In May, a randomly selected group of HomeCare subscribers completed a 23-question survey about their reimbursement procedures. Compelling and informative, the findings from the 398 respondents reveal information that can help your organization gauge itself against the industry norm. (To see the complete survey results, turn to pg. 28.)

The results in five categories — personnel, revenue, training, appeals and days sales outstanding — are of particular importance to your business, and deserve further discussion.

Personnel

According to the HomeCare survey, home medical equipment staff members who handle reimbursement-related functions perform the following tasks: order intake, billing, accounts receivable and collections. However, I believe that if the term “reimbursement-related tasks” were further defined, the survey results would be different.

For instance, 47 percent of all respondents say they employ between two and four employees to perform all of these tasks. The bulk of these responses were from companies that generate up to $4.9 million in revenue. But I almost never see so few people handling intake and billing for companies with $4 million in revenue — this would not provide enough people to accomplish the necessary tasks.

For the average HME business with revenue greater than $2 million, I see two to three people in intake and three or more people in billing. Nonetheless I agree with the survey's findings that a company with up to $1 million in revenue that sells standard HME products may be able to function with two to four employees handling intake and billing.

In sharp contrast are the results from companies that generate more than $5 million in revenue. For these bigger companies, the number of employees who perform reimbursement-related functions ranges from 11 to more than 50 employees. This shows that growth does not warrant a proportionate increase in numbers of employees. Instead, it suggests that perhaps with growth comes a need for more control and additional staff.

Further, this does not mean that larger companies are necessarily inefficient. Frequently, companies that experience rapid growth cannot keep up with the need for more employees. They typically get bogged down in the sales side of the business and eventually realize that they also must add staff. Many neglect to hire when it is necessary and instead wait to experience a financial bottleneck before looking at their insufficient staff as a possible culprit.

“There is such a thing as too much business,” says Tracey Wills, chief executive officer of Canadian Valley Medical Solutions in Oklahoma City. “Without the proper infrastructure, you will quickly drown in the paperwork and operational needs of a business on the rise. With the financial piece in place, you should be able to hire the appropriate number of people and train them before you gain more market share. Planning for the growth is the key.”

Revenue

According to the survey, Medicare accounts for 48 percent of the average HME company's revenue. In fact, nine of 10 respondents submit claims to Medicare. However, respondents state that, as revenue increases, the number of Medicare patients decreases. In part, this is because companies look beyond Medicare to find new business, such as managed care contracts.

“You are always looking for the next opportunity and a way to diversify,” Wills says. “This keeps you balanced. You never want all of your eggs in one basket.”

The survey shows an increase in managed care revenue as companies grow, which correlates to the exponential increase in staff as a company's revenues rise. Consequently, it is logical to surmise that most managed care contracts require more work than does Medicare. On the intake side, managed care contracts usually require a prior authorization for each patient, which often expires each month. This process uses more man-hours than does the process for qualifying a Medicare patient, because Medicare typically requires a medical necessity document that often is good for a lifetime.

And, from a collection perspective, Medicare reimbursement for clean claims is simpler than reimbursement for other payers. Medicare allows for automated postings and electronic funds transfer, and often pays clean claims within 14 days.

In contrast with Medicare, managed care makes just obtaining reimbursement for the initial claim challenging, because most MCOs simply do not pay in a timely fashion or they determine that a company's authorization was not valid. To stay on top of this problem, one biller (or team of billers, for large companies) or an accounts-receivable representative typically specializes in working with the managed care payer, learning the payer's payment patterns. Often, collecting payment requires the combined efforts of this specialist and the sales contact (or company manager or owner). With MCOs, it is not unheard of to see a turnaround time of 150 days, which invariably will skew the days sales outstanding figures.

Training

Despite the demands that growth places on a company's staff, the survey found that people are training their intake personnel. Specifically, 88 percent of respondents say they train their intake staff in product information. Three quarters of respondents state that they provide specific customer-service training. This is impressive — in previous years, a similar survey probably would have found that employees received very little customer-service training.

I believe there is a direct correlation between well-trained employees and accurate and complete orders. And as complete orders increase, the demand for collections decreases. Haphazard training accomplishes little, and, if the training is done in desperation, it undoubtedly will cost more to undo mistakes.

Now that there is a considerable number of Internet and CD-ROM training programs available to the industry, training employees is easier than before. Even Medicare offers interactive, on-line programs. While these programs are not comprehensive enough to meet all training needs, they can be an integral component of a more-thorough training program.

Appeals

Despite all of your training efforts, you still will encounter a certain percentage of denials. How you handle denials varies by company. According to the HomeCare survey, 61 percent of respondents appeal more than 75 percent of their denials. Apparently, the appeals process is well worth your while — survey results show that HME companies win more than 75 percent of their appeals. What does this mean? If you combine persistence with a qualified patient, you stand a good chance of winning your appeal.

Days Sales Outstanding

Another way to monitor progress is to measure DSO. According to the survey, younger, smaller companies show low DSO — an average of 50 days for companies with revenue under $1 million and 61 days for companies with revenue between $1 million and $4.9 million. After $5 million, DSO reaches 81. I believe this increase in DSO may be caused by an increase in managed care business.

The survey found that managed care DSO was 62 days compared with Medicare DSO, which was 46 days. However, only 13 percent of respondents calculate DSO by payer. If companies segregate DSO by payer, they can pinpoint specific payer problems and may decide not to take business that will not be paid for in a timely manner.

News You Can Use

Regardless of which of these areas you study regularly, clearly there is merit to having the information from this and other surveys for future studies and for your own knowledge. Further, it is helpful and useful to have a gauge against which to measure your company's performance. Therefore, while no survey is completely conclusive, each provides benchmarks for HME providers, helping you to set standards and create plans for growth.

Miriam Lieber is president of Lieber Consulting, specializing in operations management and reimbursement for the home medical equipment industry. She can be reached via email at mllieber@pacbell.net or via phone at 818-789-0670.