What to Do?

HomeCare’s editors are the lucky few who, quite often every year, corral top industry experts, ask them the hard questions and hope for the best answers. This year, the hardest question is also the simplest: What’s your advice for providers?

The home medical equipment industry is experiencing a glut of new mandates, unexpected reimbursement cuts — and the tediousness of another year of “ifs” and “whens.” In short, sums up Neil Caesar of the Health Law Center, “it’s a mess.”

So, since advice is something we could all use, we gathered the experts — our Editorial Advisory Board — for the virtual roundtable discussion you will see on this and the following pages. Their comments cover timely issues, from accreditation to capped rentals to attitude and resourcefulness, as well as timeless topics from marketing and retail to business costs.

Accreditation — Start Now

Tom Cesar: Home care providers who are determined to maintain their Medicare reimbursement status after 2007 must meet the accreditation requirement prescribed in the Medicare Modernization Act.

While many geographic locations will not be included in the initial phase-in, you should take a proactive approach and prepare to become accredited as the requirement spreads nationally.

A large number of providers will be trying to retain their reimbursement status. Thus, your company may be waiting in line to apply for accreditation. Do not delay your preparation. Begin immediately.

Develop a plan that is realistic and feasible for the size of your company. Assign each employee sections of standards that reflect his or her strengths and job responsibilities. Assign specific target dates for completion of goals. The schedule should be spread over a number of months, perhaps a year or more.

Use the draft quality standards from the Centers for Medicare and Medicaid Services as a basic guide if you are waiting to decide which particular accrediting organization you will choose. Better yet, purchase an accreditation manual.

Since CMS is delaying the process for reviewing and approving accrediting organizations until this summer or possibly later, it would be prudent to utilize all resources available in getting prepared. Following are two free resources:

• The draft quality standards for DMEPOS are available on the CMS Web site. Although they are not final and will likely have changes, you should access these standards in preparation for accreditation.
• HME companies also will be required to adopt a compliance program as defined by the Office of Inspector General. This information can be downloaded as well.

Cara Bachenheimer: If your company is not accredited by 2007, you may not be able to participate next year if CMS decides to start competitive bidding in your geographic area. Do not wait for CMS to approve accreditation organizations — that may not give you the time to become accredited.

It is a fairly safe bet that the existing accreditation organizations for HME providers will make it their business to ensure they are approved by CMS, no matter what the final quality standards end up stating. Does that mean some accreditation organizations’ standards may change? Absolutely. But take it from any provider who has gone through the accrediting process: It always takes longer than anticipated.

Don’t delay. Start now.

Capped Rentals — Ask The Right Questions

Miriam Lieber: Now that capped rentals will end after the 13th rental month and title to the equipment transfers to the patient (as mandated by the Deficit Reduction Act), you need to figure out your potential exposure.

How many of your patients actually continue renting (capping the equipment after the 15th month), and for how long? How much extra revenue do you garner on the continued rental patients (six-month maintenance and service fees included)?

Do you spend more repairing the equipment at no charge? Measure this per product, as the trends will vary by item.

The same is true for oxygen with its new rental cap at 36 months (also included in the DRA). How many oxygen patients rent beyond 36 months? What is your potential revenue loss? Once you learn the answers to these questions, you will be able to prepare for the change.

Given these new provisions, decide if you are interested in the repair market. If changes are made to further reduce the total number of months the patient can use the equipment and get reimbursed by Medicare, you will definitely need a plan that includes diversification of both product and payer.

Bachenheimer: With the Deficit Reduction Act, we are now faced with developing and implementing a political and policy strategy to reverse the ill-conceived provision that limits home oxygen therapy rental payments to 36 months and transfers ownership of the equipment to the beneficiary.

This provision — probably more than any other legislative change Congress has handed the HME industry — will impact consumers in ways that providers cannot protect. How will consumers know when to obtain maintenance after 36 months? How will consumers obtain back-up tanks in the event of an emergency such as a power outage? Will consumers be forced to pay out-of-pocket to ensure access to replacement supplies and emergency services?

