What’s Next?

Each fall, Medtrade offers home medical equipment providers and manufacturers alike a time to evaluate business and incorporate new products and services that can enhance profit. But this year, it is uncertain how the current legislative/regulatory environment will impact the trade show, which takes place Oct. 2-4 in Orlando.

Will it be business as usual, or has the implementation of competitive bidding changed the Medtrade scenario for all?

WAITING ON THE WILD CARD

Tom Ryan, president and CEO of Homecare Concepts, Farmingdale, N.Y., believes providers will be seeking creative ways to adapt at this year’s event. “Providers in the first round will have to factor in the probable outcome of their bids as we will not know the winning bidders or the price at that time, and that may be a wild card calculation,” he says.

“As we all look at activity costs as well as cost of goods, we have to see how we can improve on what will obviously be deteriorating margins. The challenge will be to look to either decrease the cost of goods and services or look at technology that can decrease some of our activity costs in providing services to our patients.”

Ron Bendell, president of Waterloo, Iowa-based VGM & Associates, says providers will most likely stay the course. “We will not know the results of the first round of bids by October and people have to run their businesses in the meantime — and they have to do it as if they plan to be in business for years and years to come,” he says.

While advising providers to be prepared for changes, he says, “you have to run your business in today’s environment. You don’t want to put yourself at a disadvantage by not running it properly and not running it to the best of your capabilities.”

Michael Farrell, senior vice president of Poway, Calif.-based ResMed’s sleep strategic business unit, thinks it is too early in the process for providers to change their buying plans.

“Winning suppliers for the first 10 MSAs are currently expected to be announced in [February], so I don’t think it will directly impact their buying decisions dramatically pre-Medtrade, but it will soon thereafter,” he says.

“I expect many providers will be gathering information to prepare for competitive bidding and will be trialing commercially available options for value-priced equipment for contracts awarded in the MSAs. Some more aggressive HME providers are already buying products in advance, expecting that they will be awarded a contract, and using the products in existing competitive HMO environments.”

According to Tim Pontius, managing director of Steven Richards & Associates, Tarpon Springs, Fla., buying trends at the show will most likely not be dramatically different. He thinks providers will continue to look for new product lines and new areas of business.

“Everybody is kind of taking a wait-and-see approach,” Pontius says. “For the folks in the top 10 MSAs, their degree of urgency and their attitude is going to be a little different than those outside of those areas.”

Beth Guevara agrees. Manager of reimbursement planning for Murrysville, Pa.-based Respironics’ sleep and home respiratory group, Guevara says providers inside the first 10 MSAs “are wondering if they can get their ducks in a row and are also planning what their next steps will be as they plan for winning — or not winning — the bid.”

Those not included in this round are “waiting to see how it will turn out and hoping there will be some relief,” she says.

That means there could be some reluctance from providers when it comes to spending this year, notes Carl Will, group vice president, HME division, Invacare Corp., Elyria, Ohio.

“There is a lot of uncertainty, and providers certainly tighten their belts and slow down their buying during periods of uncertainty. They will spend more time trying to efficiently deploy their assets,” he says.

“Ultimately, they still need products to run their businesses and need to return to normal buying levels until competitive bidding is in full effect.” However, Will continues, “when the winning bids are determined, all bets are off for what the non-winning bidders do.”

DISASTER PLANNING

Although only a percentage of providers are involved in the first round of bidding, the entire industry is paying close attention.

“Clearly there is a buzz that is affecting management across the HME industry.” says Farrell. “Many are watching to see if legislation may slow down or stop the implementation of competitive bidding beyond the initial 10 MSAs; they are waiting to see how the bidding process unfolds before making major investments or significant costly changes to their operations.”

Because “Medicare is the ‘bellwether’ agency upon which many other payers base their reimbursement,” competitive bidding has devastating potential, points out Dr. Robert D. Hoover Jr., chief medical officer for DeVilbiss Healthcare, Somerset, Pa.

“There has always been a perception that Medicare overpays for home medical equipment; therefore, other payers like state Medicaid programs and managed care often set their reimbursement as a percentage off of the Medicare fee schedule,” he explains.

“Assuming the reimbursement levels achieved by competitive bidding reflect accurately the minimum amount providers can accept and still maintain margins, further discounts off of that rate by state Medicaid programs and managed care plans could spell disaster for the industry.”

Hoover adds that Medicare bidding is “a very complex program that has, to date, been fraught with difficulties in implementation. Most providers in non-competitive bidding MSAs are just relieved that their areas were not selected for round one,” he says.

“While some may be (and should be) looking at their business operations and determining how to wring more efficiencies out of their operations, most are likely waiting to see how it plays out.”

Though the bidding process has been frustrating for some, the delays that have occurred with the first round also offer opportunities for the industry to gain momentum in Congress for legislation that would mitigate the program.

“Every time it gets delayed, it gives us another opportunity to get the information to our representatives and continue to fight it,” says Bendell. “The proposed changes in oxygen we’re hearing about were there at Medtrade last year and the industry was able to fight [them] back, so the industry will once again need to do its part to fight these changes.”

