The Six Point Plan, The Balanced Budget Act of ‘97 (resulting in oxygen cuts of 30 percent and more), inherent reasonableness: What do these regulations have in common? They led to massive changes in the home medical equipment industry — changes so drastic that many HME providers felt forced to sell their companies. Those who remained had to reengineer the way they did business, which resulted in increased efficiencies. It was a matter of survival — HME providers had to learn to cut expenses and better manage their internal operations.

The same will be true if competitive bidding is implemented. It will be survival of the fittest. In addition to becoming active in state and national lobbying efforts to defeat the impending competitive bidding legislation, HME providers must focus on the inside of their companies to become more operationally fit.

In the event that lobbying efforts are not successful, there may well be attrition. Dressing up your company for sale may be among your options.

For those who choose to remain in the industry, preparation is imperative. Do you truly know your cost of doing business? Do you analyze monthly management reports? How is training handled in your company? Is your software maximized? These are among the myriad of questions that every HME provider must be prepared to answer.

Costs of Doing Business

If competitive bidding is implemented, you will have to know your costs. This means knowing not only your cost of goods, but the costs associated with intake, delivery, billing and collections. These costs include information gathering, documentation retrieval, forms, data entry and management reports. Don't forget that all of these activities require personnel, and that some activities are more expensive than others are.

You likely will find that the costs of doing business are more expensive than you originally thought. For some products, processing a new patient may cost more than you will make on the product. Evaluate each product against the allowable charges to determine if it is fiscally worth your while to carry the item.

Jim Clark, president of Clark Respiratory in Catskill, N.Y., performs “cost accounting” measures by product line.

“You need to understand how each payer treats each product and then you can determine your true costs,” he advises.

Clark uses a computer spreadsheet program to produce a grid of his core products by payer. Then, he lists his costs and compares them to each payer's reimbursement model.

“Reimbursement varies greatly by payer,” Clark says. “Some payers pay rent to purchase on items. Other payers pay a la carte.”

Another cost Clark routinely measures is respiratory therapy visits, as well as product delivery and pick-up costs. Currently, each respiratory therapy visit costs $67, which he believes is too high.

So, he has decided to encourage in-store visits by opening another location and reducing other expenses, and he expects to lower his average respiratory therapy visit cost to approximately $30 per visit. In the process, Clark says he has learned that by measuring his true costs, he can find “additional ways to increase efficiencies.”

Analyzing Monthly Reports

How many providers actually manage monthly reports that gauge their companies' progress? Well, while some get bogged down in the day-to-day fires that need to be extinguished, others, like Greensboro, N.C.-based Advanced Homecare, make sure to measure monthly outcomes.

Kim Brummett, director of reimbursement for Advanced Homecare, measures the following on a monthly basis: cash receipts by main payer type; percent of accounts receivable over 120 by main payer type; and write-offs and bad debt.

To determine her company's achievement in these areas, Brummett creates database reports, broken down by customer type; reports for Medicare account analysis; and Access tables and Excel pivot tables that break down the data any way she needs.

In addition, Brummett constantly creates and revisits her action plans to achieve her goals, focusing on detailed processes to determine if there is room for improvement.

Training

Big or small, HME companies should have a consistent and established training program, whether formal or informal. Training is important not only for new employees, but also necessary to keep your current staff up to date. Regulations change frequently, and people forget the innumerable requirements and policies that impact operations.

With a variety of media available for training — Internet-based training programs, interactive CD-ROM programs, teleconferences, videos and manuals — it's easier than ever to educate your staff.

In addition to training, test your employees to ensure they have absorbed the material. By testing, you also will be able to identify the leaders in your company and those staff members that have growth potential.

Finally, remember that even though you train staff today, you may have to retrain them on the exact same information down the road. Training is not a matter of memorization. Rather, the goal is to make your staff resourceful enough to locate on their own the answers to their questions.

Is Software Maximized?

Many HME providers do not take full advantage of their existing software. If you learn more about your software programs, along with their intricacies and short cuts, you may find ways to eliminate your manual processes.

Take stock of each manual task performed by your staff and ask if you could possibly accomplish the same outcomes using your software. If the data is in the system, it should be able to be extracted. By eliminating manual processes and by using your software to manage your business, you will achieve optimal efficiency.

Some companies are able to generate reports in a variety of ways. Beth Wyatt, reimbursement director for Sparrow Regional Medical Supply in Lansing, Mich., monitors her unbilled A/R by using a “diver” report to isolate top dollars by doctor, which she shares with the physicians. Wyatt was able to decrease her unbilled days from 45 to 17 by using this software, and says “it allows the staff to check the progress of CMNs daily with software that is user friendly.”

By maximizing your existing software programs, you can easily detect and even prevent problems, and set and achieve goals more expeditiously, as Wyatt experienced.

Operational Fitness

These are just a few ways to create operational efficiencies, which is a must for HME providers who intend to survive in the wake of upcoming changes to the industry.

According to Reid Bellis of the Region D Rehab A Team, “it is incumbent upon the provider to collect all information up front or risk incomplete data funneling through the system.” And, as Bellis has done, it is important that you join with state and national organizations to forge a unified voice in defending the HME industry.

Ultimately, however, it is also essential to review and give the appropriate amount of attention to your company's insides. “It is important to be able to focus on the here and now,” Brummett says. “Set goals.”

If competitive bidding becomes a reality, or if business remains as usual, you will have dressed your company up for growth or sale. Then your future will be your own choice.

For a closer look at the sell-or-stay quandary, see The End of the Road on pg. 40.

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