How will prescribing physicians feel about this policy? What physician will feel good about having a patient on home oxygen owning a concentrator with no direct relationship to a provider?

Educate your patients about what the provision really means for them.

Attitude — Be Resourceful

Terry Pageler: Define the “problem.” Therein lies the solution.

CMS is seen as the enemy. They are not. Because this industry fails to define the problem, CMS seems to be an enemy that providers feel powerless to combat.

Imagine a farmer moves from Ecuador to Iowa. He plants his crop and, suddenly, it all dies. He goes to plant again the next morning, and his field is covered in white powder. “Who is my enemy that would kill my crop and cover my land?” he asks. He returns home to his warm land and proclaims Iowa to be a barren dessert, not fertile to grow even the weakest crop.

Just as Iowa’s winter — with its white, powdery snow — is a harsh reality, so, too, is CMS. Neither, however, is the enemy. The farmer just needs to understand the “problem.” Then chop wood or freeze. By that, I mean he must do something about it. Tackle the winter’s harshness, and the harvest will be bountiful.

Cindy Ciardo: Change has become the mantra of our industry, whether we like it or not. Those who resist will have a difficult time staying in the game, but those who welcome change will be among the top-selling retailers: Not only are they ready for change but they respond promptly to it as well.

In the battle to generate more sales, the winner isn’t always the biggest company but the most resourceful. The secret to greater success is having tangible ideas you can implement effectively.

A strategic marketing plan builds a framework to help guide your business in the right direction. Ask your staff to put on their thinking caps and network with colleagues — both are excellent ways to gain a different perspective and expose yourself to new ideas.

Retail — Be Diverse, Different and Diligent

Colette Weil: Just like a stock portfolio, your HME revenue sources need to be diversified to maximize return.

The right mix is art and science. It is personalized to your firm’s core capabilities, expertise and area. And if you are like more than 38 percent of HME providers who responded to this magazine’s 2006 Forecast Survey, you intend to expand your retail position.

Think strategically. Expand in categories that complement your current offerings or are new offerings that leverage your referral base. Market your retail expansion to fully maximize all customer and referral source contact points.

An integrated strategy using a variety of methods to reach your target audience increases the opportunity to build your brand name and stimulate retail sales overall. Create a plan of attack using multiple tactics. A plan and schedule can help you evaluate and select the tactics most appropriate for your business and budget.

Get your staff trained, excited and compensated. No one is enthusiastic or supportive of something they don’t completely understand.

An attractive in-store presentation is an important start. But don’t rest on your wall or display’s laurels. Work with manufacturers to obtain their complete support for merchandising help, signs, coupons, postcards, direct mailers, in-store demonstrations and detailing collateral. Use their Web site plug-ins. Schedule their field sales staff for employee training, in-store help and joint sales calls.

Don’t be shy about asking for cooperative advertising, key market funds, customized ads or sample press releases to submit to your local papers, assisted living center newsletters and senior magazines. Set a promotional plan. Use incentives such as speakers, demonstrations and free samples to engage consumers.

The industry’s manufacturers are in this with you. The more you sell, the more they sell.

Louis Feuer: Look for new and exciting products that would interest the very same customers you are working with now, and build on the relationships that you have taken so long to get in place. For example, you might consider expanding your rehab lines to include products that make living at home easier, and looking for products that can improve your patients’ quality of life.

If do not wish to expand your product line, then make sure you continue to review, audit and analyze the way you deliver products to your customers. Can you do it more efficiently without increasing your costs? Would investing in new technology cost additional money in the short term but increase your productivity over the long haul?

Ciardo: Specialty storeowners in particular must either get serious about operating their businesses or be prepared to accept stagnant revenues. There are ways to simplify your efforts, multiply profits and increase your odds of success, but it usually takes personal sacrifice, diligence and commitment.

