Providers Offer Strategies for Savvy Product Selection WHAT TIPS THE BALANCE when you decide what products to carry from which manufacturers? Is it doctor request? Customer demand? Is it just-in-time delivery, in-service training or the manufacturer's reputation?

Perhaps the choice hinges on a reimbursement issue. Or maybe it's something as simple as courtesy - the manufacturer's rep calling before showing up to make a sales pitch, for example - that makes all the difference.

Your product selection also depends on your location, size, customer population and range of products and services.

What follows are product-selection tips gathered from home medical equipment providers from across the country. While they tend to agree on a few broad points, such as putting quality and reliability before cost, they have diverse ideas about what these mean in the day-to-day business world.

Quality doesn't cost more - it pays you back. If HME providers agree on any one thing, it's that buying cheap is not the best route to profitability. It's nice to pay low upfront costs for equipment, but not at the expense of quality.

"Price is certainly a concern," says Ben Shapiro, chief operating officer of Eden Medical, a full-service HME and respiratory provider in Hendersonville, Tenn. "But quality and dependability are of greater concern if the price is reasonable."

Providers (and manufacturers) define "quality" in quite a few ways, but it usually boils down to reliability and ease of use. Equipment that doesn't break down obviously doesn't require as much staff time to service. Equipment that's easy for patients to use and HME employees to operate also saves time and cuts the number of home visits.

"You don't want to jeopardize quality because if you don't have good products you're going to have more overtime," says Robin Lundblad, director of HealthLine Medical, a Hibbing, Minn.-based company that offers a full line of HME and respiratory products.

Ease of use saves money for the 70 employees at Northwest Respiratory Services in Eden Prairie, Minn., says Dana Brandt, vice president for sales and marketing. "For example, you don't want to have to stand on your head or bend over to see serial numbers of hour meters," he says. "If you have a large company and have to train a lot of people, that makes a difference."

The same principle applies to patients, says Helen Kent, owner of Vista, Calif.-based Progressive Medical, which handles respiratory, sleep and wound care products. "The less trouble a patient has using a product," she says, "the fewer visits are necessary to teach him or her - and the less chance there is of something going wrong."

Go with top-notch suppliers. The need for quality and reliability can also be applied to the manufacturers themselves, say providers, who suggest that you buy from those who will be around for the long haul.

"It is better to negotiate the best possible deal with a leading reputable manufacturer than to purchase the cheapest product available," says Steve Elrod, president of respiratory company Oxy+Plus in Duluth, Ga.

Rebecca Dyer, president/chief executive officer of Memphis, Tenn.-based Allied Medical, a broad-spectrum HME business carrying about 2,000 products, says much the same thing: "We've found that arguing over pennies isn't worth it if the vendor's service and reliability are substandard."

Let the customer choose. The value of choosing quality over cost might be clear, but real-life businesses don't always have such an easy choice when patients, doctors, reimbursement rules and the firm's own viability are taken into account.

With certain products, however, it is possible to balance cost and quality by shifting some of the decision making to the consumer. This is the approach taken by Dyer at Allied Medical.

"On the common cash-and-carry items as well as the large purchase items," she says, "Allied tries to offer a `good, better, best' product to give clients a choice on how to spend their money."

Make sure customers will buy it. Patients and physicians can be good sources of product intelligence, both in pointing you toward new products to offer and away from old products that should not be in your inventory. Even if you don't make customer preference the deciding factor in choosing a product - many HME providers consider it only after quality and price - you can't ignore it. After all, if people won't buy it, you can't sell it.

Roger Miller, president of Dependicare, a full-service HME and respiratory company in Broadview, Ill., says his company considers "the customer, manufacturers/distributors and potential profitability, in that order" when evaluating a new product.

"We do not want to carry something that will not move. Thus, we like to have documented demand prior to considering it." How does Miller find out about that demand? Usually from his field staff, although manufacturers and distributors also "play a major role for us in informing us of customer needs and use."

