In Franklin Trammell’s view, “If you’re not growing, you’re backing up.” That philosophy has helped the founder and owner of Carolina’s Home Medical Equipment in Matthews, N.C.—“just a tenth of a mile from Charlotte”—to successfully navigate the treacherous waters of the current HME industry, particularly Medicare’s competitive bidding program and its debilitating audits. It has also steered the company into posting an astounding 80-percent growth rate over the last three years.
Inc. magazine recognized that growth in its sixth annual 500/5000, which rates the nation’s fastest-growing private companies based on percentage revenue growth. Revealed in August, the listing saw Carolina’s placing 231st of 500 in the health care industry and 2,849th overall.
Despite the grim outlook for reimbursement for HME, Trammell is confident that his growth will continue—at least for another year. “There is no reason at all to think that our growth will not at least continue at the pace we have been on,” he says. “After 2014, when Round 2 of the Medicare competitive bidding program begins, who knows? It depends on the bids we win. I am as optimistic as I can get.”
How has Trammell fostered such success in these trying times for the HME industry? The answer is not in opening a multitude of locations. It is, instead, in his shrewd ability to identify potential areas of growth and to also build on his company’s reputation for what he calls “extreme service.”
A Good Thing to Do
Trammell’s career plan never included HME—far from it, in fact. For 29 years he worked in corporate America as an executive in a Fortune 100 company in the textiles industry. About a decade ago his career derailed when the entire industry moved to Asia. “At the same time, my father suffered from a series of strokes resulting in numerous hospital and rehab stays. This was my first introduction to our industry. Prior to that I didn’t even know the DME industry existed. My family had a very difficult time dealing with the fact that our once very strong patriarch was no longer independent, but quite the contrary. We were never formally introduced to our great industry, and had we been, things would have been far better for us.”
Trammell found himself thinking long and hard about what his family was going through. The textile industry in America was dead, and he needed a new career. “As corny as it sounds,” he says, he decided that getting into HME might be an opportunity to help people cope with issues such as those his family had encountered. So he set about doing the due diligence and learning about the dynamics of the industry. He talked to people at manufacturers like Invacare and Pride Mobility, spent time with a friend from the textile industry who had opened an HME company and he even read the Medicare manual.
“This looked good to me, and like something that could not be outsourced to China,” Trammell says, noting one of the huge positives of the industry, even in these uncertain times.
So, in November 2003 he and his wife Martha opened Carolina’s Home Medical Equipment, a full-line HME company that only excludes high-end rehab. “My wife and I made a decision early on to never deviate from our core values,” he says. “We handpicked our staff very carefully, being sure that our values were properly aligned. Quality products, extreme service, diversity of thought and highly ethical standards continue to be the basis of our business.”
That “extreme service” component was one he brought from the textiles industry.
It was a given in that business, he says. “In the HME industry, that was not a given. If you are the new kid on the block, the only thing you’ve got to separate yourself from everyone else is not just good service, but the best service. It just caught on. Even with reimbursement going down, I continue to buy the highest-quality products I can find. I’m even stepping up the quality. It will pay back in the long run.”
Carolina’s employs 23 people and they are all dedicated to the concept of extreme service, Trammell says. He is so proud of them that a photo of each employee—as well as one of Henry the bird and Holly the dog—appears on the company website, along with customer comments reflecting on their service. One such testimonial lauds Carolina’s employees for helping a health care facility during a flood.
“The crisis was very overwhelming for us, and their help was invaluable in helping us evacuate the neighborhood. Both of your men were willing and able to do whatever was needed to help, including pushing beds down the hill and giving up their jackets to keep our residents warm. I want to assure you that we will continue to support your organization and we appreciate all that you do for us.”
“What a breath of fresh air!,” writes another customer. “Terrell [Harper, the company’s patient service manager] went above and beyond all expectations and was so helpful and pleasant to work with. His smile was infectious. This man needs to win some type of service award. In today’s time it’s hard to find high-caliber workers in the service industry. Let me tell you, you have a gem.”
Trammell says he gets great satisfaction from knowing that his company and its employees have made life easier for someone. He also knows that it’s those acts of extreme service that allow the business to grow, because word does get around.
Growing the Business
Although his company has grown 80 percent in the past three years, it has been controlled, targeted growth. Four years ago when Trammel’s son Andrew joined the company as controller, he brought with him “good ideas, innovative ways of doing things,” he says. The result has been the modernizing of the infrastructure.
“Everything is state of the art—the software, GPS on the vans, everything is on the screen dispatch display with all the delivery technicians, where they are delivering, where they are picking up. We know where our vans are all the time. It has enabled us to be a lot more responsive.”
Still, he adds, “We have also been very careful not to outgrow our infrastructure as, in doing so, our quality would have slipped. We have grown nicely over the years thanks to our incredibly talented, dedicated and highly motivated staff of 23 coupled with referral partners that share our core values of quality and integrity.”
Trammell has elected not to open multiple locations, but he has expanded the company’s facility twice by buying out his neighbors. The last expansion was earlier this year. Carolina’s was “busting at the seams. We needed more customer service space, we needed more showroom space and we needed more warehouse space. I was having to go outside for my warehousing. Everything is growing. Every category is growing.”
Carolina’s is now 9,000 square feet, including a 1,500 square-foot showroom. “We are increasing our retail sector,” he says about the larger showroom. While Trammell does not believe a provider can make a living “selling canes and bedside commodes,” he does ascribe to the power of retail to pull people in and to give a boost to the bottom line.
