Capitalizing on Cash Sales

May 1, 2001 12:00 PM, Denise H. McClinton

"When Medicare made cuts, I asked why don't we pick out lines that don't involve Medicare and focus on them," says Patel. Compression hosiery became his product of choice. Now, his company sells an average of 10 to 12 pairs of stockings a day.

Patel tapped into the right market. As a whole, the compression therapy market is projected to grow to $156 million by 2006, according to a 2000 report by Mountain View, Calif.-based research firm Frost & Sullivan; sales of compression hosiery are expected to be a significant part of that growth.

Such statistics coupled with the lure of cash sales are whetting the appetites of many HME providers. Compression hosiery products are not reimbursed by Medicare, and although some managed care organizations cover the medical-grade products, that number is decreasing. "That is the beauty of it," says Kim Gustafson, sales and marketing manager for Health-E-Quip, a provider in Hutchinson, Kan. "It is a cash item and there is no paperwork."

As the market for compression hosiery has changed, so have the products themselves -- and that's altered the public's impression of the stockings, says Gustafson. "There used to be a negative stigma if you had to wear compression stockings," she says, referring to the medical-grade products that once were the customers' only option. "Now they come in ultra sheer [fabrics] and nobody knows you have a compression stocking on."

Most manufacturers now offer a variety of styles, colors and compressions -- and products specifically designed for men. "They [manufacturers] have come out with a line of support stockings for men," says Patel. "Before, you had to put a man in a ladies thigh-high stockings."

There is other good news for providers of compression hosiery. Manufacturers now offer preventive products, which means the compression is set below 20 millimeters of mercury pressure. That makes the target audience almost limitless, experts say, since practically anyone who sits or stands for the majority of the day might benefit from wearing some form of compression hosiery. "Poor circulation is a common diagnosis and wearing compression stockings helps that circulation and keeps the swelling down," says Gustafson.

Additionally, the market for medical-grade products is large and includes patients with vascular or lymphatic disease, varicosis or thrombosis; burn patients; maternity patients; patients following sclerotherapy; and those who have had heart, organ transplant and cosmetic surgery.

So, how can HME providers make the most of this growing market? Making a strong statement is crucial, says Patel, who dedicates over 4,000 square feet to compression hosiery. "When you walk in, you see a big wall with all the boxes," he says. "You cannot do 'rinky-dink' and expect to make money out of it. You have to spend money."

At the Genesis Center, a division of Genesis Home Care in Chattanooga, Tenn., "we have dedicated nearly a third of our building to compression hose," says John Jordi, the center's physical therapy assistant.

In addition, providers can beef up profits with add-on sales for items such as cleaners, laundry bags, stays and donners. And they can also follow these steps to success.

The first step to building a compression hosiery business is to choose the type and size of your inventory. Some providers suggest carrying only one line of products. "The benefit is a [comfortable] inventory level and price point," says Gustafson.

Patel says he reduced his inventory from five brands to one because of the manufacturer support he receives, such as free inventory exchange for slow-moving items.

However, some providers prefer offering a variety of manufacturer lines. The Genesis Center carries four brands, each with its own advantage, says Jordi. One brand offers fashionable colors and styles, another is easy to put on and yet another line is designed for easy care. Additionally, Jordi carries one line because a referral source prefers it.

Beth Stein, executive director of Compass Healthcare in Cincinnati, says she carries five lines because of individual body shapes and styles. “That way we can offer patients the greatest selection, so we get better compliance,” she says.

With compliance comes repeat sales. Purchase patterns vary, but sources say most customers buy two pairs of compression hosiery at one time and most buy new pairs before the warranty — four to six months is standard — expires. Stein sends reminder cards out so patients will return regularly for a new pair.

Patel keeps customers returning with a customer service plan. He instructs employees to accept any return regardless of the reason. “They know I will take care of them,” says Patel. “Because of that, they will bring another customer back.”

To increase your opportunities, say industry players, know who you want to target with a marketing campaign and put that plan into motion.

