When it comes to being prepared for the implementation of competitive bidding, Patrick Hanna believes in the inside-out approach.
With CMS poised to implement competitive bidding in selected home medical equipment markets in 2007, the president of Tiffin, Ohio-based B&K Home Medical Services and his staff have been concentrating energy and time on perfecting their internal services. And Hanna says that has made them “well-positioned for the future.
“It's the inside-out approach. You can't market your business to death and then not answer the phone or deliver your products on time,” he says. “So we've spent time working on our internal practices. It's the best advertising I can get because I have a happy customer who will tell others about B&K.”
Adjusting to Change
Make no mistake — Hanna is not a naïve HME provider. Like everyone else in the business, he is grappling not only with competitive bidding but also with oxygen reimbursement cuts, new supplier standards and revised power mobility codes and reimbursement rates, not to mention the everyday pressures of doing business in a very competitive field. He is well aware of the threats to his ability to serve his customers and to his bottom line.
“It's tricky to adjust to the different changes in the industry with the reimbursement cuts and competitive bidding right around the corner,” he acknowledges.
He knows that competitive bidding in particular could threaten his small HME — perhaps not in the first go-round of 10 major markets, but definitely down the road. But Hanna has never thought of throwing in the towel and moving on to a less stressful, less government-dominated business.
“I don't think it's going to be necessary for people [to shut their doors],” he says. “There are new tools that come into play that help us be more efficient — document imaging, the concept of activity-based costing and doing more with less, growing your sales but not hiring more people.
“I'm somewhat of an optimist,” Hanna continues. “I think there will be ways to face the threats [that loom]. You find ways to do more with less and be more efficient. You manage costs so you have some profit at the end of the day.”
In short, providers must figure out what they can control. And internally, that is a lot, according to Hanna. At B&K, for example, activity-based costing has led the company to drop product lines — diabetic and ostomy supplies — that were not cost-effective either in time or reimbursement.
The company also has expanded its showroom. A family-owned business that started out as a pharmacy 25 years ago and now focuses fully on HME (the company also owns ECS Billing and Consulting), B&K is now located in the building that once housed the pharmacy; a pharmacy is next door.
“We doubled the showroom size when we moved,” Hanna says. In addition to installing what Hanna calls “a nice fitting room,” the company also expanded the number of products on its floor. Now, customers can choose from a dozen or so lift chairs and scooters that are on display, as well as a host of other items.
“Obviously we are placing a little bit of a bet there that we are going to get some walk-in traffic and generate a little bit of cash,” Hanna says.
In addition, every few years the company sponsors “B&K University” for its customers with a day full of guest speakers, a showcase of new products, a sleep lab, promotional items, door prizes and lunch. A local radio station does a live remote broadcast from the site. The event is well attended, Hanna says, and helps fulfill the company's mission statement, which calls for “reaching out to the community, taking care of our employees and our patients.”
Sometimes, taking control means spending money to build profit. Hanna says B&K became accredited through the Joint Commission in 1993.
“For a small company like ours, a family-owned business, [we] saw the need for that to get payer contracts,” Hanna says. B&K just went through its first unannounced survey (“I think we were one of the first companies,” Hanna says), and there were no recommendations and no follow-up needed.
Taking Time to Act
But Hanna is not banking only on internal changes. He's also active politically and is working hard in support of the Hobson-Tanner bill, officially known as H.R. 3559, which would soften some effects of the DME competitive bidding mandate in the Medicare Modernization Act and give smaller providers some protections.
Introduced in July by Reps. David Hobson, R-Ohio, and John Tanner, D-Tenn., the proposed legislation calls for the implementation of competitive bidding only after provider quality standards are in place. It would exempt metropolitan statistical areas with populations under 500,000 from competitive bidding, and also would exempt those items and services that would not achieve at least a 10 percent savings for Medicare based on the fee schedule currently in effect.
“We're really working hard to get H.R. 3559 passed,” Hanna says, noting that he has met with legislators to explain not only what the bill would do but also the HME business itself. He has found, he says, that most legislators do not have an understanding of the HME industry or how it ultimately saves the government money.
“It's a continuing challenge to educate legislators at the state and federal levels, and I think we all need to take some responsibility in doing that,” he says.
“I have a lot of faith that we are going to be around a long time, because the need is there,” Hanna continues. “Even though the dollars and cents might not be there right now with some lines, if you are creating the value, common sense will ultimately prevail.
“But you need to go to the legislators and educate them. [Home care is] saving money. We need to keep that in front of them on a daily basis.”
Hanna is championing H.R. 3559 because it has the potential to “help with a lot of the concerns we have. What I really like about it is that even if you lost a bid, you could participate at the winning bid price,” he says.
And that's crucial to a business like his that's located in a rural area — and many others nationwide, Hanna says.
“If [H.R. 3559] doesn't go through, you're going to end up doing a great deal of damage to the industry,” he predicts. “If it doesn't go through, we are really stuck. We won't have the opportunity as [businesspeople] to do something to affect our future.”
The time for providers to act is now, Hanna says. And one way, he believes, is for providers to become members of their state HME organizations. Hanna, who recently was appointed to the board of the Ohio Association for Medical Equipment Suppliers (OAMES), believes membership in such a group can keep providers informed about what is happening in the industry and also gives them opportunities for action.
“If everyone can stay in the loop and make those calls when the alerts go out, they can make a difference. For people who are not members of their state organizations, this is the time,” he says. “If you're looking for a sign, this is it.”
By being active in the industry, Hanna says, providers are actually protecting the beneficiary. And taking care of the beneficiary, he notes, is the most important thing in the HME business.
“You have to take care of the customer [and] you have to keep your customers happy, but sometimes that means managing their expectations, too. We ultimately have to make sure we are taking care of their health care needs, that they feel we are providing a solution to their problem and they will come back to us,” Hanna says.
That goodwill could ultimately pay off for the provider. “I know we've got customers who are pretty happy with us and wouldn't like to see us go away. If I have to pull them in to write a legislator, I know they'd be willing to do that.”
Company Snapshot
B&K Home Medical Services
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Traditional HME provider
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Family-run company with two branches in rural Ohio
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20 employees
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Accredited by JCAHO since 1993
Tips for Taking Control
With numerous new government dictates looming for how HMEs will be operated, providers need to find ways of doing business more efficiently. And that, says Patrick Hanna, president of B&K Home Medical Services in Tiffin, Ohio, means taking charge of things you can control. Among the practices Hanna suggests:
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Invest in activity-based costing so you can accurately assess what each product/activity is costing and whether or not it is cost-effective.
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Eliminate product lines that are not producing the return on investment that you want.
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Consider document imaging, which can eliminate some inefficiencies by cutting back on piles of paper and making documents accessible to anyone needing them.
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Become accredited. It could help you land contracts with other payers.
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Join your state and/or national industry organizations. This will keep you informed and allow you a forum for letting your voice be heard.