EFFICIENCY EXPERTS

Providers who are serious about staying in business must have a strong grasp of their costs, according to Bill Elliott, president and CEO of The MED Group, Lubbock, Texas.

“The companies that are going to win long-term in this are going to be systems-thinking operators and are going to be operating their business on the basis of good information,” he says.

“They’re going to understand every element of their cost structure and are going to structure partnering relations with a few selected suppliers that they can have a mutually beneficial arrangement with.”

Elliott advises providers not only to focus on what they can buy at the show but also to seek out partners who can offer the solutions and tools that their companies need.

It is all about improving operational practices, says Bently Goodwin, CEO of RemitData, Memphis, Tenn. He advises Medtrade attendees to look for ways to deliver care differently and less expensively than they have in the past. “Providers need to look toward streamlining processes, because eliminating inefficiencies is going to be key,” he says.

“Competitive bidding or no competitive bidding, the HME industry continues to be tougher and tighter. It puts the onus on HME providers to be efficient in operations and inventory management,” adds Gretchen Jerzerc, Respironics’ director of U.S. marketing, sleep-disordered breathing.

At Medtrade 2007, providers should be more selective with their orders, says Ted Raquet, vice president of domestic sales for Exeter, Pa.-based Pride Mobility Products.

“Providers need to invest in their future by making purchases from the manufacturers that are fighting for them in Washington. Doing business with manufacturers not involved in the industry efforts takes resources away from those who are investing heavily in the short- and long-term health of the industry,” he says.

At the show, providers will be thinking about their near-term needs arising from competitive bidding, says ResMed’s Farrell. “Providers will be responsible for serving all beneficiaries in a given MSA, making it difficult for some suppliers to drive long distances for repairs. Purchasing high-quality, reliable products will help cut down on non-reimbursed business costs,” he points out.

KEEPING YOUR BALANCE

Providers should be attending Medtrade with a two-pronged approach, counsels DeVilbiss’ Hoover.

“First, they should be attending the educational sessions hosted by the various industry experts. Competitive bidding is a very complicated process, and providers should ensure that they are very familiar with the regulation and the mechanics of how it works,” he says. “It is clear from listening to the Open Door calls hosted by CMS and the Competitive Bidding Implementation Contractor Palmetto GBA that there are still providers that are confused about various aspects of the program.”

Second, Hoover says all providers, whether they are located in the first 10 MSAs or not, should be looking at products with a good balance of features, quality and price. “Competitive bidding is a pricing game; however, patients will still want products that are reliable and provide value. Manufacturers also recognize this and will be highlighting products at Medtrade that meet this goal.

“Providers should be looking at all of their costs of doing business,” he adds. “That includes not only the cost and value of the products they purchase but also the other expenses of running their businesses.”

While it’s usually one of the most prominent conversations providers have with their vendors at the show, this year pricing will be an even more important consideration when providers are looking at products.

As they do, Homecare Concepts’ Ryan says it’s essential for providers to understand the true costs of providing services. “They need to look at technology that can decrease the costs of doing business, and look for the best pricing from manufacturers or their buying groups,” he advises.

“Manufacturers also need to partner with providers and teach them how to cut costs,” adds Joel Mills, CEO, Advanced Home Care, Greensboro, N.C. “Those manufacturers who bring money-saving ideas to providers will win in the long run.”

Cutting both acquisition and process costs will be important going forward, according to Mills, a past president of the American Association for Homecare. He encourages providers to network with their peers and get involved in the industry’s fight again competitive bidding. “If providers do not invest in AAHomecare now, then no one should feel sorry for them when they go out of business,” he says.

Acknowledging that there is a lot going on the legislative front, Cara Bachenheimer, senior vice president of government relations for Invacare Corp., says providers “do not have the option to ignore it anymore.

“Medtrade is a good opportunity to reevaluate business strategies and choose quality products even if it means spending a little more on the front end. We are seeing dramatic changes in the industry, and providers will have to be aggressive in their approach,” she says.

Getting involved is crucial, concludes Seth Johnson, Pride Mobility’s vice president of government affairs. “Everyone really has a stake in the industry and needs to become much more active in Washington in order for the industry to gain fair treatment from the government,” he says.

“I really do think positive change is possible within the reimbursement system, but the main key there is for the industry to remain passionate and to present those messages on a united front.”

