The HME industry faced a challenging year in 2013, and many providers are now looking to diversify their businesses. The good news is that there are other revenue sources that may offer HME providers the ability to diversify their revenue streams and minimize reliance on Medicare as a provider’s main source of revenue. In 2013, the CMS Office of the Actuary published data showing that the year’s overall DME expenditures were expected to be $42.2 billion dollars. Medicare accounted for 19.8 percent of the total, while 54.7 percent of the overall expenditures were out-of-pocket or cash. Out-of-pocket—cash—is one of the fastest growing contributors to the overall forecasted DME expenditures through 2022 (2022 forecasted expenditures is $35.7 billion). With the overall market potential and the overwhelming demographics that reinforce the graying of America, is it any wonder that outside investors and non-traditional retailers are expanding into our marketplace? Ask yourself, would big box stores, Internet companies and financially smart private equity organizations be working and expanding in the HME marketplace if it were not seen as a great opportunity for future revenue and profits? Our industry has a growing patient population, which is not news to anyone reading this; however, our industry is still learning how to identify and increase revenue in these growing segments. Thousands of people turn 65 every day and with the Affordable Care Act (ACA) predicted to increase the utilization of health insurance coverage (30-50 million new patients), it will continue to be a target rich environment. The ability to diversify your business continues to be the biggest challenge any business—not just HME—faces moving forward in an ever-changing business climate. Some businesses have always done this well. Some saw the changes coming and are still in the process of making adjustments. And some businesses are just now addressing the changing marketplace. It made sense in years past to focus on Medicare and Medicaid, which traditionally were profitable without all the scrutiny of audits and dangers of recoupment. However, in this new business climate, we all need to be healthy, diversified businesses managing on multiple fronts for patients and referral sources. The following four main categories are only some ways you can begin to diversify your business.
Maximize all payer opportunities. Find every source you can work with that will pay you a manageable rate for providing services. Identifying all the opportunities, understanding how to present your value proposition and negotiating contracts can be very challenging and sometimes payers are not willing to work with independent providers. You can look toward different groups or others who have negotiated these contracts for provider partners. This will allow you to focus on taking care of your customers and your business.
Part of looking at your business should include a strategic eye in the geography of your market area and how that relates to your location(s) and the competitive bid areas. A strategy that some providers have implemented is to expand their service area in non-competitive bid areas. Start with smaller operations, expand your sales force to call on local referral sources and notify your payers that you are expanding your coverage area to include these new areas. One caveat you need to understand is that competitive bid rates will be implemented across the nation by 2016. You will not have to participate in a competitive bid round, but the fee schedules will be implemented. At press time, CMS had not indicated what those rates will be. Some providers have also expanded their service area for specific product categories—complex rehab, non-delivery oxygen and supplies that can be drop shipped are categories that providers may want to explore in their diversification strategy.
Long-Term Care Facilities
Traditionally, long-term care facilities, nursing homes and assisted living facilities have purchased a portion of their product needs from HME providers, but also a large portion of their purchases have come from direct suppliers. These facilities will always purchase a percentage of their products from this type of vendor, but there is an opportunity for the local HME provider to find more business in this area. The key is to understand these facilities, develop relationships with them and inquire into what your HME can provide to them. Many times, the individuals in these facilities have never realized you can provide most of the items they need because they have never been asked before. Product categories include:
- Fall prevention
- Wound care
- Seating and positioning
- Facility equipment
- Contracture management
- Diabetic shoes
- Mobility equipment management
Like everyone else, long-term care is under increased pressure to do more with less. Let them know you are there to help in many different ways.
Expand Product and Service Offerings
This has always been the traditional way to grow your revenue—to look for the next best thing to add to your product and service offering. Gaining new customers is always important, but maximizing the potential of your current population is generally more profitable and more cost efficient. In this scenario, the focus is on maximizing revenue per patient. For example, are you maximizing the revenue potential of your sleep patient population? Is your replenishment program maximized? Are you providing cushions and filters to meet the replenishment schedule and ensure that the patient is compliant? Are you communicating with the customer to ensure that additional products like pillows, cleaners and nasal pads are being used to encourage compliance and a pleasant CPAP experience? Before you look for the next great product and service, focus on doing everything to help your customer with their present needs and then educate them about other products that may make their life better. When it’s time to find new customers, focus on big opportunities and changing the business model. This is where the willingness to stretch beyond your comfort zone comes into play. Einstein’s definition of insanity tells us, “Insanity is doing the same thing over and over again and expecting different results.” The industry has to get better at educating the consumer about different products and services we offer so they can make a more informed choice on their health care.
One area where manageable improvement can be made is in marketing, by creating cost effective local and regional campaigns that create patient and prospect awareness. Campaigns can include cable advertising, health fairs, sleep days, direct mail, physician waiting room support and electronic marketing. Tools such as these were once the standard in the HME industry but ended up falling by the wayside because sales and revenue were successful in the system we were once in. Consider getting back to the basics in current product categories and potential new ones. Why does your patient drive to large stores to get a product that you can easily supply? The answer, almost every time, is because they simply did not know you could provide such products. It is your job as part of the industry to create awareness with your customers that you do provide those products and much more on a local level. If you are not educating your patients on what is available, then are you really doing your job?
No Touch Revenue
Incorporate a new strategy for automation that helps you expedite time and becomes part of your solution. No touch revenue is a drop ship program that can provide worry-free, hassle-free delivery direct to the consumer’s home. This can reduce your inventory costs and significantly maximize efficiency. Here is an abbreviated list of products that can fit this model: simple DME (walkers, crutches, etc.), incontinence, gloves, skin and wound care, orthopedic soft goods, enteral and more. Create this recurring revenue for your business and to most efficiently serve the larger patient base. In the end, all of this means welcoming an adjusted business model that involves creating, in many cases, a new attitude or mindset that starts with leadership and training at all levels within your organization. Change can be difficult to accept, but it can be exciting when approached in the correct manner.