Nine Ways to Achieve Operational Efficiencies and Profitability

The HME industry is transitioning from the slow dime to the fast nickel, and without some major course corrections, today’s margins will force providers to retool their business strategies. It’s time to realize the opportunities and challenges facing the industry and react appropriately. Let’s explore nine 
ways to move toward diversification and operational efficiencies for greater business profitability.

1. Developing Retail

In this industry’s infancy, things were much simpler. Barriers to entry were almost nonexistent, documentation requirements were minimal and a lion’s share of a provider’s business came from insurance reimbursement. Today’s HME marketplace is markedly different, with more purchase decisions being made by adult caregivers rather than the patients themselves. Catering to these new customers requires a retail presence to reach these more savvy shoppers. To thrive in a retail HME endeavor there are certain factors that can make or break the success of such an undertaking. Among these factors are location, dedicating less than 800 square feet of floor space, having an outside salesperson, limited product selection and the lack of well-trained retail staff. It is advisable to seek the services of a consultant who specializes in retail operations and who can assist with demographics, competition, store layout and product selection before you ever implement a retail HME program.

2. Data Mining/Analysis

Buried in a company’s enterprise software system’s database is a treasure trove of information, which should be accessible through either on-board reports or extern-
ally via a report writer. This information is critical in steering the operations of an organization on a macro level. Data mining for product selection and revenue sources provides valuable insight into possible areas of product expansion. A perfect example of this methodology would entail expansion of companion products such as diabetic shoes, foot care products or sugar-free supplements and snacks, if data mining for product selection revealed a high volume of diabetic test strip and lancet business. Data mining for revenue sources would entail running sales (revenue) reports to determine where a company’s business is coming from. Revenue broken down by product category, referral source, payer source, geographic area and by salesperson can let owners and management know where additional sales focus is needed and exactly from where the company’s business is derived.

3. Diversification

Thinking outside the box on product selection can often yield increased revenue and potentially higher margins as compared to the mainstream HME product lines of oxygen, hospital beds and wheelchairs. Suggestions for product expansion can include bariatrics (as obesity has become a major health issue), women’s health (particularly if there is an oncology clinic nearby), home access-
ibility (ramps, stair glides, bath lifts, etc.) and home diagnostics (cholesterol tests, blood pressure monitors, etc.). Continuous Passive Motion (CPM) machines can also be identified as a profitable revenue source and have not been included in the competitive bidding categories.

4. Different Patients

More of today’s HME customers are adult caregivers and not the actual patients. 
This sizable part of our population—commonly referred to as baby boomers
—represents the fastest growing HME target market and, at the same time, are both a blessing and a curse to the industry. While there are many of them (including your illustrious author), they stop funding the Medicare Program via payroll deductions when they retire, thus putting a significant drain on the Medicare trust fund when they begin to attach Medicare benefits. They are 
typically loyal, repeat customers who make purchase decisions while they are in your store and normally buy brand rather than the bare bones lower-grade product. Boomers are also more technologically astute than you may think and reaching them via electronic means is a viable 
marketing strategy. Several studies have shown that approximately 92 percent of boomers use e-mail regularly and nearly 47 percent are regular users of social 
media sites such as Facebook and Twitter.

5. Different Payers

Past DME payer mixes were typically 66 percent Medicare/Medicaid, 25 percent commercial insurance and 9 percent private pay. Market forces have moved many payers away from this distribution due to competitive bidding and lower margins. Historically, Medicare has always set the bar in this industry. Now, the industry is seeing other payers adopt a competitive bidding mentality or reduce their allowables down to CB levels or even lower. Today, spreading risk over multiple payers is necessary to offset lower CB margins and lower fee schedules of other payers. Workers Compensation can be a viable, and in most cases, profitable payer source. There are also re-pricers who give you access to payers you may not be able to access without them. One example is Carecentrix (carecentrix.com), and VGM members use Homelink (vgm
homelink.com).

6. Determined Use of the ABN

Medicare’s ABN (Advance Beneficiary Notice of Noncoverage) is one of the most misunderstood documents Medicare has ever given us, while at the same time being one of the most powerful documents we have at our disposal. Utilized properly, the ABN can increase margins in certain situations and serve as a get out of jail free card in others. The ABN has three predominate uses:

• Limitation on liability—If the patient requests a Medicare item normally covered by Medicare and you are anticipating a medical necessity denial, the ABN is used to make the patient liable for your full billed amount.
• Upgrades—An ABN is used in an upgrade situation in which the patient desires an item that goes beyond what is medically necessary under Medicare’s coverage requirements, such as upgrading from a folding to a wheeled walker. Not, however, within the same HCPCS code, i.e. from a less expensive to a more expensive folding walker.
• Waiving Medicare—Medicare beneficiaries have the option to waive having an item billed to Medicare and can instead pay you with cash, check or credit card at the time of the transaction.

7. Document Imaging

Keeping your documents in digital form has been okay with Medicare since Sept. 27, 2002. Working in a paperless environment improves document retrieval, billing efficiency and will result in labor savings. Scanning documents into a document imaging program should be a routine part of your business operations. It is recommended you scan your documents, categorize them by date, place them in banker’s boxes and store them within HIPAA guidelines. Also, put two sets of eyes on the process. No matter how much you spend on a scanner, several pages can be pulled through at the same time. Have a physical count before scanning and confirm with your software that the same number of documents is scanned. If the numbers do not match, start over.

8. Dynamic Salespeople

Salespeople are the key to a successful retail HME program. Be sure these folks are well trained (abuse your vendors—if you carry a vendor’s products, they should be eager to make sure your salespeople understand their items and how to sell them). Give the salespeople a professional title such as “HME Specialist” or “Medical Equipment Expert.” Finally, ensure they are compensated properly through an incentive or commission system with bonus points for add-on sales from the base item the customer initially requested.

9. Dramatic Marketing

Advertising and marketing budgets should be approximately 5 percent of your company’s gross revenue. One of the most popular marketing approaches in today’s marketplace is even marketing. Events such as Diabetes Day, Foot Care Day or Hypertension Day should be advertised, targeted at the public and referral sources, held after hours and include appropriate food. Embarking into a new program in the wrong direction is far worse than not embarking at all.