• Plan ahead. Having a big heart and good intentions is not enough to run a business if you are not well informed about the industry and the obstacles in your way to financial success — government regulations and legislation, managed care contracting and poor reimbursement, claims processing requirements, certifications and accreditation mandates, key competition in your area, and the list goes on.
• Assess the playing field. An in-depth knowledge of the industry and operating within its influence is going to give you the competitive edge you need to be successful. What is your current market share in relation to your competition? What services do they offer? What is their size, location, marketing approach, type of customer and pricing strategy? How are you different? What is the market’s growth potential, median household income, level of education, age groups and ethnic population? Is it more productive to sell more products to your existing client base or to expand by reaching out to a new target population?
• Define your service area. What are your geographical limitations? Is there a way to reach clients out of your immediate area either through expansion or subcontracting with a noncompeting but complimentary business? What are the potential trends and threats in your area?
• Improve customer relations. Give your customers what they want, and they will continue to do business with you. The products and services you provide should reflect their needs.
• Manage your inventory. All retail stores need to manage inventory closely. Inventory sitting on a shelf is money, and it represents a large portion of your business investment. It is important to monitor your inventory levels: ensure quick turnaround, avoid shortages, improve purchasing procedures, streamline vendors, negotiate better terms with companies from whom you purchase in volume and update merchandise to reflect customer needs.
• Buy and price merchandise for profit. Most stores use a “keystone” markup that applies to their product or service. Adapt a pricing strategy based on an item-by-item calculation for regular, promotional and off-price merchandise.

Pageler: Differentiate. To simply say “We Provide Better Service” is not a differentiator. The reason? Everyone says it. Without exception, providers will tell a referral source that what separates them is 1) their people and 2) better service … Right? To differentiate, you have to 1) say something different, and 2) be different.

Folgers is able to get by with “Mountain Grown” as its differentiator. Why? Because no one else says it. In reality, coffee won’t grow unless at altitude. So even if the act is not distinct, the words must be. Whatever your claim, it must be voiced consistently and repetitively.

Even better, of course, is to differentiate with distinct substance. Realize that doctors, too, are suffering harsh CMS realities. Physician offices seek top-notch support from you because they are trying to cut their own overhead. What are you offering — what are you investing in — that can help them? Find that — invest in it — and you will distinguish yourself.

Again, declining reimbursements are the reality. Dell Computers isn’t profiting because prices are going up. Just the opposite. Relative prices continue to drop, yet Dell gives the fickle customers what they want.

Bottom line: Doctors want you investing in their practice. What are you prepared to give them that no one else is? Differentiate yourself and you’ll capture market share. Be efficient operationally and, like Michael Dell, maybe you can put your own IBM out of business.

Marketing — Get Involved

Feuer: Develop a sales, marketing, and networking program that helps you reach out to customers. Become involved in civic activities, community events and professional associations. “Involvement,” “commitment” and “participation” — these are the new sales words for 2006.

Weil: When pressures bear down, many HME providers withdraw from marketing in their community.

It’s hard to keep your game when you’re being slammed from all sides. You retrench, evaluate, do cost analyses and prepare redeployment of resources. All necessary. But there are side effects. You can lose employee momentum, market value and community visibility.

Shrewd providers recognize that to grow business, this is exactly the time to maintain high visibility to reinforce their brand. If you are strong in one area and the rug is pulled out, you will bring the same strength to another. That’s brand recognition and equity — the hard investment you made to build your community reputation.

So, in times of uncertainty, how do you reinforce your position? Stay visible. Heighten your publicity efforts to garner more press coverage. Affirm your role as a community and referral source information conduit. Launch new programs, whether a retail line extension, new category or service change to existing programs. Teach, educate, direct mail, advertise, e-mail, talk and participate in events.

Finally, double up efforts to remind stakeholders you are accredited. All collateral, Web site and advertising should clearly emphasize accreditation. Stay in front of legislators.

Shelly Prial: As pressure is mounting from Congress to reduce costs, providers find themselves under a great deal of stress. One cry is universal: “Where can I find new income?” The answer is, “In your own backyard.”

