by Bruce Brothis
May 12, 2015

Unless you have been living under a rock for the last five to 10 years, there is a pretty good chance you have heard all the buzz about retail and cash sales. Well, guess what? The time to act is now, and there are two major reasons why. If you were lucky enough to have avoided both rounds of competitive bidding, what is about to happen to your Medicare allowables could be potentially catastrophic, especially if Medicare Part B is your predominant payer. Beginning Jan. 1, 2016, all allowables for the competitive bid items, in every state, stand to be lowered to approximately 110 percent of the average Single Payment Amount, representing a 25 to 35 percent reduction. Have you heard of the baby boomers? They're here and are having a dramatic impact on our industry. Depending on which report you read, anywhere from 8,000 to 10,000 adults turn 65 every day. They are post-World War II children, born between 1946 and 1664, and they represent both a blessing and a curse. Not convinced yet? Let's dig a bit deeper. Competitive bidding, which has decimated the industry in terms of margins and number of providers, was implemented in such a way that completely shut many out of competition with unscrupulous organizations submitting "suicide bids." Sometimes beating this dead horse is the only way to expose the long-term damage that was caused to the industry. Some providers bid low out of fear, some out of stupidity, some to try to service markets thousands of miles away and some solely for the purpose of selling their company with bids attached. Regardless, all we are left with are dramatically lower allowables and providers who are trying to service patients thousands of miles away. Now consider the baby boomers. As for the blessings, they are loyal, repeat customers, most of whom make their purchase decisions while they are in your store. Many boomers have disposable income and tend to buy brand (quality), and many of them are adult caregivers taking care of parents who are at home rather than in facilities. The curse of the boomers is simply the sheer number of them, putting a strain on both the Medicare and Social Security trust funds. All indicators point to the retail "gold rush." You do not need to abandon insurance billing completely. But remember, the industry average DSO (Days Sales Outstanding) is in the mid 80s while the DSO for a cash transaction is one. Retail, retail, retail.


Ground Rules for Retail

  • Just like your local supermarket and the big-box stores, the front third of your showroom typically generates 80 percent of sales.
  • A good minimum number of square feet for a successful retail operation is 800.
  • Having an outside salesperson will greatly enhance your chances of success, as they help get the word out about your retail operation.
  • The average cash sale for a nonretail-oriented dealer is $30, while a retail-oriented provider averages around $160.
  • Vary quality selection (good, better, best) and start with the best, forcing the customer to work down.
  • Be open after 5 p.m. and on Saturdays. Remember, many boomers still work, so accommodate their schedules.
  • Marketing can still consist of print and television but do not underestimate the power of the Web. Event marketing, Diabetes Day or a hypertension event (again, after hours) can pay tremendous dividends.