Survivability: The New Watchword

During 15 years in the business, the president and founder of Alpine Home Medical has simultaneously worked to prepare for and kill competitive bidding. With Round 2 of the hated government program scheduled to affect two of his five Utah locations in Ogden and Salt Lake City, Jay Broadbent is confident he can survive.

Meticulous attention to product diversity, while not making the company immune, has significantly increased the odds of survivability. In these uncertain times, good thinking requires a willingness to expand and add new equipment choices. With that in mind, Broadbent started offering lifts for homes and vehicles years ago.

Prior to taking on the lines, Broadbent had referred his power wheelchair and scooter customers in need of lifts to others. Instead of giving away all that business, he called up manufacturers Bruno and VMI and started a successful addition to sales, which already included mainstays such as oxygen, CPAP and wheelchairs.

Unlike these three product categories, lifts were cash items not involved in Medicare or competitive bidding. In addition to the original two lift brands, Broadbent has added more manufacturers to capture other parts of the market. “We’ve got some new competitors in town and they are competing solely on price,” says Broadbent. “It’s hard to only offer top-quality product and try to compete on price. We are adding other lines for the simple fact that we must be able to compete if the decision to buy a lift is based solely on price.”

Doing well in vehicle lifts, stair lifts and porch lifts means going back to basics. For Broadbent, that means hiring good staff — from salespeople to installers and every position in between. “Make sure you are properly insured,” adds Broadbent. “Especially if you have vehicle lifts, you have possession of someone’s vehicle and must be insured for damages to the vehicle. Fortunately, it is not horribly expensive.”

According to Broadbent, the savvy people you hire should be hard at work visiting rehab centers and hospitals, because officials at these institutions will all too often forget what you offer. In these cases, a friendly and tactful reminder can make all the difference. Three or four times a year is a good guideline. “It’s amazing how quickly they forget what you do,” says Broadbent of these referral sources. “You may have been there two or three months earlier, and you may have told them you do lifts, but they act surprised and think you are just the wheelchair or oxygen guys.”

Preparing for Round 2

Under current metropolitan statistical area guidelines, Alpine branches in Ogden and Salt Lake City are subject to Round 2 of competitive bidding. And while other shops in Logan, Provo and St. George are out of CMS’ tentacles for now, the government must apply bid rates nationwide by 2016.

Broadbent draws no distinction between cities and applies his product diversification philosophy across all five stores. While he plans on entering the next bid, the amount he submits will be “realistic” and based on a systematic analysis of operating costs. “We hope to be a participant in Medicare,” says Broadbent. “However, if we don’t win that bid, we have survivability. We have been planning since competitive bidding went into law. We have been tailoring our business well before it gets to our doorstep.”

Despite the 36-month oxygen cap and reimbursement cuts, Alpine’s oxygen business has been growing. And thanks to consistent sales calls on hospitals, physicians and sleep labs, CPAP sales have likewise seen growth. Along with wheelchairs, these three categories all represent Alpine products that are subject to competitive bidding.

If Round 2 prices end up like rates in Round 1, however, Broadbent concedes that future Medicare business will be difficult. “Reimbursement at the current bid rates is extremely low,” he says. “I don’t see how a business can make a profit at those rates. I have heard the phrase ‘race to the bottom,’ and that is exactly what it seems like. You might be able to provide the product, but there will be absolutely no service component.”

A vigorous CPAP supply replacement program is one way Broadbent has gone beyond the Medicare audience. With MedSage Technologies (recently acquired by Philips Home Healthcare Solutions) in charge of automated reminder calls, the efforts continue to earn additional revenue.

Focus groups conducted by Alpine Medical indicate that people often hang on to their masks longer than necessary, so proper replacement programs can aid patients and help the bottom line. Other non-competitive bidding items on the product roster include bath safety products, compression therapy, personal care items, ramps, breast pumps and orthopedic goods. In bath safety, Alpine allocates roughly 150 square feet with Invacare and Carex serving as the two main brands.

Maintaining a Personal Touch

Good thinking usually applies to expanding vital markets in creative ways. However, knowing when to quit can be an equally valuable trait. After giving online sales the old college try, Broadbent recently decided to discontinue the company’s online efforts.

