area, I will go out of
business.”
“I don’t know that any company in this industry has a
future.”
On a more hopeful subject, we asked providers how they would
spend the money if they could invest any amount in their HME
business. We got a range of answers on this one, too, everything
from adding inventory and new locations to hiring on expert staff
to utilizing more technology and more advertising. However, some
said, with the industry’s mounting uncertainties, they would invest
“not another penny.”
And one funny guy? Well, he said, “I’d relocate to Costa
Rica.”
What percentage of your revenue is generated from
the following?
Medicare
38.3%
Medicaid
16.5%
Managed care
(MCOs, HMOs, PPOs, etc.)
13.3%
Private insurer
12.4%
Retail sales
10.4%
Commercial/institutional accounts
7.2%
Other
1.9%
Will your company’s revenue increase, decrease or
stay the same in 2010 compared to 2009?
Increase
41.4%
Decrease
28.2%
Stay the same
29.4%
No Anwer
1.0%
What percentage of your company’s revenues are
derived from …
Sales
54.9%
Rentals
45.1%
What measures are you taking to deal with the 9.5%
DME cut/the 36-month oxygen cap?
Increasing efficiency
57.3%
Changing oxygen delivery model
35.0%
Changing product mix
29.8%
Specializing in a particular business niche
22.0%
Moving into retail
21.7%
Changing payer mix
21.0%
Layoffs
21.0%
Moving away from Medicare
21.0%
Expanding
14.9%
Increasing sales staff
12.6%
We have made no changes
13.9%
About PECOS: In aggregate, providers estimated
only 33% of their physicians and other referral sources were
registered in the Provider Enrollment, Chain and Ownership
System.
Data were collected Nov. 19-Dec. 17, 2009. Of 309 HME companies
participating, 57 percent operate a single location and another 13
percent operate two locations. Thirty-nine percent of respondents’
companies employ 10 or fewer people, while 11 percent employ 100 or
more. Twenty-nine percent reported revenue under $1 million, while
7 percent indicated revenue of $25 million or more.
The largest group of companies is located in Jurisdiction C (41
percent), with 18 percent operating in Jurisdiction B, 17 percent
in Jurisdiction D and 15 percent in Jurisdiction A. Eight percent
of participants reported nationwide operations.
Not all respondents answered every question, and some totals may
add to more than 100 percent due to multiple responses. Survey
methodology conforms to accepted marketing research methods,
practices and procedures.