Use the Americans with Disabilities Act and Occupational Safety and Health Agency standards as starting points. Every place where people gather — markets, parks, stores, motels and theaters — must adhere to the guidelines of the ADA. Every workplace must adhere to OSHA guidelines.

Every HME provider has all the necessary items on his or her shelves to enable these requirements to be satisfied. Help any of these places meet the requirements, and you will simultaneously develop new cash sales and perform a community service.

Finances, Productivity and Competitive Bidding — Know Your Costs

Lieber: The next year for HME will be telling. With so many unknowns and variables related to competitive bidding, it is tough to know exactly what to expect. Regardless, you should be planning now to prepare your bid. In the process of planning, you will learn your true cost of doing business.

Many providers use activity-based costing to determine these costs. Remember to build in a profit or, ultimately, you will not be able to remain financially viable. Based on your findings, you may even decide not to bid; however, you will learn your operational weaknesses.

Hone in on those areas now, work toward improvement and, no matter your fate with competitive bidding, you will be better poised for your future.

Jane Bunch: The HME industry is going to be (and has been) much like climbing a mountain over rough terrain. But, what gratification we feel when we have reached the top — or enabled our customers to live productive, independent lives in their own homes.

This will be one of the toughest years for our industry. Providers have to be smarter than ever before. You may have to change the way you are doing business.

Streamline and run a tight ship. Where can you make sensible cuts to maximize profits? Be diligent in collecting co-pays and deductibles. Audit paperwork before transmitting it to ensure you keep the money reimbursed to you.

Train your personnel appropriately and frequently. Are they keeping up with all of the current updates and changes? Are you using a denial management program to ensure denials are being worked as soon as possible? Empty the basket you have been keeping all of your eggs in, and start new by filling it with innovative ideas.

Feuer: Track and monitor your business. Look for trends within your own company. Notice any changes in ordering patterns, product purchases or territory revenues. Once you notice a change, be proactive. Determine what the change actually is; then, determine what may be causing it.

Never misplace a lead, a message or a referral. As competition grows and reimbursements change, the cost per call will continue to increase due to employee benefit plans, gas, etc.; therefore, you cannot afford to lose a lead or, even worse, a customer!

Ciardo: Manage your money effectively. The one and only way you can take control and make your business earn more money is by knowing how much you are spending, buying and selling. In today’s technologically advanced world, it is imperative to computerize your business, streamlining everyday tasks and business procedures.

Evaluate your operating expenses, and use sales forecasts, expense sheets and financial statements on regular basis. Good financial records help you know where you are and where you are going.

If you budget wisely and know the interval of your monthly income and expenses, you won’t have to worry about running out of money. Watch your monthly overhead and operating expenses ratios. Develop a budget and follow it.

Neil Caesar: To master all the new government requirements — and the new attitude behind them — you must first master your internal systems. The lessons of the past several years demonstrate that Congress (and perhaps CMS as well) evidently believe that the vast majority of HME suppliers do not have their act together, are not particularly professional and neither know nor care about reimbursement, regulatory and quality standard rules and requirements. To them, we may “talk the talk,” but most of us do not “walk the walk.”

Many HME experts advise you to diversify products and payers to respond to continued squeezing of the government dollar. Retail sales, cross marketing, enhancements, add-ons and “lifestyle” purchases are all part of the solution. But these choices focus on outside sources of revenue.

Are all of us generally capable of pursuing this growth effectively? Is our industry capable of supporting this growth effectively? If you do not have the capability within your internal delivery systems (financial and patient management systems, compliance systems, reimbursement systems and so forth) to pursue, support and nurture these options and opportunities, can they mean anything?

The key to achieving strong and flexible internal systems is to roll up your sleeves and go to work with focused and sustained self-assessment. How do you actually run your systems? How do you learn the best way, or the mandatory way, to deliver your product, to document its necessity, to code it correctly, to interact with payers, to interact with referral sources? Do you, in fact, do it step by step?

