Swimming with Sharks

Payment reductions, economic uncertainty and more stringent claim scrutiny have all contributed to the turbulent times confronting home medical equipment providers nationwide. Invariably and understandably, companies have gone out of business, sold, merged or moved away from HME. Those that remain have made future plans that include payer diversification, acquisition/business takeovers, software changes and a more profound reliance on more profitable side businesses.

As I traveled around the country this past summer, I observed the various ways HME companies are looking at their future. Following is a recap of what those companies did to reinforce their future viability.

Payer Diversification

As we all know, among audits, competitive bidding, accreditation and overall allowable cuts, Medicare is working diligently to get rid of HME providers. After all, it is far simpler to do business with fewer companies. While companies that were never completely reliant on Medicare are well situated, others are scrambling to find additional payer sources.

For example, some companies buy truckloads of adult diapers and provide them to Medicaid recipients monthly. This type of business may have been shunned in the past; now it represents a stable, repetitive revenue stream that pays consistently and regularly. Likewise, despite being an intense and demanding business, hospice contracts, if negotiated well, also provide healthy and steady referrals with reliable payment flow.

Inventory Management

Companies that saw Medicare oxygen changes and competitive bidding cuts coming began planning for these cuts by reviewing their purchasing patterns, their vendor relationships and their delivery practices. Rather than relying on status quo, they asked “What if we change the way we purchase, from whom and what? Why not use more of a formulary type approach to purchasing?” The more dedicated you are to a vendor, the more likely the vendor will be to work with you when you need dating, better pricing, etc.

Further, knowing that competitive bidding was still a real possibility, some HME providers took seriously the notion that their purchasing patterns contributed appreciably to their bid prices. Still others looked into a more automated approach to inventory management by using bar coding and scanning with automated purchasing/replenishment when their inventory fell below a minimum threshold.