As home medical equipment providers gathered for Medtrade last month in Atlanta, members of HomeCare's Editorial Advisory Board got together to talk about the industry's state of affairs. In the process, these respected HME professionals — the consultants, lobbyists, attorneys and providers that we all turn to for advice — looked ahead to the newest challenges: Medicaid cuts, professionalism and the art of remaining profitable in a tough market. The roundtable exchange also encouraged ideas about how providers can deal with these emerging business concerns, which are certain to affect their companies on a day-to-day basis. A list of the magazine's participating Editorial Advisory Board members accompanies this article. We hope you learn — and benefit — from reading their comments as you prepare for the next hot topics facing HME. The Oct. 8 dialogue began with a question on Medicaid as Board Member Jane Bunch informed the group of cuts in Georgia's program that had been fashioned in a state budget meeting just that morning.
HomeCare: Are Medicaid cuts the industry's next big issue?
Bunch: Definitely. The state of Georgia had a budget meeting this morning where pharmacy was cut 4 percent. Along with that, there was a proposed 3 percent cut for DME, and there are other cuts in Florida, South Carolina and Tennessee where some products in DME lines will no longer be carried in the state Medicaid programs.
In California, Medi-Cal has announced they are no longer covering compression hosiery and, possibly, even [incontinence supplies]. That's a huge change to just totally cut products out of the whole program. And, it looks like every state is going forward with some cuts across the board.
Feuer: I just did some research on the subject, and at least 40 states are having Medicaid cuts. Just as an example, in New Jersey, the income level for a family of four to be on the Medicaid rolls was $30,000, but it's dropping to $4,500. Massachusetts had 50,000 people taken off their Medicaid rolls just in the last few weeks.
If you go through the list of states that are making these changes, there are going to be a tremendous number of low-income working people who are not going to be eligible for Medicaid. I think the cuts are running from 12 percent to 18 percent nationally.
There are many people making a living in this industry from Medicaid, so this has got to come down and affect our industry.
Bachenheimer: The real difficulty at the state level involving Medicaid is that things happen so quickly, and you have few opportunities to actually address them in any meaningful way.
We've been dealing with Medicare and competitive bidding for years, almost ad nauseam, but with Medicaid, the changes are proposed one day, and 30 days later they could be in effect. It's very difficult to have a meaningful influence over the process.
That's a huge issue for the industry in how we can grapple with Medicaid state by state, or even collectively.
Margolis: We have to understand that with Medicaid the problem is not only price. The problem is policy, process and price, and if we address it in that way, we're going to be much more successful.
The states have to save money; there's no doubt about it. Somebody screwed the budget up in just about every state all at the same time … and now they're doing silly things. For example, in the state of Texas there is a proposed rule that says if you're delivering custom equipment and it takes more than 75 days to deliver it from the day of authorization, then your reimbursement is cut 10 percent.
So in Medicaid, the story is not totally about dollar cuts. The story is also about terms of eligibility and about trying to establish meaningful relationships in policy that are going to work over a long period of time.
Bachenheimer: The difficulty is that there are 50 states, and this is happening in virtually all of them at the same time. Whether it's happening on the legislative side first and then going to the regulatory, it is still happening in a compressed period of time.
But there is the ability to turn things around and have conversations much more readily with individual policymakers who have that wherewithall. Getting involved in the process can make a difference.
Cohen: Involvement in the process can make a difference, but the real issue with Medicaid is that they're cutting programs. And if the program goes, there go those products that go with the program. It's not that they're going to pay you less; it's that they're not going to pay you at all.
We need to do more than look at the products that Medicaid is cutting back on. The industry has to be looking to keep people eligible.
Feuer: These decisions are being made very quickly, so the point about realizing that these changes are happening rapidly is extremely important. When the states make a decision, it doesn't malinger like in Washington, so that's why you've got to get involved and work with state-level people really well.
And the bottom line is, you've got to work with your customer really well, because the customer is insured today. I think the whole retail focus needs to change, because you're not going to have a lot of people to bill for.
Margolis: One of the things we have to do is question everything that the states tell us. Most states cannot point to the legislation or the regulatory language that says, for instance, that people have to wait three to five years before they get a wheelchair or that the only ones who can appeal a decision are the doctor or the patient. That's a crock of hooey in most states, because suppliers can appeal. To me, appeals are the key, because they shine an outside light on the process.
