The HME business is only as tough as you make it
by Miriam Lieber
October 9, 2019

During conversations with two successful home medical equipment (HME) providers, I heard the following directly opposed statements:

“HME is not an easy business,”

and

“HME is an easy business in which to succeed.”

The more I think about those statements, the more I realize both may be right.

Either way, HME is an industry that is not for everyone and certainly not for those who rely on the status quo. It challenges providers and creates opportunity. How you seize the opportunity will determine whether your success in the business is easy or hard to achieve.

Industry Challenges

Although it is neither a new nor surprising issue, payer reimbursement fickleness has caused HME providers to jockey for position as the playing field has narrowed. As the industry continues to contract, it’s critical to stay nimble and diversified when it comes to payer mix; try not to rely on one or two payers for your entire revenue stream. Be prepared to change your payer mix as contracts, fees and reimbursement terms change, especially when you least expect it. In addition to copycat Medicare reimbursement reductions among commercial payers, there is an increased focus on sole-source provider contracting. This leaves the HME provider at the mercy of their payer relationships, and even unable to say no to contracts that leave their business unprofitable.

Third Party Payers & Marketing Strategy

While reimbursement woes continue, there is hope for the upcoming Medicare Round 2021 competitive bid contract period, provided HME bidders consider their cost of doing business when calculating lead item amounts. As HME owners continue to diversify, some are moving towards less insurance reliance.

Alternative funding sources (such as foundations and charities) and self-pay options work for some, while others derive revenue from hospice, home health, nursing homes and other related revenue streams. Regardless of the payer mix, it is important to stay agile and ahead of the reimbursement curve.

For networking purposes, larger organizations have payer relations staff who work to develop contacts and relationships with payers. The largest providers have forged partnerships with payers to keep patients in their own continuum of care and to meet all of their health care needs from one source. Smaller HME providers should build their own marketing direction and do what they do best to garner revenue and reimbursement.

One example is the niche provider who focuses on a few key product categories to meet the needs of their marketplace. Most often, the niche provider’s product mix includes replenishable supplies, which enables the company to drop ship product and enlarge its reach to a regional and national presence.

Stay educated on the latest trends. Subscribe to health care websites and other industry publications such as HomeCare magazine. Also, attend webcasts and industry education summits that provide innovative, current and future forecasting coupled with networking opportunities.

Automation & Data Reporting

To enlarge the footprint of any HME company, leaders must rely on data and reporting to know where the business generates its best return on investment (ROI) and which referral sources supply the company with the most profitable orders. Automation and data also enable operations to process orders efficiently. For example, with referral intake portals and electronic documentation directly from the referral source (in addition to drop ship and/or hand-held automated delivery modules), orders can be processed smoothly. Moreover, orders can be confirmed rapidly, ensuring claims are submitted to the payer as quickly and accurately as possible.

Such tools and resources often come with a cost, however. It is incumbent upon the HME company to analyze its ROI to determine which initiatives will bring the best return. Scheduling one automation solution at a time allows companies to record measurements before and after the initiative to quantify the efficiency gained. Larger companies often stagger the implementation of such changes to a select patient population in order to measure impact before rolling something out to the entire patient population. This provides a before and after comparison, a great way to know the solution’s true gain.

Staffing for Success

The single asset that can make or break a company’s success is staff. As one of the most costly bottom line expenses, employees are the key to success. One obvious truth is the stronger the leadership, the stronger the staff. By motivating staff to rely on objectives and expectations—much like the automation measures described above—leaders will begin developing them. Setting goals together with team members, which promotes maximum buy-in, and establishing standard levels of performance allow employees to self-evaluate. They will know if they are producing according to the plan they helped develop. Accountability sets in and productivity will begin to rise and hopefully soar. Objective expectations make it popular to do well and achieve goals. The atmosphere will be positive and those who aren’t willing to work hard will often find another place more suitable for them.

With a solid marketing direction and a mix of payers and products that bring the right ROI, an HME company will learn to thrive. With data and automation initiatives that bring it a healthy return, plus staff members who want to achieve results and grow, a company has the capacity to be profitable and withstand the constant reimbursement pressure that entangles others. Aiming high in a positive direction and maintaining a sustainable and diversified book of business creates a healthy approach to an otherwise mature market that continues to contract.

This business is as easy or hard as you want to make it—after all, your perception is always reality!