Mandatory accreditation, competitive bidding and compliance initiatives will each require that providers focus on how they run each aspect of their operations, and to establish mechanisms for monitoring, correcting and improving.

If you take the time now to identify and assess how you run each of your operational systems, objectively and thoroughly, you will gain insights that permit both compliance with upcoming requirements and the ability to assess what needs improvement and how to go about doing so.

Not only will this approach help you achieve the necessary knowledge and flexibility you will need to deal with these and other challenges, but they will provide immediate improvement in your abilities to respond to and address the new requirements being imposed almost weekly.

This is the same approach to maximizing profitability that is embraced by successful businesses in all industries. It demonstrates professionalism. It shows we “walk the walk.”

Wallace Weeks: Our businesses are much like cameras. A change in the scene or the surface may demand a change in the focus.

Competitive bidding represents a major change in the environment and demands a refocusing of most home care businesses. The way your business must refocus is to answer the questions: What solution (the result of products and services) does my business offer? What customer (related to payer) is it offered to?

The solution you offer is most influenced by your vision, values and skills. Thus, for example, some companies deal with mobility solutions, and others deal with respiratory solutions.

The customer you offer your solution to is most influenced by your vision, resources and controls. Resources are your company’s assets (the people bring the skills), and the controls are the systems that keep the company on track.

When refocusing, also consider the position your company currently holds in the marketplace. The market is comprised of more than the customers; it includes rivals, centers of influence, vendors and, in some cases, potential new entrants.

The logic of focus is often impeded by the heart, because the heart of most providers wants to help all people in the market in any way possible. The truth is that no provider can do this. Moreover, some providers do some things better than other providers.

The heart needs to accept that a business is best suited to help a certain type of customer with a certain type of products and services. And, a business should help as many of those people as it can while leaving the others to companies that can do a better job serving them.

Refocus your business by aligning product and payer combinations with your vision, values, skills, resources, controls and market position to get the greatest profit those elements can produce.

Next, improving productivity is essential because competitive bidding will reduce reimbursement faster than manufacturers can reduce the cost of goods.

There are three ways to change your company’s productivity. First, make sales to product/payer combinations that require the least man-hours per revenue dollar. Some products and some payers require more man-hours per dollar of revenue created than others.

Activity-based costing helps to assign the costs associated with a transaction in order to identify the opportunities. By shifting your product/payer mix to transactions that require fewer man-hours per dollar of revenue, you improve productivity.

Second, re-engineer processes to remove time. Re-engineering starts with the question, “Can we eliminate this process?” If not, “Can we eliminate any of the activities that it requires?” Then, consider each activity for ways to remove redundancies, keystrokes, footsteps or any other user of time. Some solutions require only management approval, while others may require investing in technology.

Third, change the proposition to your customer. This is potentially the most disruptive to your business, but competitive bidding may require it — and it certainly offers the best opportunity. For instance, one common proposition is that providers deliver oxygen refills as the customer desires. Changing the proposition may require the customer to pick up their tanks, or limiting the number of deliveries you make.

Help — Ask for It

Bunch: Outsourcing billing, data technology and other areas of your business may be profitable. Sit down and do the math. Outsourcing is becoming more prominent than ever before. It makes sense. Do what you do best and leave the rest to others that specialize in the areas you have problems with.

Ciardo: Don’t be too proud to seek out assistance. Outside advice and help can give your business the competitive edge it needs. Attend professional development seminars, take financial and business management courses at the community college and join professional groups and your state and local trade associations.

Know your strengths and weaknesses. Critically assess your interests, skills, abilities and limitations. If you are an owner or facility manager, your basic roles include marketing, finance, administration and the responsibility of personnel. Rarely will one person play all these roles equally well.

It is important that you know which parts you can handle proficiently and which parts will require help to be done well. It is also important to be objective and take a close look at your overall strengths and weaknesses. A strong leader recognizes his or her weaknesses and gets help.