Bill arrived at his HME dealership early on Monday, a small victory in itself. He had already spent the drive over mentally prioritizing his tasks for the new week and was even unlocking the store a full 30 minutes early. Bill was ready to bring new meaning to the word “productive.”
However, it was the Monday after several monthly Medicaid orders for incontinence products were delivered to customers. Both phone lines were lit up. The first caller was Helen and she was not happy, “Those briefs you sent me are leaking again!”
Does this sound familiar? With reimbursement for incontinence products falling every year, HME dealers are left with little choice on what to offer customers receiving Medicaid assistance. The downward reimbursement trend in this product category has dealers seeking the least expensive products from distributors. For many HME dealers, even those products offer the thinnest of margins.
Continued support for industry associations lobbying at the local level and in Washington can help raise awareness for the issue, but the reality is that lobbying efforts thus far have not had the impact on reimbursements the industry desperately needs.
In most states, HME dealers can solve, or at least greatly reduce, the leaking brief issue with a simple booster pad for the Medicaid segment of the business. Many entitlement programs will allow billing for this type of pad under code T4535. It is important to note about this means of backup:
- Make sure the chosen pad has a flow-through construction.
- Most of the time, dealers have the luxury of choosing a relatively robust pad vs. the least expensive one. This varies state-to-state based on reimbursement rates.
Perhaps more importantly, if a dealer has not already done so, it is time to start focusing on the cash side of incontinence product sales. This does not mean dealers should abandon Medicaid customers. Instead, champion new and more creative ways to help this segment of business.
While this transition to a stronger focus on cash sales can be applied to most HME product lines, we will use incontinence products as the example to map out a plan of action.
1 Choose Higher Quality Products Yes, customers want the best deal possible on their products. However, when it comes to the incontinence product category, customers also want the best protection possible. They do not want leakage, they do not want odor, and they want to avoid the embarrassment that these negative outcomes bring. You will be surprised to find out just how many of your regular customers are willing to pay for quality if you take the time to educate them. Keep these points in mind:
- Your customers are probably already coming up with their own solutions to compensate for lower quality products (e.g., changing more often, wearing two briefs at once, adding a variety of pads to supplement absorbency, etc.). These remedies put the customer’s skin at risk.
- Your customers using these tactics may actually save money using a higher-quality product that requires less changing and no additional products to supplement absorbency.
- Better products produce a higher margin for you and are the best choice for your customers.
2 Choose Products Not Readily Available at Chain Stores Again, your customers are looking for the best deal. Given this, it is not in your best interest to promote products that the big chains can offer at lower prices. Don’t try to compete with these products; choose elite products that only dealers can offer.
3 Rely on the Manufacturer to Launch While many dealers do not have direct-to-manufacturer purchase relationships, they do have direct access to the manufacturers. Most manufacturers will be delighted to provide the signage, in-store marketing items and samples needed to create awareness and demand for higher-margin items. If they aren’t willing or responsive, keep looking for the right partner.
Once a dealer has a more unique and durable product to offer that delivers the kind of margin that strengthens the company, consider taking it out to the local business community—home health agencies and skilled nursing facilities. While many businesses source from the same distributors, in many cases an HME can offer faster service and more personalized delivery, or even direct consumer billing options larger distributors struggle to match. HMEs have the local business card to play.
Starting with samples of various pad offerings can give customers a chance to make sure the product works for their needs. Taking care of customers delivers every time in the HME business, whether customers are Medicaid or cash paying.
This article is the first in a seven-part series. Each article will focus on a concern of the retail incontinence market. Read the full series here.