Crash Course in Competitive Bidding

For additional information on competitive bidding, its effects and strategies to survive, check the following Medtrade sessions:

• What in the World Is Going On? A Medicare Update
  — Andrea Stark, Medicare consultant, MiraVISTA
• Survival after Competitive Bidding: Operations and Marketing Strategies That Set You Apart
  — Miriam Lieber, president, Lieber Consulting, and Colette Weil, managing director, Summit Marketing
• Joint Ventures and Competitive Bidding Networks for HMEs
  — Amy Leopard and Robert Crump, partners, Walter & Haverfield
• Complex Rehab and Assistive Technology Competitive Bidding Update
  — Cara Bachenheimer, Esq., senior vice president of government relations, Invacare Corp.
• The State of the Power Mobility Device Industry
  — Dan Meuser, president, Pride USA, and Seth Johnson, vice president, government affairs, Pride Mobility Products
• Retail HME Strategies Panel
  Moderated by Jack Evans, Global Media Marketing
• Power to Compete
  — Wallace Weeks, president, Weeks Group
• The Current Status of Legislative Activity
  — John Gallagher, vice president of government relations, The VGM Group
• Structuring Competitive Bidding Networks and Subcontracts
  Neil B. Caesar, JD, president, Health Law Center
• AAHomecare’s Top 10 Series on Critical Issues Facing the Industry
  — Walt Gorski, vice president, American Association for Homecare
• Demand Will Only Increase: Growing Your Business in a Competitive Bidding Environment
  — Denise M. Fletcher, attorney, Health Care Group, Brown & Fortunato
• Competitive Bidding – What’s It All Mean? Are You Prepared?
  — Cara Bachenheimer, vice president of government relations, Invacare Corp.
• Operations Checklist for the Current Regulatory Environment
  — Mark J. Higley, vice president of development, The VGM Group

Advice from the Speakers

What do you need to know before heading to Medtrade? HomeCare asked some of this year’s speakers for their advice. Here is what they had to say:

Get accredited

“My advice on accreditation continues to be, ‘Don’t wait!’ Medicare will be announcing a ‘drop dead’ date when all providers must be accredited in order to continue to bill. These deadlines are often very short and do not allow enough time to get all of the work done well.

“Accreditation usually takes from four to six months and must include an unannounced survey. Your accrediting organization needs from 60 to 90 days to schedule an unannounced visit. Organizations that do not have time to adequately prepare risk failure or often end up with follow-up surveys that involve additional time and potential expenses. Therefore, at Medtrade, take advantage of Accreditation Central and the educational sessions. Also, talk to your peers and meet with the industry vendors and their customers as you make your decision and move forward.”
— Mary Ellen Conway, Capitol Healthcare Group

Plan ahead

“With the third round of competitive bidding delays, providers should keep a close watch on the second wave of competitive bidding. Take notes on lessons learned from round one and plan ahead. Simulate ‘what if’ scenarios even if you aren’t sure of your company’s impact or involvement. Attend educational programs that talk about diversification, operational efficiencies, marketing and the changing face of HME providers.

“On the show floor, look for vendor consolidation, innovative new products that aren’t reimbursable and ways to cope with the various competitive bidding outcomes, including hasty inventory expansion if you win, shifting products if you lose. Meld your knowledge from the educational sessions with your show floor time. If you determine that you will expand your retail offerings so that you can realize additional cash sales, spend time looking for cash products that move well in a storefront. If you learn that inventory management and document imaging are primary initiatives this year, make appointments with software vendors who offer this type of business solution.

“For the HME provider of 2007, it’s anything but business as usual.”
— Miriam Lieber, Lieber Consulting

Think new revenue sources

“Providers need to do whatever they can at this time to become accredited and to limit their Medicare dependency. Attend every seminar that offers another source of revenue, another niche to explore or another means to improve your current profitability as well as exploring subcontracting for competitive bidding. All HME businesses need to be asking themselves, ‘How can we increase both our gross sales and net profits without Medicare?’ Think outside the box! Think retail. Think women’s health. Think wellness.”
— Jack Evans, Global Media Marketing

Listen and learn

“While at Medtrade, providers should open themselves up to any and all learning/changing experiences both in the educational sessions and in the exhibit hall. Ask questions and listen and become aware of the technology/programs that are out there. When combined with your own creativity, these will augment your business efficiencies.”
— Jacquelyn McClure, BS, RRT, FAARC, LGS Enterprises

Devise a strategy

“For providers attending and investing in Medtrade with one or many employees, your business strategy objectives should define your needs in education, training and marketing prior to the show.

“No two providers are alike in their markets. Be sure that trade show programs deepen your expertise to execute your business strategies in product, payer, service and geographic initiatives. If your strategy is to expand or deepen relationships with different payer sources, attend programs that provide new skills and tools. If your strategy is to expand cash sales and retail through specific product categories, specifically attend retail and vendor seminars that will train you on marketing, merchandising, customer service and promotions know-how.

“Your exhibit hall focus should basically follow your pre-plan with key vendor appointments to identify profitable line extension opportunities, new product/market requirements and their program support. Be sure to leave room to see new innovations.”
— Colette Weil, Summit Marketing

Industry Advocates Speak Up at Medtrade

Reps. John Tanner, D-Tenn., and David Hobson, R-Ohio, will present a video keynote address to kick off Medtrade 2007. The two legislators are authors of H.R. 1845 — or as it has come to be known, the Tanner-Hobson bill — which would change the competitive bidding program to ensure beneficiary access and allow all qualified providers to participate in Medicare at the bid rate. The keynote is sponsored by Invacare Corp.

Tuesday, Oct. 2, 7:30 a.m.
Orange County Convention Center, Room W110 A/B