Weeks: Come Out on Right Side of Profit Line

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.