Jordi says most of Genesis' compression hosiery sales are to women. This is largely because the company, while it carries men's products, focuses on breast cancer treatment and post-surgery needs.

But the market for men's compression hosiery is increasing and you may want to target that end of the market. Whichever you prefer, a marketing plan is especially important for compression hosiery, since most of the consumer market either does not know it exists or does not understand its benefits, experts say. Also, physicians are not aware of advancements in the industry. And that is a problem since most sales — 60 percent in Patel's business and 90 percent of Compass Healthcare's, for example — originate with a doctor's referral.

Patel tries to educate the physicians he works with. He schedules an appointment to present information on compression hosiery products, then, follows up with a package that includes more educational information and a sample of the product.

This face-to-face interchange with physicians, he and other providers say, is necessary since some compression hosiery products require a physician's prescription. “I travel with our marketing [representative] and explain compression to physicians,” says Jordi. “We let them know why it is pertinent and that we carry a variety of stockings and socks.”

At Health-E-Quip, a marketing representative visits with area physicians, often with a manufacturer's representative. The company also sets up information tables near the physicians' entrance at local hospitals, offering literature and samples of different products. “Physicians stop by to check out what is new,” Gustafson says. “We explain the products and tell them what we have and do in the store.”

Detailed in-service programs are a successful marketing tool for Compass Healthcare, says Stein. If physicians understand how compression products work and prescribe them correctly, then compliance will rise, she says.

Leg health fairs are also a profitable method of informing referral sources as well as the public. Gustafson says her company promotes the fairs with radio and newspaper advertising, and distributes fliers to nursing homes, hospitals and physician offices.

When Patel holds his leg health days three or four times a year, he sends out cards to all current customers and referral sources letting them know a manufacturer's representative will present information on the uses and benefits of compression therapy. Then, he provides attendees with a free lunch and a 20 percent discount. “[The discount] brings a lot of the repeat customers back,” he says. “And I might get four or five new customers that day.”

Getting new customers into your store does not have to be difficult. It does take a plan, though. At Health-E-Quip, Gustafson advertises regularly on the radio and does a live talk show at least once a week.

Once you enter the market for compression hosiery, your employees must receive proper training, experts say — and that often comes from manufacturers. They teach employees how to measure for compression hosiery and provide information on the benefits, contraindications, costs and limitations of the products, says Jordi.

Most providers say it is important to pass this information along to the customer, to explain the benefits of the hosiery and also teach them how to care for the product.

“One of the things most people say when they walk out is that they learned more than they ever thought they could,” says Jordi. “Some patients need a lot of education and we spend a lot of time with these folks so they feel competent when they go home.”

Following the above steps can put providers on the road to success, but it is also important for them to be aware of their competitors, experts note. Although many pharmacies and mass retail outlets carry compression hosiery products, they cannot always offer specialty services such as custom fittings.

Both Patel and Stein receive referrals from competitors — but on opposite sides of the scale. “We find that when they get a complicated case, some dealers send them to us,” says Stein. Patel refers his clinically complicated cases to one of his competitors, but receives many referrals from nearby pharmacies. It all comes down to choosing a focus and building your business on it, they say.

Health-E-Quip's employees are trained to fit preventive, medical-grade and custom compression hosiery products, but Gustafson stresses to customers and referral sources that Health-E-Quip is a wellness center.

Conversely, Compass Healthcare provides similar products, says Stein, but it also caters to the extreme clinical cases. “We do not want to be a store,” she says. “We look like a medical office. We want to explain to people that compression stockings, at the therapeutic level, are a corrective device. [They are] a prosthetic and replace a part of the body that is not working.”

In the end, building a compression hosiery business takes foresight, planning, and the willingness to actively market your products and services, according to experts. Incorporate education and opportunity abounds.

“I don't see any drawbacks [to this market],” says Gustafson. “Everything I stock is out on the floor; I have a good selection of products that move; our computer allows us to know our reorder points and we get new products within a week. It is a cash item and I do not see a down side to that.”