Benchmarking Your Business for Now and for Later

When it comes to your home medical equipment business, do you want to be a dinosaur or a dynamo?If you chose the latter — and you likely did if you're intent on staying in the business — it's time to do some benchmarking to make some critical assessments and comparisons about your business to be sure you're on the dynamo track.

If you don't, warn three longtime HME consultants, you could quickly find out that you're going the way of the stegosaurus.

“The bottom line is that by knowing industry benchmarks, [HME providers] can see whether they are operating smart and profitably or if there is room for improvement,” says Jack Evans, president of Malibu, Calif.-based Global Media Marketing.

But in an industry where there is a dearth of national statistics, benchmarks aren't so easy to come by. Evans, along with Wallace Weeks, founder and president of Melbourne, Fla.-based Weeks Group, and Bruce Brothis, education services director and senior consultant for Alternative Billing Solutions, Bloomington, Minn., recognized that.

But they also knew that their years of working with providers — ranging in location from rural to urban and in type from mom-and-pops to national chains — made them privy to trends and numbers that could help other providers benchmark their HME operations.

The three will present their findings at Medtrade in Atlanta during an Oct. 19 seminar sponsored by HomeCare. From operations and staffing to profit margin and merchandising, following is a preview of some key information from the upcoming session.

Financial/Operational Benchmarking

There are numerous ways to benchmark your company financially, according to Brothis, including days sales outstanding, denial rates and even accounts receivable aging averages.

• Days Sales Outstanding — “The most efficient way to benchmark your organization financially against the industry is to compare your DSO to the national average,” says Brothis. “What DSO represents is the average amount of time it takes from when $1 of revenue walks through your front door until you put that dollar in your pocket.”

  The industry average for DSO hovers “around the high 80s,” according to Brothis. The target, however, should be the mid-40s, he says.

  How do you know your DSO? Here's Brothis' formula: