The Upside of Outsourcing and Its Other Side

Mike Walsh, president of Norcross, Ga.-based LifeGas, got an earful at the last Medtrade. Walsh's medical gas distribution company surveyed about 300 home medical equipment providers at the October trade show in Atlanta. What were the biggest challenges to doing business, the company wanted to know, and what did they need help with?

It came as no surprise that “most of the problems revolved around reimbursement cutbacks,” Walsh says. “Naturally, all of [the respondents] were looking for ways to cut costs.”

Cutting costs: It's the mantra in this era of frenetic change and looming threats to the bottom line of just about every HME provider. How do you contain costs without compromising care and quality of service?

For some, the answer could be outsourcing. Paying another company to deliver your hospital beds and diabetic supplies or bill Medicare for you might have its appeal. It has the potential to reduce operating costs; after all, you don't need to pay for trucks, drivers, insurance and astronomical gasoline bills if someone else is handling your deliveries. And you don't need a billing department if another company is doing your billing.

But is outsourcing right for your HME business?

The Outsource Option

“Outsourcing can be a good business practice,” says Wallace Weeks, founder and president of Weeks Group, a Melbourne, Fla.-based HME consulting firm.

But his is a cautious endorsement. Not every function can be outsourced effectively and not every company is a good candidate for outsourcing, he and other industry experts note.

“Companies should only consider outsourcing processes or functions that are not key to their strategy,” Weeks says. “So it would probably be bad to outsource sales, customer service and some facets of delivery. To outsource payroll, accounting, human resources and [information technology] would probably be good.”

Mike Mallaro, CFO and CIO for Waterloo, Iowa-based The VGM Group, says there are opportunities for HME companies to outsource effectively.

“Outsourcing is something other industries have used effectively to improve efficiencies and reduce costs,” he says, and HME providers can sometimes do the same. Indeed, he says, some providers have been successfully outsourcing billing and delivery functions for years.

But Mallaro adds he is “not a proponent of doing a tremendous amount of outsourcing. The key is, if you can find a function or an area that someone else can do better than you, then you need to look at it,” he says.