N. Caesar: The flip side of the Medicaid programs acting too quickly — whether it is an intentional desire to see what they can get away with, or, as I suspect, more likely overburdened bureaucrats trying to see what works by taking the quick way and seeing if anyone complains — is that you still wind up with the same result.
Every state's Medicaid program is subject to that state's administrative procedures, acts and similar requirements. There are 50 sets of laws that home care suppliers have with Medicaid that they don't have with Medicare, and very few suppliers take advantage of that.
The relationship that needs to be developed with the Medicaid representatives is a friendly, respectful but businesslike relationship, recognizing that sometimes you're there to help them and sometimes you're there to keep them on the straight and narrow. The best way to do that is to have a first-name relationship with the people who matter. Do it when you're saying hello and not just when you're complaining, and it will be a much better relationship.
Another point is that home care providers generally, and DME in particular, are in a strong position to galvanize their customers, i.e., the Medicaid beneficiaries. State representatives typically view Medicaid enrollees as an invisible constituency, and they typically view DME suppliers and home care providers as an invisible constituency. But everybody the supplier services can vote for their state representatives, and that is an area for some leverage in dealing with the state programs, both at the policy level and at the process level, that can and should be taken advantage of.
Cox: Looking at this industry and watching everything that happens in Washington, one of the things that I do not like is how we react to what happens to us. We shouldn't have a victim mentality. We have to be more proactive.
It is absolutely true that we have to have influence in every corner, not just in Washington but at the state level. 2004 is an election year, and it's important that we all get together and talk about who's going to carry our water from Washington, and who's going to carry our water throughout the country. Elected officials are a reflection of who we are, and we elect them.
We've got to be politically active at all levels, and we need to make sure that the patients are active, every provider is active and everyone in the industry is active as we create the influence to protect the interests of the industry. We have to create relationships so that those officials understand our industry so well that when something comes up that will affect us, they think about it and their staff thinks about it.
We are fighting regulatory issues right and left, and we're doing the best we can, but we are basically drinking from a fire hose because we're being hit from every direction. I've never seen anything like it. As soon as we think we've taken care of one thing, another thing pops up. So we've got a lot of work to do at every level.
HomeCare: Working in a business with these legislative and regulatory issues, what do providers need to do to stay competitive and profitable?
Weeks: The smaller companies need to think of themselves as businesspeople, and act like they are actually in business to be profitable.
One of the more specific things that providers should be doing is considering their concentration in payer sources. As challenging as it might be to profitability sometimes, not having a diversified payer source will continually keep them captive to every movement that those payer sources make.
And for those who are highly concentrated in Medicare/Medicaid, or in some private health plan as a payer source, they put their business at risk if that payer source makes a drastic enough change in the way that it pays.
It's not about running away from one payer source. It's about diluting exposure to those concentrated payer sources by growing other payer sources more quickly.
Margolis: What I would tell people is to keep doing what they are doing in terms of patient care, because the differentiator between the good rehab business and the good DME business and the good oxygen group is that relationship with their client. If you want the client to be with you during the hard times, then you have to give them what they want and what they need.
What we have to offer people is the service and the relationship. That, along with running your business in an intelligent manner, will help you survive whatever situation we get put in. Things may be different when you come out at the end of the tunnel, but you still will be there.
Ciardo: From a perspective of providing those services, I agree. However, although I have a diversified payer source and our service level hasn't gone down, it means that bigger companies with more money and deeper pockets are signing on at reimbursements that go lower and lower and lower, and I have to meet that price. That's becoming more difficult to do because we have no control over reimbursement rates that continue to be driven down by those companies who don't provide the service.
N. Caesar: It certainly is harder, but if you don't give them another reason why they should care whether you say “yes” or “no,” the reason is going to be cost, and cost is the most fickle loyalty there is.
It always comes down to leverage. The people on the payer side respond to pressure just like the people on the supply side do. I agree that it's harder to negotiate on price these days, but you always have leverage if your customers are loyal to you — and that comes from two things: delivering exemplary service, delighting the customers as it were; and making sure people know it and say it on your behalf, and that you say it on your behalf. It's the marketing and public relations side of things.
The DME sector of the industry is even worse than the rest of the industry, which is pretty bad, in sticking up for itself, in learning how to market itself, and equally, in learning how to have something to market. A lot of people get into the DME business without really having a business mindset. If there's something we are going to focus on over the next decade, it would be to get the industry to clean up its act in many ways, one of the most important of which is to put on a suit every morning.
