Since raising prices is not something we can do easily in this industry, profitability depends largely on how efficiently providers operate. If a company wants to be efficient, it only has to manage two areas, because all improvement (or decline) in efficiency originates in “throughput” and “quality.”
Throughput refers to the quantity that gets produced in a certain time-frame, such as how many deliveries a technician makes or how many claims are processed through billing. Quality is lack of failures in what the customer perceives he has paid for.
To manage throughput and quality, use these eight strategies to make your good company better.
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Specialization can be used at both the company level and the job level within the company. An HME company can be specialized in a product or a category of products, such as in serving respiratory or diabetic patients. An example at the job level might be the specialization of the billing department, which can be separated into Medicare billing and private insurance billing. Generally, the more narrow the specialization, the greater the opportunity for efficiency.
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Standardization was proven to be valuable by Henry Ford. The output of the work is first given a standard, and then the processes that result in the output are given a standard. If we used standardization at the industry level we might all look alike, but standardization at the company level allows providers to differentiate themselves from their rivals by finding better ways to solve customers' problems.
We use standardization at the company level to require all intake staff to ask the same questions and put the answers in the same places. What if one intake coordinator was allowed to put patient information on the billing system, and another was allowed to put patient information in a spiral notebook? The inconsistency would certainly dampen efficiency and profitability.
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Some industries use Shared Infrastructure better than HME. Most of what HME shares is through group purchasing organizations, and is generally catalog publishing.
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Consolidation will continue in the HME industry. When two companies merge, they become more efficient because they can better use specialization, standardization and shared infrastructure at both the company and job levels. Often, the efficiency of shared infrastructure shows in the elimination of duplicated jobs.
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Controlled Growth is used by the smartest of companies to evade the “Law of Diminishing Returns,” which states that if one factor of production is increased while the others remain constant, the overall returns will decrease relatively after a certain point.
Sometimes this phenomenon manifests itself in what seems to be chaos in the company. Before that happens, however, the point of diminishing returns can be estimated so that a provider can control growth to match the acquisition of resources.
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Quality is tied to any company's efficiency, because most customers will pay only for a certain level of mistakes. If billing quality is poor, for example, a provider will have more cash consumed by accounts receivable than is necessary, thereby reducing profitability, sustainable growth, competitiveness and morale.
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In general, health care, HME included, has great opportunity to become more efficient through the use of Technology, which can make it easier for customers to do business with your company. Technology also can be used to deliver a superior solution to your customer and to make sales and administrative processes more efficient.
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Government Intervention is the most difficult strategy to execute. It's not easy to get governments to change policy, but your involvement with industry lobbying organizations can help. It is also important to look beyond the federal government level, because certain efficiencies may be acquired through local government intervention.
Wallace Weeks is founder and president of The Weeks Group, Melbourne, Fla., a consulting firm that specializes in total business improvement for small businesses, specifically in the area of post-acute health care. He may be reached by phone at 321/752-4514 or by e-mail at wweeks@weeksgroup.com.
