Economic recovery across the country has been sluggish and fickle. In some months, the job market seems promising and in others unemployment rates are still staggering. In some pockets of the country the housing market seems to be rebounding and in others it is stagnant. You would think HME would be exempt from this discussion because, after all, it's health care, something everyone needs regardless of the economy. Besides, isn't HME accustomed to government cuts, CPI freezes and more?
So why are HME companies suddenly falling prey to the struggling economy? It seems that the realities of oxygen capping along with other product reimbursement inequities and cuts have made it impossible for providers to remain profitable. Some businesses have closed their doors on their own and others have been forced to sell or file for bankruptcy.
Let's look at how some HME providers have managed to stay afloat while others have decided, or been forced, to exit the marketplace.
After inquiring what providers have done to secure their position in the industry while confronting an unprecedented year of scrutiny and cuts, I learned that HME companies have had to stop being everything to everybody. Instead, they are more selective in the patients they accept — and they are more likely to say "no" than ever before.
What is the biggest challenge these businesses have faced as a result of recent Medicare changes?
Specifically, I have heard from providers throughout the country that traveling oxygen patients are plaguing every respiratory company, regardless of the number of months the patient has been renting. More problematic than that, however, is the impact of new regulations on the patients who have rented beyond month 36 and now want to travel.
Out-of-pocket expenses are crippling (gauging the "permanent" resident provider for travel oxygen is rampant), and as providers leave the market in some places, finding others who are willing to accept these oxygen patients is increasingly difficult. With little choice and fewer remaining providers, the patient will suffer in the end because access problems are erupting. In addition, when/if competitive bidding is implemented, access to care will undoubtedly become even more limited.
The biggest challenge currently is getting a provider to accept an oxygen patient after a certain number of months (typically 18 or more). With lower reimbursement rates and the 36-month cap constantly looming, HME providers may also be unable to accept charity oxygen patients, notwithstanding the good will benefit. As a result, more and more companies are asking staff to decline unprofitable business politely.
What else are providers doing to stay afloat in these tough economic times?
Reducing Expenses
Reducing expenses is on everyone's mind today. "Is it really necessary?" is a question more readily asked, not just with respect to the extra service HME businesses inherently provide but also with respect to the basics. What used to be considered common practice is no longer the case.
For example, HME companies now question whether the delivery can wait until tomorrow (for all but true life-support equipment) or the next time someone is in the area rather than dropping everything to meet the referral source request. In fact, is the delivery necessary at all or is there a more economical way to get product to the patient? Asking the patient to come by the office or store to pick up equipment is standard operating procedure. Why use a clinician if it is not absolutely necessary?
Saying no to patients and referral sources is becoming a more common occurrence. One provider told me he no longer uses respiratory therapists to go to patients' homes. (If you are considering this option, check your state respiratory rules first as they vary.) Others will no longer repair equipment that they did not deliver originally.
ABNs and Upfront Qualifications
In addition to reevaluating service levels to ensure the viability of an order, some companies have decided to gather medical necessity documentation before dispensing equipment. Although it may mean the patient waits longer to receive equipment, the company is more certain of its financial exposure and, consequently, knows if the written documentation substantiates the need for the equipment prior to its release. Moreover, many providers have learned to use an advance beneficiary notice with specificity to avoid the fiscal responsibility associated with Medicare denials sans a valid ABN.
Collecting Copays Up Front
When asked what other tactics they are employing to bring in more money, many providers indicated that they are collecting their copay portions up front. When a patient has a portion to pay, he or she must pay it now rather than later; financing customers is no longer an option.
Taking control of private pay receivables is an initiative undertaken by many providers over the past year. By accepting more debit and credit card transactions, auto-debiting of checks and outsourcing private pay invoicing and/or collections, some companies have reduced their private pay DSO by up to 40 days, for example. Recognizing the need to collect every dollar owed to you is a necessary change in today's environment.
Diversification
Not only do you have to change your mindset about collecting money but you must also abandon unprofitable business in favor of revenue that is collectible. Allowing patients and third-party payers from 90 to 120 days to pay their bills is impossible to maintain today. Further, cash/retail is one way to eliminate receivables and help diversify your mix of business.
Putting all of your eggs in one payer basket is a dangerous business practice, and generating 10 to 20 percent of your revenue through cash is one way to diversify today. Changing payer mix will obviously influence your product mix, as certain payers dictate the products you carry and vice versa. This is especially true of third-party payers like Medicaid, which pays for diapers and bathroom safety aids while Medicare doesn't.
PAP therapy, for example, is payable by a diverse mix of payers because the average sleep apnea patient is younger than the traditional Medicare beneficiary (onset of sleep apnea ranges from 40 to 55 years old). This creates a healthier mix of revenue since there is no longer a reliance on one specific payer for the product category. If one payer (such as Medicare) cuts reimbursement, the business would likely survive on revenue from the other third-party payers that reimburse for PAPs. It is prudent, therefore, to examine payer and product mix closely to ensure adequate diversification in the current fickle marketplace.
Now that oxygen capping has been a factor for over a year, it is time to revisit the internal operational changes and challenges the cap has created. Are you maximizing efficiencies? Do you have the best practices and staff to do the job? What initiatives will help you gain more bottom-line profit in the coming year? How will you grow to ensure viability and profitability?
The answers to these questions will help you capitalize on more of the revenue and profit left behind by those who have succumbed to the pressures of the economy and Medicare cuts.
Miriam Lieber is president of Lieber Consulting, Sherman Oaks, Calif., specializing in operations management and reimbursement for the HME industry. You can reach her at 818/789-0670 or by email at miriam@lieberconsulting.com.