Falih Audisch, president of ApGuard Medical, a full-service HME/respiratory company in Woodland Hills, Calif., also puts customer requests high on his list of factors to consider. "We try to please the referral sources by purchasing products according to what the patients' needs are," he said. "I would say customer request is very important, and then potential profitability."

Quality, price and manufacturer service all come before customer preference in the product selection process for Elrod. But it doesn't hurt for the customer to ask for a product, he says. "If the customer [defined as a referral source, patient or payer] requests a certain product, we will carry it."

Customer complaints need to be heard, too. End-users can tell you quickly if you've made an unwise product decision - such as buying too cheap for comfort. Lundblad notes one such case at HealthLine Medical: "We went with a different incontinence product because of price, and we had maybe 10 complaints [from patients]," she says. "So now we're reviewing it."

Weigh customer demand against volume potential. Is the customer always right? Maybe not when he or she asks for a product no one else seems to want. Dealing with product requests from just one or two patients isn't always easy for an HME business that's trying, in Miller's words, to carry only those products that move.

Miller says Dependicare will stock a product for a customer or two, "but only if we are convinced its use will expand to a broader audience ... unless it's a really important customer or a really special need."

Dyer takes a similar tack at Allied. "Customer request is important," she says, "but if only one customer requests an item and others don't buy it as well, we keep this available only through special order with a two- to three-working-day turnaround."

Listen to your manufacturer reps. It's no surprise that HME providers say they learn a lot about new products from salespeople. Part of the reps' job, after all, is to get the word out about new product to potential buyers. Reps can also be helpful in explaining all the technical aspects of a product. "Most of the time, manufacturer representatives inform and educate us on their latest and greatest product," says Elrod.

Audisch's advice on this front is simple: "Speak with every manufacturer's rep."

Miller agrees, saying, "In general, I think our manufacturers and distributors do a great job of keeping us on track with what new technology our customers are using."

But he also advises other providers to get second opinions before buying. "Don't be wowed by manufacturer sales reps," he warns.

Says Elrod, "I believe the worst way to select a product is to just go by what the manufacturer or manufacturer representative says about a product. You might find out the good features but not their shortcomings."

Do your own research. Where do you go for objective information? The answer depends in part on how much time and staff you have. Kent lists her research sources, in order of importance, as "manufacturers, trade journals, peers in industry."

Dyer says Allied has a purchasing agent who "spends a large amount of time reviewing catalogs, trade magazines and speaking with vendors in search of new and/or improved items." The company also sends several people to Medtrade each year, she reports.

Lundblad says she uses magazines and trade journals. As for trade shows, she prefers smaller events such as Medtrade West, where you can browse products "in smaller doses, and you can actually talk to the vendors."

The Internet, according to these providers, doesn't seem to make much of a difference, at least yet. Either they don't use it much, or they don't quite trust the quality of the businesses that sell on it.

Dyer takes the latter view. She says Allied will go to the Internet if a client has requested something that can't be found elsewhere. However, she adds, "We find the Internet and new vendors to be the most risky and prefer to remain with vendors who have a good history with Allied for reliability and quality products, if possible."

Who in your company does the research will depend in part on the size of the business and the type of product. If you're large enough, you might have a designated purchasing agent. And certain equipment requires a close look from specialists. "Obviously, a clinically oriented product like a specific respiratory product would require significant input from the respiratory staff," Miller says.

Try before you buy. Test drives make as much sense in HME as they do at the auto dealer. Demonstration models are a good way to see if a product is easy to use, effective and readily accepted by physicians and patients.

Miller says Dependicare usually gets a demo model "to test ourselves, market to referral sources and use on a patient. Then we get feedback from all three to determine its usefulness. We do use trade shows and trade magazines to research existing and new products. The most reliable and credible way is to let those who use it every day test it."

Dyer says her company also works testing into its product-selection process. "Once the appropriate person within Allied has reviewed the [product] literature," she says, "we decide if we would like a demonstration of the product or have several sent to us for trial. We either try the product out ourselves or request a client try it out and give us feedback."

