If there's a bright spot in the home medical equipment sector in Naples, Fla., it could well be Sunshine Respiratory & Medical Supply.
It's not even a teenager yet, but the 11-year-old company is pulling down $25 million in annual revenue from its five retail pharmacies, including two locations that focus on HME. And it's doing that by combining beach balls and flip-flops, stamps and packages, ice cream and sodas with prescription drugs and oxygen concentrators.
Not your usual recipe for an HME provider, but then, Sunshine doesn't subscribe to a universal approach to doing business.
"We started Sunshine Pharmacy with a vision to get back to the old-fashioned neighborhood pharmacy feel in our retail stores," says owner and pharmacist Del Parrish in a video on the company's website.
That means responding to particular needs in the individual locations where Sunshine, which opened in February 1999, now has pharmacies and HME businesses.
"The fact that we are independently owned and operated gives us the flexibility to meet the customer's needs on a more personal level," says Ken Maxwell, the company's vice president of sales and marketing. While the core business is the same, each location is tailored to its particular locale. "You don't have that cookie-cutter style," Maxwell says.
The company polled the communities in each location to create its neighborhood-specific stores. At three of Sunshine's branches, for example, you can buy postage stamps or mail packages at the U.S. Postal Service or UPS locations inside.
"One of our locations is next to several residential communities, so having a post office there is a favor. People can come in and do any sort of pharmacy business they need and do any medical equipment business they need [at the same time]," Maxwell says.
At the GoldShore location just a block from the beach, you can stock up on suntan lotion, flip-flops and beach towels. Another location carries sodas, water and ice cream.
"You wouldn't drive across town to get an ice cream bar, but if you're in the neighborhood pharmacy or DME, you'll pick one up," Maxwell says. "It helps get people in the door."
Come On In
Getting people in the door. Sunshine believes that is going to become even more critical as the HME sector gets squeezed by such forces as competitive bidding, audits and rapidly declining reimbursement.
"HME is not something people think about until they have a need for it," Maxwell says. "The more variety you have, the more reason you have to bring people into your store, and they'll tell others, 'I remember seeing that at Sunshine when I was there.'"
Sunshine is actually made up of three divisions — pharmacy, respiratory and medical supply — but there is a unique quality to each store. "This all came about by the belief that to be successful and profitable, you have to adapt to your environment," Maxwell says. That's what got Sunshine into the HME business in the first place.
"A few years ago," Maxwell recounts, "we saw that the changes being made to Medicare's Part D coverage would have a significant impact on our bottom line. Plus, as a pharmacy, customers came in all the time looking for various HME items. So instead of turning these customers away, the decision was made to expand into the HME business"
Sunshine opened one location as a test, and when that proved a success, it purchased a competitor, giving it two key HME locations. The company is looking to open even more stores in the near future, Maxwell says.
Even the HME locations aren't the same, however. Sunshine's major HME shop, known as Sunshine Medical @ Palm, is directly across the street from a major hospital and next door to a private medical center.
"It's a high-traffic location, so we've made it very retail-friendly," says Maxwell. "We remodeled the interior to make more open space, added a mobility section, four patient fitting rooms and more display space. Instead of customers looking at thumbnail pictures of an item on the Internet, they can come in, pick it up, look at it, test it (if appropriate) and then decide if it's what they want, all the while getting advice from qualified, professional staff."
Sunshine goes beyond basic HME, Maxwell says. "We do a lot of wound care, a lot of rehab and mobility and we carry a lot of DME items that people don't usually think about," he says. "The typical customer, when they think of DME — if they think of it at all — thinks of wheelchairs, oxygen, hospital beds. But when they come into the Palm store, they walk around and say, 'Wow, I didn't know you carried all this."
The company also carries lift chairs, scooters, reachers, other aids to daily living and boots. Here, Naples' wealthy demograpic plays a hand in product mix. Its downtown GoldShore location, Maxwell confirms, carries more retail power mobility, and it's not uncommon for customers to walk in and buy two lift chairs at once because they want a matching pair. "It's million-dollar clientele," he says.
With 25 competitors within 10 miles in the Naples area, being a diversified company with diversified locations has paid off, Maxwell says.
"It has given us an edge over our competitors," he believes. "Being in Florida, we have a lot of competition. Some of our competitors only do respiratory, some only do DME, some do Medicare, some don't do Medicare. At Sunshine, you can get all these services with one company. It makes our company more of a one-stop-shop."
Stay Awhile
Frankly, Sunshine is banking that its diversification of business and products within each location will help it survive.
"All this is a result of innovative thinking — staying ahead of the game to meet the challenges of the industry and meet the changing needs of our customers at the same time," Maxwell says. "It has paid off by affording us tremendous growth in the face of increasing regulations, reimbursement cuts, slow economy and competition."
Sodas, beach balls and reachers might not seem important in the grand scheme of things, he acknowledges. "If you think of them as little things, it's insignificant. But when you look at the big picture and you look at your bottom line, that's when you see the payoff."
Will it be enough in the face of the big game-changer, namely, competitive bidding? Maxwell believes Sunshine, which will be in Round 2, is nimble enough to change as needed. The makeup of the HME division's revenue is currently about 48 percent Medicare, 27 percent private insurance and 25 percent private pay, but that is likely to fluctuate.
"The current HME industry is very complex and is in a state of panic. Medicare is making deep cuts, and many HME owners are wondering if they'll be able to stay in business," Maxwell says. "We feel our approach will not only help us survive the current environment but ultimately help us gain market share, expand services and, therefore, maintain and even increase profits."
That won't come about simply by cutting costs, he says. "Companies are looking to streamline operations, cut costs wherever possible," Maxwell says. "You don't want to cut your costs to the point of cutting your services. If you cut your services or how things are provided, you are cutting your wick at both ends.
"You also want to look for ways to bring in new revenue, and that's where this diversification comes in," he continues. "This is why each of our locations is slightly different. Each store brings in additional revenue by providing items unique to their locale. This is also why we've expanded into our various services. Each service is different yet [they comlement] each other, and the company as a whole prospers."
There's no doom and gloom at Sunshine, even with formidable challenges facing the industry. Says Maxwell, "We are already looking for a third HME location. The decision right now to expand with the economy the way it is and impending Medicare cuts is a big decision, a big financial decision. And it is one a lot of companies are not going to make. Without looking at the future and without being proactive, they are just going to let these problems hit them in the face.
"If you can see it coming at you and you react, the impact is going to be less significant on your bottom line."
Bright Ideas for Success
What does it take to make it in today's home medical equipment environment? The key element, according to Ken Maxwell of Sunshine Respiratory & Medical Supply, is quality employees.
"First, hire the best, most qualified people Then, make sure that everyone knows they are valued and each one is a critical component to the overall success of the business," Maxwell says. "When your employees feel they are needed, valued and appreciated, they do their best."
It is especially important to have a competent billing staff, he says. "You can do all the business in the world on the front end, but if you can't collect for it on the back end, you're digging yourself into a hole."
Here are some other guidelines that are working for Sunshine, according to Maxwell.
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Don't panic! Make sure your business plan is solid and that you continue meeting your patients' and referral sources' needs.
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Don't be afraid to change your approach. What worked 10 years ago may not work today. What worked five years ago may not work today. What worked yesterday may not work today.
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Make sure you're documenting and billing everything as accurately as possible.
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Don't just cut back; look for ways to expand your revenue. Ask yourself, "What else do my customers want?"
