Over Troubled Waters

During a recent visit, I learned that Italy has a government-provided health care system similar to Medicare and Medicaid. Citizens with enough money can purchase private health care services if they choose to.

While spending some time in Venice, I learned that what we call streets are for pedestrians there. All non-pedestrian traffic is by boat. Stores and restaurants get their goods by boat. Express couriers pick up by boat. Even the garbage is collected by boats with small cranes to lift dumpsters that are rolled out to canal-side locations.

One morning, from the top of a bridge, I noticed a boat delivering hospital beds and wheelchairs — a DME provider using a boat in his everyday business. The next morning the city experienced one of the seasonal tides that are sometimes higher than its streets. Venetians keep rubber boots for these occasions. In our country we would describe this as an adverse circumstance because we are not prepared for it. But in Venice, deliveries are not stopped and business goes on.

That evening I received a phone call from a gentleman in the U.S. who wanted to start a DME business. He said he had heard that oxygen was the most profitable segment in the current environment of home care and wondered how that should fit into his business plan. I explained that is not true and why.

His call led me to think about private equity firms: Some are considering investing while others are already putting significant sums into innovative products and methods associated with delivering home care. They are doing so because they see opportunity in the disturbed home care environment.

The point of all three examples is that running a good business is not about avoiding adverse circumstances caused by geography, nature, government and rivals. It is good if an industry can avoid adversity, but the fact is we can’t. A good business happens when people develop business models that will succeed because of the circumstances.

Providers in our industry need to be asking, “Do we have a business model that will succeed because of the circumstances?” If the answer is no, then it is either time to develop a new business model or develop an exit strategy.

For those who choose to develop a new model, at least four elements of the business should be assessed. Each must ultimately be aligned with the others and with our industry’s environment.

• Vision and Values It is vital for a business to stay focused on its vision and be true to its values. The business model will not succeed if it does not support them. Think of vision as “what the business will be when it grows up.” Narrow thinking may lead to missing the boat in the future.
• Skills, Resources and Controls Skills reside in the business’ people. Resources are its financial and physical assets. Controls are the mechanisms that alert management to conditions that are off target and provide a path to return to target. Managers are responsible for the deployment of the three. Because a business does not currently have appropriate skills, resources or controls does not mean they cannot be acquired or that it cannot develop a business model to succeed. Management’s role is to abandon the wrong and deploy the right.
• Product-Payer Combinations Regardless of the industry, the core of all business revenue, expense — and thereby, profit — is the solution the business offers and the customer it is offered to. For DMEPOS, we can call the solution “the product” and the customer “the payer” associated with the person we actually serve. Businesses must align their vision, values, skills, resources and controls with the product-payer combinations that will best be served.
• Acuity and Personalization of Care Companies whose values include highly personalized care should focus on delivering products and services that truly demand the personalization of the product (like custom rehab) or customers who have truly acute conditions (like on ventilators). Product-payer combinations with less personalized or acute requirements will produce better profits with high levels of automation. Providers who mismatch the service level to the product-payer combination will be inefficient.

Wallace Weeks is founder and president of Weeks Group Inc., a Melbourne, Fla.-based strategy consulting firm. He can be reached at 321/752-4514 or by e-mail at [email protected].