The online sales presence ultimately became more trouble than it was worth, and staying compliant with Medicare also became too much of a concern. “We never really sold much online,” says Broadbent. “When people go online to buy something, it is totally driven by price with no service component. The two business models — brick-and-mortar and online — were not all that compatible for us.”

Customers who visit Alpine’s brick-and-mortar shops find displays that allow them to see, feel and touch the products. Two or three different brands ensure a selection that caters to all financial situations.

When it comes to marketing, the personal touch has again worked best for Alpine Medical. “I don’t think anything substitutes for one-on-one, face-to-face marketing,” says Broadbent. “That is the most powerful method. In addition to that, we do some radio spots throughout the year that advertise the stair lifts, vehicle lifts and porch lifts to let the general public know the types of services we offer. Word-of-mouth is also powerful.”

Ultimately, people in the close-knit communities of the Beehive State rely on the personal touch that Broadbent has cultivated so carefully. For the past four years, part of that commitment has stretched beyond business matters to include the B In Motion Foundation, a non-profit organization that provides wheelchairs and other mobility-related equipment to those who otherwise would not be able to afford it.

An annual charity bike ride, called “Riding 4 a Reason,” takes place in mid-August to raise funds for those in need. “My background was rehab and rehab sales, and you come across those individuals for whom you know exactly what they need but their insurance won’t pay for it, or they flat out just don’t have insurance,” says Broadbent. “We wanted to find a way to help people get what they need, so my wife and I created the foundation.”

Staying Connected

It’s also a good idea to stay plugged in to legislative issues, but even the most dedicated of advocates have found it difficult to stay motivated in recent years. Broadbent has experienced the highs and lows as a fixture in the Washington, D.C., offices of his Utah congressional representatives.

An undeniable high came five years ago when Broadbent hosted a meeting with Republican lawmaker Orrin Hatch, the senior senator from Utah, and at the time a member of the Health, Education, Labor and Pensions Committee. The visit to Alpine Home Medical’s Salt Lake City location came after a lot of relationship-building with legislative aide Pattie Deloatche, who served as the crucial gatekeeper to Hatch on a variety of health issues.

During the 45-minute visit, Hatch toured the 18,000-sq.-ft. office-warehouse-service complex, which includes a spacious showroom. After the tour, Broadbent presided over a mini-town hall meeting where the senator heard from Medicare oxygen and wheelchair patients who were concerned about maintaining access to quality services in the era of national competitive bidding.

The visit proved fruitful when just three months later, Hatch and Sen. Kent Conrad, D-N.D., introduced a companion to the Hobson-Tanner bill in the Senate in the fall of 2006. The Medicare Durable Medical Equipment Access Act (S. 3920), was designed to ease the effects of competitive bidding for small providers by allowing “any willing provider” to participate under the contract rate, provided that the supplier was properly qualified.

Hatch said the bill was important to preserve access to home care in rural areas and allow small businesses to participate in Medicare. “Any provider not awarded a contract would be prohibited from participating in Medicare for up to three years,” said Hatch after the visit to Alpine. “This bill would allow applicable small businesses that did not receive a contract to continue to provide durable medical equipment in Medicare at the competitive acquisition bid rate.”

At the time, Hatch stated explicitly that conversations with home care providers in Utah, who expressed concerns about their ability to stay in business and continue to provide customers with a high quality of service, helped convince him to cosponsor the legislation. Looking back on the visit five years later, Broadbent sees the experience as mostly positive, but he concedes that maintaining the message in the midst of bad industry press was, and is, a daunting challenge.

Senators keep a close eye on the political winds, and brutal attacks from the likes of NBC News, 60 Minutes and The New York Times made it progressively more difficult after Hatch’s initial burst of interest. “The negative press about our industry has not helped us with Sen. Hatch’s office,” says Broadbent. “They are keenly aware of some of the fraud, waste and abuse that gets widely reported. That has hurt us.”

Despite the frustration, the optimistic Broadbent still actively communicates with elected representatives and remains steadfastly involved, helping to create the Utah Medical Equipment Dealers Association for which he serves as vice president. In an industry longing for “good thinking,” he still maintains that political involvement is the best idea.

“There is so much apathy in our industry with other dealers who don’t get involved,” laments Broadbent. “It’s hard to even get providers to participate in a local association which was designed purely to benefit all of us. It comes down to our livelihood, and our businesses are at stake.”