Dallas Jackson and Wendy Wigmore Jackson, RN, know that government reimbursement rarely goes up. Coupled with a relentless commitment to personal service, that simple truth has guided the husband-and-wife owners of Jackson Medical Supply, a three-store HME operation on the eastern edge of Northern California's San Francisco Bay area.
Predicting whims in Washington is never an easy task, but home care providers who wish to stay ahead of the game must be nimble, creative and patient. When grumblings about competitive bidding grew louder, the Jacksons responded by adding to their base in Vacaville with two additional stores (Woodland and Vallejo). The new locations served patients in areas where the giant chains were not doing the job, say the Jacksons, who distinguished themselves with the mom-and-pop approach.
Back then, their dependence on Medicare hovered around 20 percent of overall revenues. Since that time, the number has crept up to 30 percent. It's still low enough to offer peace of mind, but Wendy acknowledges the figure is more than they would prefer.
So far, the long arm of competitive bidding has not ensnared the Jacksons. However, Round 1 bid prices released in early July average out to a 32 percent cut across the affected categories. The couple agrees such a cut would greatly impact their business, but even under such conditions they both believe they would find a way to survive.
"Currently, we do very little in scooters through Medicare," says Wendy. "If and when those prices went nationwide, we probably would stop doing [power wheelchairs] through Medicare and only do cash-basis chairs. The amount of work it takes to do a PWC for Medicare is long, tedious and time-consuming. Unfortunately, the customers in need of power mobility are the ones who are going to suffer the most."
The problem is that competitive bidding is not the only concern. Higher taxes amount to yet another cut in pay, and it's a variable that Wendy and Dallas are already incorporating into their 2011 business plan.
"You have to know your competitors and your marketplace, but you always have to anticipate what government is going to throw at you," says Dallas, who worked in Northern California's financial district for many years before finding his true passion in the DME world. "Government policies can knock the wind out of you if you don't plan ahead. Next year taxes are going up 25 to 30 percent because they are taking away some of the Bush tax advantages. Some mom-and-pops are going to be taxed at the highest rates, because even little companies make more than $250,000 a year."
For the Jacksons, most of the money eludes their pockets and gets funneled right back into the business. "One of the keys of our success is that right from the beginning pretty much all our profits went back into our company," says Wendy. "We are always upgrading things. We upgraded by buying two stores … along with new computer systems."
When the 9.5 percent reimbursement cut hit the home care world in January 2009, the Jacksons worked around it by increasing volume and focusing more on walkers and hospital beds. The cut did inflict some pain, but Wendy responded by negotiating vigorously with vendors. "We are not the biggest company on the block," she says. "But I play hardball, and in return we are loyal."
Elimination of the first-month purchase option for power mobility is yet another obstacle that all mobility providers must soon deal with. The new policy is causing the Jacksons to rethink their inventory. "Your biggest concern is your capital outlay, and it goes back to working with vendors," says Dallas. "Most of the power chairs are lightweight, and they are good for inside, but they are made from materials that are easily broken and scratched. They have plastic parts. Someone can have one for two weeks and it looks like six months, and under the new rule we will have to replace the parts."
The Jacksons are looking to carry sturdier models that can take everyday abuse and hold up over a long period.
"Pride Mobility is already working with a different product to help in this regard," reveals Wendy. "Invacare has also has provided support and help. They know and we know that you can't keep replacing thousand-dollar products once a month and only getting a low amount of dollars for it. This policy is going to go through in January 2011, so in the back of my mind I hope somebody stops it. "We are not going to get out of mobility, but we can't afford to do it the same way."
No Debt, Good Deals
Since the Jacksons are steadfast in their commitment never to yield on personal customer service, they must save every possible dollar through rentless efficiency that includes a Web-based computer configuration linking all three stores. Factor in accreditation from the Waterloo, Iowa-based Healthcare Quality Association on Accreditation and the operation can only be described as lean and mean.
"Small companies often take their money and run, but if you want to build a company you have to constantly take that money and draw it back into the business in the form of logical growth," adds Dallas. "Whatever that takes, whether it is having more vans out on the street, better computers or better product lines, you need to grow and watch the bottom line to succeed."
As "cash-and-carry" business owners, Wendy and Dallas avoid debt like the swine flu. They do not have loans out for anything, so everything that comes in is paid for on the spot, or through a typical 30- to 60-day payment plan. Avoiding the need to borrow money to make payroll requires a keen eye on cash flow and living within their means.
After a decade in the business, the Jackson's product line has expanded beyond the main core of power wheelchairs and scooters to include diabetic shoes, hospital beds, bathroom safety, ambulatory aids, seat lift chairs, mastectomy and orthopedic supplies. A beefed-up service department ensures that any customers who have problems will find their way back to the store. When they do, honesty is always the best policy.
"We have turned people away and told them that they only need new wheels and not a new scooter," explains Dallas. "That honesty goes a long way. If you sell things to people that they don't need or want, a bad reputation will spread."
