Getting a Cost-Cutting Game Plan

It’s no secret that the DME industry is in the fight of its life. CMS competitive bidding has excluded hundreds of small businesses from what was once 30 to 50 percent of its revenues, while private insurance payers are seizing on competitive bid rates to reduce their fee schedules as well.

The silver living is that the companies that are able to survive in the current environment may have a larger market share than before the crisis, if they can just outlast companies that don’t have their fiscal houses in order.

In addition, if the Affordable Care Act succeeds in adding millions of people to the insurance roles as planned, there will be a much larger DME market to divvy up. But first, DME providers must ensure they remain a viable business when and if the market becomes more favorable.

One path to better profitability is reviewing your operations to understand where you can cut business costs. Be warned: Across-the-board slashing of your budget can do more harm than good, particularly if it leads to less business coming in the door, leaving your company weaker in the long run.

Now more than ever, DME providers must implement the many productivity tools their business software and Internet-based Web portals offer.

Barcoding can save a great amount of man hours when it comes to inventory tracking. Reports that allow a business to understand when expiring or additional documentation will be needed should have long ago taken the place of paper tickler files and manually updated spreadsheets. Fax and shipping capabilities integrated into your software system reduce the labor intensity of those processes.

Electronic eligibility checking through your software system, or the use of Web-based portals for government and commercial insurance payers, help reduce the human resource cost of employees waiting on the phone to glean the same information. Electronic document imaging offers significant gains in employee productivity for staff members charged with working unpaid insurance claims.

What if you have already implemented all of these productivity-enhancing solutions? What else can you do to cut costs? It may be time to bring your entire leadership team together for one massive brainstorming session. Include managers and supervisors from all areas of your business—operations, clinical, sales, reimbursement, logistics and purchasing—and review every item in your detailed profit-and-loss statement. What can be cut or reduced without harming the overall profitability of the business?

To get started on a new strategy, ask the following questions:

• Is it time to get new shipping bids? Even one dollar per shipment makes a difference over the course of year.
• Are there products that you are physically delivering that can be shipped instead?
• Are you shipping a 90-day supply whenever an insurance payer allows?
• Are you doing more in-home follow-up than your competitors? If it’s not increasing the number of referrals the company receives or an integral part of your marketing pitch, would a phone follow-up suffice in most cases?
• Can you migrate patients on higher cost name brand supplies to a generic product, or negotiate volume pricing with zero percent lease terms on equipment?
• Can you substitute less skilled, lower cost employees for certain tasks that require only basic aptitude, such as insurance verification or patient collections? If so, be sure to develop 
a specific telephone script and step-by-step rules and processes for them to follow.
• Are there certain tasks—such as patient collections, prior authorization retrieval or, again, insurance verification—that can be outsourced, whether within the U.S. or even in foreign countries?

Presumably, you’ve gotten this far in the business world by hiring smart, creative people that are able to solve problems. And as an entrepreneur you probably possess at least some of these same qualities. If you assemble a brainstorming session on cost-cutting with only 
one rule—no idea is too far out of bounds to put on the table—chances are you 
will be delightfully surprised at the 
excellent and efficient ideas that rise to the surface.