Roll with the reimbursement rules. In the HME business, you have to think not only of your customers but of payers as well. Medicare, Medicaid and managed care reimbursement increasingly drive product selection - and product elimination.

Lundblad says the pressure of lower reimbursement has been greatest in such areas as incontinence products and scooters. Other lines such as ostomy and urological products, she adds, "we're looking at just eliminating."

Customers are better informed than they were when she started in the HME business 10 years ago, Lundblad continues, and that knowledge is a double-edged sword. On the one hand, it helps them make better choices. But they might request products that third-party payers don't cover. "They're also more demanding in what they want," she says, "which gets to the reimbursement issue."

HME providers can use reimbursement rules to their advantage, says Kent. A smart provider can win business by helping referral sources - such as physician groups and home health agencies - solve their own third-party payer problems. Products that assist HHAs in managing diseases with fewer home visits, for example, can save the agencies money under the prospective payment system. If your products help the agency's patients get better and can cut down on visits, she says, "you are the DME they're going to work with."

Products that help patients avoid emergency room visits also help save money for the physician groups that are paid fixed per-patient rates under managed care, she adds.

Know what you need from your manufacturers. The level of service provided by manufacturers is a key part of any product decision. Some providers insist on just-in-time delivery; others say they can do without it. Some do their own repair work; others might depend on the vendor.

In part, the need for just-in-time delivery is tied to space. If you have plenty of room for inventory, quick delivery from the manufacturer isn't important. Eden Medical's Shapiro says, "We keep sufficient inventory in stock, so [just-in-time is] not that important yet." But it's vital to Allied Medical, where space is limited.

"Delivery also plays an important role in cash flow," Dyer says. "Why purchase something and have it sit on the shelf for a few weeks? I'd rather have it on [the manufacturer's or distributor's] shelf than on mine."

When it comes to repairs, service is no substitute for product reliability, especially if your company does the repair work. Brandt says Northwest Respiratory Services does most servicing in-house, but he doesn't want to have to do a lot of it. "We want the product to be dependable," he says, adding that his company keeps tabs on breakdowns to see which manufacturers' products have the most problems.

There is one type of service-employee training might benefit just about everyone. A manufacturer that does a thorough job of schooling an HME provider's staff is saving that provider money because that staff will spend less time figuring out the equipment or correcting mistakes. As Lundblad says, "Companies we're successful with are those that have offered in-service [training] for staff ... especially in respiratory, where there's a lot of employee education involved."

Go with the winners and weed out the also-rans. "Don't spread yourself too thin" is useful advice in many settings. It applies well to the question of how many products, and from how many manufacturers, an HME provider should carry.

One key element of product decisions-whether the issue is adding or dropping products-is the need for focus. Providers advise choosing products carefully, dealing with a small number of manufacturers to get volume discounts and weeding out products that aren't moving.

Elrod explains why Oxy+Plus keeps the roster of manufacturers small: "We try to limit our product lines to two manufacturers because we believe it is more cost-effective to do so. We are able to negotiate better pricing due to volume purchasing and by bidding one supplier against the other."

On managing product lines to choose winners and drop losers, Miller advises: "Add slowly, delete quickly." This is easier said than done, he acknowledges. How often does Dependicare evaluate the products it carries? "Not nearly often enough," he says. "This is really difficult to coordinate, and we have not been good at it."

Take advantage of new business technologies, within reason. Technology and marketing channels change, but some things, such as the need for good products and salespeople you trust, remain the same. For many HME providers, Internet access and electronic transaction capabilities are not make-or-break services. As Shapiro says, "We use the technology if it's available. If not, we do it the old-fashioned way."

Internet capabilities might "play a role in a few years when systems are more Internet-complete," adds Miller, "but right now it doesn't play a role."

Elrod, however, seems to have moved into the future already. He says he is dealing with leading manufacturers who "are working with me to do everything electronically. And if they did not, it would make a big difference."

But Elrod, like other HME providers, stresses the low-tech idea that the manufacturer and the provider still have to be a good fit. "Make sure the manufacturer is a good partner for you," he says. "Make sure they will complement your strategic plan."