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Profit from Retail in HME

Successful retail by the numbers, and what you need to do to make it happen.
by Jack Evans

The first-month sales at a new retail home medical equipment business in Walnut Creek, Calif., were $20,000. Another new retail HME location in Lynchburg, Va., sold $1,400 one of the first days it was open. These are impressive results for retail-only stores that are not Medicare Part B providers. I waited on one customer at the California store who wanted to buy a scooter, lift chair and stair glide. (Read more about Allstar Medical Supply in Walnut Creek, Calif., in "Diary of a Retail HME Start-Up.")

Why are these new retail HME stores successful? What do they do or offer that is different from traditional HMEs? What can you do differently to capture some of these profitable retail sales? Read on to find out how you can diversify successfully into retail HME.

Four Common Actions of Successful HME Retailers

  1. Reduce or eliminate Medicare. These traditional HME providers have had enough aggravation from Medicare, whether the issue is competitive bidding, the PECOS, ZPIC audits or denied claims. They have diversified their revenue stream and either completely eliminated or reduced Medicare to less than 30 percent of their total revenue. The end result is that the ongoing reimbursement cuts and added regulations may affect their bottom line — but they won't be out of business.

  2. Stretch your comfort zone. By trying a completely different business model, these HME companies are becoming boutique retailers that happen to sell home medical equipment. HMEs that attempt retailing usually do not have the appropriate location, staffing, product mix or advertising program to be successful.

  3. Delegate. Successful veteran HME owners and managers are very knowledgeable and capable business leaders. However, when they shift to retail, they delegate the daily operations to retail veterans who are equally competent in their own respective business model.

  4. Think big, as in multiple locations. Hub-and-spoke business models are the most efficient and profitable in retail. Using their traditional HME as the hub, many retailers open multiple retail locations around the hub to control an entire sales or geographic territory.

Transitioning to Retail

Traditional HME businesses are not equipped to transition into retail without making the following major changes:

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