Carolina’s is strong in sleep products, but revenues are pretty evenly spread throughout the categories. The company also serves a number of hospice providers, a sector that has been quite good for the bottom line. “We started very small in a few ZIP codes close to my office and now we have grown to doing the entire region,” Trammell says. “The demographics are right there, as plain as day. You can’t miss the demographics. It’s not like the hospice population is going down.”
About 30 percent of his revenue comes from Medicare, and he is unsure whether that figure will grow or decline in the future. “We managed to sort of flourish in Round 1 of competitive bidding,” he says. The company won four contracts—oxygen, CPAP, power wheelchairs and walkers—in the Charlotte competitive bidding area. He attributes success over Round 1 to “growing the business, increasing volume, which helps offset lower prices, and diversifying into other payers and non-bid items.”
That story could change come 2014, however, when reimbursement for Round 2 of competitive bidding goes into effect. “There are mega categories in Round 2,” Trammell explains. “They are so big and so important that you just can’t afford to lose one. So I am extremely concerned about the categories.” He believes that the scope of the categories “will also force companies to provide products outside of their core competencies, which is a bad idea.”
Still, Carolina’s will bid. “We’ve already done our activity-based costing, so it’s a matter of running the numbers and figuring out what we are going to do,” Trammell says.
Competitive bidding isn’t the only major challenge Carolina’s faces, however. There is also the issue of Medicare audits, a widespread project that has stalled payments to providers, sometimes for many months.
“The audits are a big, big deal that’s driving up our costs significantly. A lot of costs we can control. This has become a fixed cost. I’ve had to allocate people to do nothing but audits. Do we win the audits at the end of the day or the end of the year? Yeah, but the amount of time we have to spend on it is crazy.”
Trammell supports the idea of audits as a way of getting the bad apples out of the industry, but he believes the audits the industry is now enduring are not well administered and it grates on him. He points to the fact that Medicare reimbursement claims for 87 percent of K0823 wheelchairs were denied in the fourth quarter of this year in Jurisdiction D. “That tells me that the auditors don’t know what they are doing. When someone with a full brain applies some common-sense judgment to it, they always rule in our favor.”
Despite all the stumbling blocks the industry faces, he believes it will always be around. “Our industry will always be here. It may and probably will look different in the future, but it will not go away as it cannot be outsourced,” Trammell says. “We must stay current and relevant in order to weather the storm ahead. The demographics are such that our customers will be there in large numbers. We must be diligent in diversifying payers, products and services in order to ensure that our infrastructure is in place post-Round 2 and audit fallout. The pendulum will swing back to center, as our industry is critical to the well-being of the ever-increasing senior population.”
And the industry must remember that “everybody is not broke and dependent on Medicare. If it is going to make their life easier, even if they don’t meet Medicare criteria, they want it anyway. And we have to be mindful of that.
“We can’t be thinking how it was five years ago. We have got to embrace the change. Somebody is going to need what we have and somebody is going to provide it. I hope we are smart enough to figure it out.”
They Can't Hear You!
Franklin Trammell, founder and owner of Carolina’s Home Medical Equipment (www.chmei.com), finds Medicare’s treatment of the industry mean-spirited at best. “Our industry represents less than 2 percent of the Medicare budget and spending has been flat for the last decade, yet Medicare seems hell bent on wreaking havoc on our industry due to a few bad players,” he says. “This has resulted in the flawed competitive bidding program and the endless river of audits.”
But the only way such treatment will ever end, he believes, is for the industry to talk loudly enough that Congress and Medicare bureaucrats hear it. “We should not roll over and play dead. We must continue to lobby Congress, be active in our state associations and trade groups and fight for our industry. Too many in our industry expect too few to deal with these important issues. It will take everyone to be successful.”
He knows that it is frustrating to go to Washington—he’s been five times. “I think we get a lot of lip service,” he says.
Still, he insists that people from the industry need to make their voices heard. “We don’t have enough providers speaking out. If we’re waiting on Lincare and Apria to do all our fighting for us, and we’re waiting on VGM and the American Association for Homecare to do all our fighting for us, we are missing out. There are thousands of providers that need to be engaged in this process.
“Do we think that we are going to legislate competitive bidding away? I don’t think so. It’s going to take everybody in this industry screaming about it. And not emotionally screaming, but providing facts and data. The industry has got to step up and say, ‘Enough, already!’ If we just sit back and accept the audits without raising Cain, it’s not going to change.”
Trammel believes that the HME industry is worth fighting for. “We are part of an incredible industry made up of many ‘mom-and-pop’ companies that do make a difference in the communities that they serve. Helping families negotiate the intricacies of Medicare and providing a means for a family member to move back home and be independent has been very rewarding. People want to live at home and not in a skilled nursing facility or hospital. This is what our industry does.”
Carolina’s Home Medical Equipment, Inc., is a private, for-profit corporation with over four decades of health-care industry experience. Patient rights, responsibilities, dignity and confidentiality are its highest priority. The company’s credo is to “treat every patient/customer as if they were family.” The testimonials listed on its website (www.chmei.com) tell a touching story:
“I want you to know how much we appreciate what you have done to help my dad. We are at a difficult time and your kindness and professionalism have made things easier for us. In our dealings with the other medical supply shops, we came to know just how special you folks are.”
“Thank you and Ashley for your assistance with our mother’s motor wheelchair. Mother did pass away after suffering a massive stroke. We commend you for exceptional service and your kindness in assisting us at this difficult time exhibits caring and compassion, qualities that are rare in today’s business world.”
“We just wanted to take time to thank you for making our search for a power wheelchair so much easier. Before coming into your office we had stopped at other home medical shops but did not find the kindness and professionalism we found with you. During an already difficult time, it makes such a difference to deal with someone who knows what you need and wants to help you get it. Thank you and your staff for all your hard work.”