Time for a Change

Recently I was driving to my home in Florida from Charleston, S.C., which I had never done before. Not knowing what to expect, I asked the clerk at a convenience store for directions. She advised that I should stay on Highway 17 but added, “Do not take that right turn. It will take you in a circle.” A gentleman who was behind me said to the woman, “Tell him the truth — you can’t get there from here.”

As an industry, we have recognized that the market does not want to pay for what we have been selling. It is a common position for any industry that transitions to the mature lifecycle stage.

To preserve the ability to do what we do for our customers, our industry has diligently deployed a strategy that could be called “change the way the market thinks.” Tactics have included studies to show what it costs to deliver products and services to our customers. We have lobbied Congress to show that one great value of our products and services lies in the savings we produce for Medicare.

Still, competitive bidding rolled out, and bidders responded with discounts that were significantly steeper than expected. Now, our strategy of changing the mind of the market cannot work. As the gentleman in the convenience store said, “You can’t get there from here.”

The only strategy that remains for our industry is to make radical changes in the way we do business, including what we sell, who we sell it to and how we process what we sell. What we sell should be defined as the entire package of things we do for our customers, such as deliver equipment in the same day, take assignment of benefits (usually without regard to the payer), document claims, service equipment and so on.

What we sell also includes the product that is delivered. Who we sell it to is generally defined by the payer type. How we process what we sell is defined in our business practices.

We cannot retract the statement that the round one bids made. Therefore, we must get on with the abandonment of one strategy and the adoption of another.

Changing the way we do business is first and foremost accomplished by redefining the solutions we offer. A provider will develop different solutions for each product category the company wishes to deliver. Redefining the solutions we offer must start with the total abandonment of all of our preconceived notions about what a customer should have. It is imperative that the new solution is developed on a clean slate.

The first question to answer is, “Who is the customer?” Keep in mind that only those with a problem to solve will be a customer. Solving problems is what causes people to buy, even if the problem is to satisfy a vanity. Examples could be someone with a prescription and a source of payment, or only Medicare beneficiaries with a prescription for a particular item, or anyone except a Medicare beneficiary with a nocturnal-only oxygen requirement and so on.

The second question is harder, because we tend to interject our personal or clinical ideas when we shouldn’t. It must be answered from the customer’s perspective. The question is simply, “What is required to solve the customer’s problem?” This solution includes the product and all of the business processes associated with it from order entry to payment.

The third question is, “Does the solution-customer combination offer an acceptable profit?” The answer can’t be determined without first quantifying an acceptable profit, then quantifying the costs of equipment and activities and, third, confirming that there is a sufficient number of potential customers to serve.

Quantifying the costs of equipment and activities must be done at the transaction level. If the profit at the transaction level is insufficient, then the solution must be reworked to remove costs. If the profit at the transaction level is sufficient then the market should be analyzed.

Some of the concepts that providers need to consider include shifting costs to the customer (consumer or payer), eliminating activities, removing cost from business processes, increasing length of service with recurring revenue customers and defining customers as users of multiple pieces of equipment.

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].