MELBOURNE, Fla. — According to HME consultant Wallace Weeks of Weeks Group, it's now an unwelcome fact of life for the industry's providers: The only way to absorb the impending 9.5 percent reimbursement cut without having profit decline is to create excess profit.
But how can providers do that?
"There is no law that says the revenue of a home care company may only be derived from rental and sale of medical equipment and supplies to persons outside of acute care facilities," Weeks noted in a recent business report. "Every provider in this country has the ability to derive revenue from other sources."
The value of alternative revenue has never been more important, Weeks said. Here are a few of the alternatives he offered:
- Rent fitness equipment. "Many seniors are advised to continue a rehab program in a local gym. For some, going to the gym adds a level of complexity and expense that compromises the rehab or wellness program. DME providers should be able to get referrals for the rental of fitness equipment and deliver it to a customer in the same way a referral for a hospital bed works. The rentals will largely be non-covered items, thereby releasing the provider from the hassles of third-party payers."
- Repair equipment. "There are a couple of approaches here. One is to become a manufacturer-certified repair facility for such items as concentrators, CPAP and so on. Another is to contract with facilities for the repair of their equipment. In either case, the relationships could also lead to the sale of equipment, again without the hassles of third-party payers."
- Contract delivery services. "DME providers are good at delivery … There are other industries that need delivery, and could contract with a DME company to provide the service. Some providers even have excess warehouse space that could hold the inventory of the customer and produce even more revenue." And if you've got extra warehouse space, how about housing the customer's inventory, Weeks suggested. And, he added, "One provider could also contract with other providers to deliver their equipment."
- Billing service. "Just as one provider could deliver for another, one can bill for another. There are obvious strategic considerations that must be made, but that doesn't mean there is no opportunity. Certainly some providers have more efficient operations than others and can, thereby, produce economic advantage to both parties."
The challenge for providers, Weeks said, will be to keep year-over-year profit levels intact.
In less than a month, he reminded, "our industry will begin to bill and collect less from the product lines that were to be covered under competitively bid contracts. Additionally, the 36-month cap on oxygen services will reduce revenue for some providers. In any case, the revenue per unit of sales will decline. If the number of customers does not grow sufficiently, total revenue for the business will decline in 2009."
View more ideas from Weeks in the Weeks Group's Business Improvement Report, and look for his "Better Business" column monthly in the HomeCare Experts section.