In today's pressure-packed business environment, the words “breaking even” aren't especially welcome. But for Iowa Health Home Care, the concept is one component of a long-term strategy to obtain and maintain customers in the competitive home health care industry.
The Des Moines, Iowa-based company is a full-service home care agency that provides HME, home nursing care, hospice and infusion therapy to Iowa residents, most of whom are managed care beneficiaries. Only 25 percent of its customers are covered by Medicaid or Medicare.
Originally named InTrust, the company was formed in 1998 by Central Iowa Hospital Corp., which includes Iowa Methodist Medical Center, Iowa Lutheran Hospital and Visiting Nurse Services. In March of 2004, InTrust became Iowa Health Home Care to align itself more closely with Iowa Health System and its affiliates throughout the state.
Several years ago, the company decided to focus on equipment repairs, an often-neglected area of home care. According to James McDonald, the company's executive director of HME, that focus has resulted in building a customer base grounded in satisfaction and loyalty.
“Our mindset is that we are trying to take a longer-term approach,” says McDonald. “Our underlying philosophy is that we try to be as profitable as we can on the repair business — but there are going to be instances where we aren't.”
He adds that although the company tries to contain these losses, it evaluates the situation with a broad view.
When IHHC repairs a $5,000 wheelchair that was bought from one of its competitors, McDonald knows he is getting an opportunity to develop loyalty from that owner. As he points out, the customer is going to need another wheelchair in the future.
“We want them to come to this dealership to get that new chair when it's time, so we are going to take care of them now,” he says. “Not only that, but we are a full-service agency here, so eventually they will most likely need another type of equipment in the future, as well as certified or private-duty nursing, infusion therapy or hospice.”
Things to Think About
McDonald explains there are other factors the company considered before building a repair business. Management wanted to get a better handle on the costs associated with outsourcing repairs, and also wanted to raise the quality of service provided to its customers.
“One of the things that you have to take into consideration is that this is a capital-intensive business,” he says, adding that the faster you can turn equipment around versus having to send it to someone else to repair, the better the economics work. He notes that if repairs are outsourced to “someone who doesn't have a quick turnaround, that means you're going to have to buy another piece of equipment to get you by.”
McDonald says an efficient repair business also can actually reduce operating expenses, so at IHHC, there is an emphasis on working with reliable equipment.
“We continually focus on making sure we are not going out after-hours,” he says. “Not only does it involve the expense of paying the technician to go out and replace [the equipment], but you have the expense of repairing it, cleaning it, bagging and tagging it and all associated paperwork that is involved, even though there's no revenue for that.
“It's very costly to go out and pick up a piece of equipment just to put another one out and not get anything for it.”
The company's first service and repair plan utilized an in-house department. Unfortunately, at the time, none of IHHC's existing employees had the experience necessary to make it work. Next, the company outsourced its repair business, but McDonald knew the quality control he desired was not present.
Instead of giving up on his plan, McDonald contacted Greg Melloh, a well-respected HME repairs expert. The two have since created a business plan for the department that ensures the company's long-range goal is executed.
“If you have somebody [on staff who is an expert at repairs], you're going to get the benefit of putting out a piece of equipment that's going to perform well in the field, and you're going to eliminate expenses by not having as many after-hours calls,” McDonald says. “We are able to control those expenses here.”
Melloh, IHHC's bio-support manager, has worked in the HME industry for more than 20 years for both local and nationally owned companies and now runs the repair side of the business with two full-time employees. To assure both successful repairs and success of the repair business, IHHC invests in education and any training necessary for its repair personnel.
What Comes In Must Go Out
The company accepts most products for repair. According to McDonald, a great deal of the business comes from the respiratory side, including oxygen concentrators, liquid oxygen systems, pulse oximeters and sleep-disordered breathing treatment devices such as continuous and bi-level positive airway pressure machines.
Although in-house repair is not appropriate for some equipment, like ventilators and infusion pumps, Melloh has a specific goal he continually works toward: “Our eventual goal is to repair over 90 percent of the products we provide here, and we are very close to that right now.”
One of the strategies McDonald and Melloh have used to achieve their success is to evaluate the products they offer carefully as part of the HME business. They also perform due diligence on the manufacturers with whom they conduct business.
“In a well-run HME business, you have to evaluate certain things before you bring in new products,” says McDonald. “For instance, part of the evaluation process should include asking for certain things from the manufacturers.”
IHHC is clear about what it expects from its HME vendors. For the company to incorporate new technologies into its product line or rental fleet, McDonald says manufacturers must offer:
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a repair manual;
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adequate warranty policies;
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service schools for new products and technologies; and
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an MSRP (manufacturers suggested retail price) schedule to ensure successful payment.
“You will have a real difficult time getting paid for parts if the insurance company doesn't have some sort of way of controlling what you are charging,” says McDonald. “What [insurance companies] require when we send in a claim is that we send a copy of the manufacturer's suggested retail price.”
He also advises HME providers to ensure the cost of service schools is included in the manufacturer's pricing.
Even with a solid plan in place, there will be products and situations that are not particularly easy to deal with.
According to Melloh, future changes in the Medicare system will continue to make instituting equipment repairs a hard call for providers. “It's getting really tough to be able to do this type of work with all of the changes — or proposed changes — coming from Medicare, especially those that will end the capped rentals,” he says.
He also says it is almost impossible to make a profit repairing manual wheelchairs, which he explains are complicated and are one of the most challenging products for repair.
“The claims processes are [very] complicated. If you get anything outside the normal HCPC codes — in other words, if you start doing any of the E1399 (miscellaneous) or K0108 (wheelchair component or accessory) codes — it just takes a mountain of paperwork and know-how to get those claims submitted properly to get them paid the first time,” he notes.
But McDonald and Melloh have also discovered ways to get their claims paid properly and in a timely manner. Since most pieces of equipment cannot be repaired on the spot, this presents an opportunity to bill for rental equipment. One of their best tips , they say, is to bill for the repaired piece of equipment and the loaner equipment at the same time. McDonald says billing these items separately can result in a denial.
The repair experts also advise providing payer sources — any payers, not just Medicare/Medicaid — with as much information as possible, turning payment submissions into educational opportunities. For repairs, that means listing the parts, the labor, an explanation of the process and the payment request for the loaner equipment.
Bringing equipment repairs in-house has been a successful choice for IHHC. The company is building a base of loyal customers who are pleased with the service they receive, and management is continually learning new ways to streamline operations and increase profitability.
Company Snapshot
Iowa Health Home Care
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Founded in 1998 as a one-stop shop for home health care
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Offers a full range of home medical equipment and home health care services throughout central Iowa, including home health nursing, infusion therapy and hospice
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Accredited by the Community Health Accreditation Program
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Only 25 percent of patients are Medicare/Medicaid beneficiaries
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In-house repair department includes three employees — the company's goal is to offer repair of more than 90 percent of the products it provides
