Market forces continue to change the way core business develops
by Alan Morris

It's no secret that the landscape of health care in the United States has changed dramatically during the past few years. A paradigm shift from traditional, volume-based fee-for-service purchasing models to value-based purchasing models is placing greater emphasis on the quality of health care delivery across the continuum. At the same time, the aging baby boomer generation is growing the health care consumer market exponentially and the largest health insurance companies are experiencing increasing gains in market share. Some HME business owners might say "Why should this matter to me? I'm not a hospital impacted by readmissions. I'm not a physician impacted by population health incentives or quality data reporting. I'm not an insurance company trying to figure out how to manage millions of lives." No, you're not, but you have just outlined a list of your biggest customers. While patients are whom you're ultimately caring for—making them your consumer—patients are rarely where marketing dollars are spent in the HME industry. A basic principle in growing any business is to provide your customers with more value than your competition. Generally, this means offering a product or service with an inherent value greater than the price charged and, ultimately, a value differential greater than the competition. In the HME industry, however, this gets tricky. Pricing is typically relatively fixed, and it is a nonissue to hospital and physician referral sources anyway. As for products, most HME providers offer the same ones. So, what does that leave? For years, HME providers have employed strategies to differentiate their services from the competition. Liaisons have been placed in hospitals to offer guidance and ensure rapid delivery. Respiratory therapists have been utilized to educate patients and improve the quality of care. Patient satisfaction scores have been used as quantifiable measures for proving that patients are happy with your company. But times have changed. We're all well aware of the reimbursement declines in HME during the past several years. Conventional wisdom says that a decline in per-unit reimbursement means tightening up the belt and ridding your business of any nonessential costs. This means no more liaisons, no more respiratory therapists and less emphasis on going the extra mile to demonstrate excellent patient satisfaction scores. But that's not what's happening—at least not for leading HME providers. If you consider three realistic possibilities, you will see substantial growth for HME businesses is likely right now. First, let's consider that from 2015 to 2025, baby boomers will have grown the industry's core market by approximately 37 percent. Conservatively, assume that value-based purchasing incentives could increase the use of home-based health care by an additional 10 percent. Lastly, estimate that industry prognostications of a 50 percent reduction in HME suppliers as a result of competitive bidding could come to fruition during that same time frame. If each of these distinct possibilities happens, the average HME supplier will grow by three to four times during that period. Leading HME businesses will have grown substantially more. Those leading providers have already been looking for ways to grow their businesses and gain essential economies of scale to help offset reduced reimbursement. They're doing so by turning many of yesterday's ideas into a marketing strategy that resonates in today's pay-for-performance health care market. They are providing quality services, and now they have an audience with a vested interest in caring. In short, Accountable Care Organizations create motivations for health systems to simultaneously improve health across a large population and reduce utilization of the inpatient setting. Physicians have incentive to improve engagement strategies and outcomes for their patients. Hospitals have incentive to reduce readmissions. As for payers, increased market share and increased population size means two things. First and most obviously, greater dollars are at stake. The second factor is the likelihood that individuals stick with the same insurance company longer, placing greater emphasis on the long-term outcomes associated with patient care from the payer's perspective. For post-acute and ancillary care providers in general, these dynamics mean the industry's primary referral sources each have their own similar but unique interests in the outcomes associated with their patients. For HME providers specifically, now is not the time to abandon competitive differentiators. In fact, the time is now to build on those principles and turn them into a more sophisticated approach to growing business. Rather than taking personnel out of hospitals, or discontinuing patient engagement strategies with respiratory therapists, invest in tools to make those individuals more efficient and effective while collecting information to demonstrate that those critical team members make a difference in health care. HME providers have had disease management programs in place since the 1990s or earlier, and businesses today are taking a similar approach. However, they are now applying a much more patient-centric, strategic method to the management of each patient's care. Having a follow-up program for patients with COPD, CHF or other chronic diseases is great, but if the purpose truly is to improve the lives and well-being of patients through quality and compassionate care, it makes better sense to have the tools in place to ensure that you're engaged with patients based on exceptions rather than a one-size-fits-all approach. Beyond the quality care aspect, management by exception is a more efficient use of your staff's time. Does your current approach provide you with the right tools to tell your referral sources that what you do matters? Even if you do have a quality team in place and they're working with patients, do you have the ability to credibly demonstrate to a hospital that your patients are more compliant, or that they're less likely to go back to the hospital? In a recent survey, more than 60 percent of case managers and discharge planners could have their decision-making swayed during the referral process if they had data demonstrating that an HME provider is able to produce improved patient outcomes. That's a considerable number and a substantial missed opportunity, given that the majority of those same referral agents suggested that they had not had these conversations with HME providers. Furthermore, multiple HMEs have recently had new payer opportunities come their way thanks to chronic condition management programs. Historically, payers have shown little interest in investing in the long-term well-being of their insured, largely because of high turnover rates in patient populations. However, as market-share gains lengthen the relationships between payers and individuals, HME and other ancillary care providers are finding opportunity in managing costly frequent flyers. The time is now for HME providers to fill a significant void in health care and demonstrate that what you do every day has real, measurable value in the marketplace. Value-based purchasing programs are here to stay for health systems, and insurance market dynamics won\'92t be reversing any time soon. Smart HME providers should be evaluating marketing strategies and creating a proposition for sustainable success. Read the 5 reasons you should invest in DME now at