Weil: It really is about raising the level of professionalism. That's very difficult sometimes for the small HME firm to do, and it's very frustrating if they have been in the business for a long time. Now they're stuck on an equal plateau with every other provider that's come into the market in the past two years.
Providers' whole approach to the marketplace has to move to a higher professionalism, not only in appearance but from a business standpoint in negotiation, in their brand presentation, in their knowledge of reimbursement, in their knowledge of what they provide in clinical information to the referral entity. It just has to ratchet up. It's a tremendous amount of work, but those that do it maintain market share.
Bunch: That seems to be one of the largest dilemmas in our industry. We are the poorest businesspeople I have ever met in my life.
I can't tell you how many people think they can open up a DME business, so they go and lease a 1,500 square foot office. Six months later, they're saying, “We've got to get reimbursed? How are we going to run this business now that we've opened it?” I'm running into [companies] that don't know how to deal with Medicare or Medicaid claims, much less diversifying their payment sources. They don't even understand how to collect what they've got.
Prial: That's a great preamble to a program that I've espoused for many, many years that has not made me a great number of friends. In fact, it has created a lot of animosity. But I sincerely believe that we are the only segment of the health care industry that doesn't have any form of a license or certification that we're trained and knowledgeable.
Our profession is completely unprotected. If Jack decides he wants to be a home care dealer, he becomes one. We are at great risk because we are not recognized as professionals. Yet, 90 percent of the dealers that I know are excellent professionals. It's that other 10 percent that are dragging everyone down.
T. Cesar: As far as the business side, traditional accreditation has not been that great of a help. One of our goals is to help our customers do better business and have best practices.
On the matter of professionalism, ACHC is going through ISO 9000 certification for our own benefit. What we want to do is glean off of what we learn from that process to incorporate it into the standards that we produce.
Bachenheimer: The thing that amazes me about the accreditation issue is that is has been so divisive in the industry. We have to get across to folks in the industry how important it is. People should not think that it is going to be the be-all and end-all — we're still going to have issues with Congress, Medicaid, etc. — but it adds a huge aura for the industry. It's something that we can hang our hats on, and we have very little to hang our hats on nowadays.
When you're in Washington, from the view of the policymakers we are the only health care “professional” that is providing services to beneficiaries that does not have any formal stature. A commitment to excellence and a sort of “Good Housekeeping Seal of Approval” can go a long way.
Prial: When you talk about a license or you talk about belonging to the national or the state association, providers always say it costs money. But this should be considered as part of their business operation. Dealers have not been able to recognize the fact that, because they don't belong to their state association or the national association or have a license, they're looked upon as the same kind of guy who shines shoes or sells the newspaper — they're just a merchant. They're not recognized as a professional.
The question is, how do we get the mass of dealers involved and bring them into the organizations so they will all participate and contribute?
Pageler: It's awfully difficult to write that check when you're worried about the check for your employees. But many home care providers simply don't understand the mechanics and statistics of business. If they can understand their own 80-20 rule, for example, and where their income comes from, they'll find some strengths, and as has been discussed here, they'll find some weaknesses. Joining the associations might give them the understanding and mechanisms to do better business.
And with these prognostications of the perfect storm yet to come, [providers] need to be stocking the cellar.
For more information on states' Medicaid cuts, see Cara Bachenheimer's “Washington Wit & Wisdom” column on page 70. For an opinion on advancing industry credibility, see “In My View” on page 76. And, of course, we want to know what you think. You can e-mail your comments on these topics, or thoughts about any others, to Gail Walker, HomeCare editor-in-chief, at gwalker@primediabusiness.com. We're waiting to hear from you.
HomeCare Editorial Advisory Board members participating in the roundtable discussion included:
Cara Bachenheimer, vice president, government relations, Invacare
Jane Bunch, CEO, JB&CS
Neil Caesar, president, Health Law Center
Tom Cesar, president/CEO, Accreditation Commission for Health Care (ACHC)
Cindy Ciardo, director of operations, Knueppel HealthCare Services
Jerold Cohen, president, Caesar Cohen Healthcare Solutions
Kay Cox, president and CEO, American Association for Homecare (AAH)
Louis Feuer, president, Dynamic Seminars & Consulting
Simon Margolis, vice president, National Seating & Mobility, and president, Rehabilitation Engineering and Assistive Technology Society of North America (RESNA)
Terry Pageler, president, Pageler & Companies
Sheldon “Shelly” Prial, consultant, HPS Healthcare Management
Wallace Weeks, president, The Weeks Group
Colette Weil, managing director, Summit Marketing