Staying away from problematic equipment categories has, in some ways, been just as advantageous as expanding product selection. Wendy's time as a nurse familiarized her with DME such as lift chairs and power chairs, but she knew little of the ins-and-outs of oxygen. Plenty of vendors and referral sources urged the Jacksons to get into the oxygen business. When they started researching the prospect in earnest, Medicare implemented the 36-month oxygen cap.
The cap, combined with other complications, ultimately caused the Jacksons to stay away. "There is money to be made, but you need to have 24-hour on-call people," laments Wendy. "It just didn't feel right. We also had good companies locally that were doing oxygen. We also have relationships with Apria and Lincare. Those national chains don't want to do the beds and DME, so they refer those patients to us. A lot of companies that deal with oxygen also happen to sell some DME. We are all DME, and we don't sell O2. Nobody can compete with us in DME service."
At first, referral sources were reluctant to send patients to two different places, preferring instead a one-stop shop for DME and oxygen. Thanks to some diligent relationship-building, nurses now see the value of splitting the orders, preferring to send patients to the personal care offered by Jackson Medical Supply. "People fight to get us now because they want that personal service," muses Dallas. "That tells me we are doing the right things."
Emphasis on Service
Since 2001, the original Vacaville incarnation of Jackson Medical Supply has flourished as a retail-rich sales environment. In late 2003, the Jacksons opened their second store, selecting a site in the city of Woodland, 35 miles to the northeast. In 2005, their third location — 25 miles southwest in Vallejo — opened its doors.
The two branches closely mimic the flagship in terms of layout and ambiance. The Vallejo store, at 3,500 square feet, is the largest, while Woodland is the coziest at 2,500 square feet. All three stores devote roughly 60 to 70 percent of floor space to retailing.
"We try to keep the store set up in a way that facilitates traffic flow from front to back, yet still making customers feel they can freely walk around and take a good look," says Wendy. "In each store, toward the back, we have secluded space for incontinence products. This space is defined by shelving and dividers, which make the area clearly separate, but without closing it off."
Efficiency, lack of debt, and astute product selection all add up, but devotion to the "cow town" of Vacaville has made the Jacksons familiar and trusted business leaders. Networking among all three local chambers of commerce in which they do business has made referrals common. Dallas is president of the local Rotary Club, and Wendy is a board member of the California Small Business Association and the downtown Vacaville business improvement district.
Even with all that exposure, the Jacksons do not neglect marketing, choosing to spend money last year on television advertising, opting to go one month on and one month off to cover their three different municipalities. "We had three or four different styles of commercials," says Wendy. "One was to educate about our mobility systems and the second to tout our overall capabilities. The third advertised our commitment to service, and the fourth described our ability to solve problems. The ads were all capped with a message to buy local."
As employers in the community with annual revenues topping $1 million, the Jacksons foster loyalty among their 14 employees with sound medical benefits, 401(k) plans and bonuses. When it came time to find help with documentation requirements and marketing efforts, they did not hesitate to hire a mobility product specialist. Now this college-educated woman is helping the Jacksons bring in sales for big-ticket items such as PWCs and scooters.
"We believe you must have somebody who actually goes out and beats the bushes and takes responsibility," says Dallas. "It is complicated now, and someone must follow up on procedures with the doctor, make sure the paperwork is exactly right and ensure the doctor knows what he really needs to do — and patients know what they need to do."
The mobility specialist acts as a personal contact that goes to the doctor's office to collect the paperwork/prescriptions, and meets with patients to be sure they qualify and really do need a power wheelchair. "She will also do the home evaluation," explains Wendy. "These are all functions that we performed since we opened, but I was doing it and I just could not keep up with the volume."
Homage to Ace
Paying homage to Ace Hardware is one of the overriding goals of Jackson Medical Supply. Like the famous chain, the Jacksons greet every customer who walks in the door. "The other thing about Ace Hardware is they have everything from the smallest little spring to parts that can go into exhaust fans," says Dallas. "We mimic that philosophy with a whole depth of products we are able to sell."
Despite the focus on over-the-counter sales, impulse buying is not emphasized at Jackson Medical Supply stores. "We promote what we call 'consultative sales,'" says Dallas. "We see middle-aged couples who have never been in a store like this and are usually here because a parent is going through health problems. They need someone to hold their hand. That's what consultative sales is all about. It's not about hard-selling or going for the impulse buy."
It's true that slightly lower prices can be found elsewhere in the area, but Jackson Medical Supply usually comes close to duplicating them. And, sometimes — when vendors offer special pricing — the company beats its higher-volume competitors.
In each store, inventory is maintained at low levels. The Jacksons opt for just-in-time replenishment because it minimizes the amount of capital tied up in stock. "We never want to be stuck with a large quantity of items that become obsolete," says Dallas.
Reliance on this technique does not appear to stifle the ability to obtain price breaks from its vendors. "With just-in-time, you speak with suppliers a lot, which allows you to nourish more productive relationships than would be the case if you just ordered from them once or twice a year," says Dallas.
