A Bottom Line in Red or Black?

Let's give a shout-out for smarter, leaner, faster. It's the new mantra of the home medical equipment business, which is changing at a speed-of-light rate.

Only weeks from now, on Jan. 1, 2009, HME providers servicing Medicare beneficiaries will need to absorb a 9.5 percent cut to 10 product categories. On the same day, the 36-month oxygen rental cap kicks in.

Meanwhile, it appears that CMS is gearing up to take another stab at competitive bidding and, in light of the nation's escalating financial woes, it is also likely that health care — including HME — could be a target when the new Congress tackles the budget. New Medicare legislation is also a possibility.

With such threats in the offing, the only way an HME provider can stay in business is to do it differently, smarter, leaner, faster, experts say. But after you've pared your costs and increased your efficiencies, then what?

Take a look at repairs.

Can beefing up your repair department shore up your bottom line? Or is it more economical to out- source repairs?

Georgetta Blackburn, vice president of government relations for Blackburn's Pharmacy in Tarantum, Pa., says her company is scrutinizing every aspect of its operations to discern where cost savings might be obtained and revenue built.

"I really see [repairs] as a possible revenue stream," she says after spending some weeks working in Blackburn's repair center. "We are analyzing what we can do much better to make it a revenue stream and not simply a write-off against our DME business."

Blackburn is taking the right approach to making a business decision about repairs, experts say. Whether you outsource your company's repairs or have a service center, repairs can either become a revenue-generator — or drain your bottom line.

Unless a company digs deep, "you won't really know if it is a cost center or a profit center," says Chris Yessayan, vice president and general manager for Invacare's Service Business Group in Elyria, Ohio.

"Providers really need to look at their entire business and figure out how to take out costs," he says. "Service is an area of business that you need to separate out."

The reason, he explains, is that there are "hidden" costs of service. Providers who know and understand every cost associated with their businesses will be the successful ones in today's volatile environment, Yessayan says.