No more than 20 percent of Maine-based Black Bear Medical's revenue is derived from Medicare, and founder Jim Greatorex would not have it any other way. The transition away from the giant federal payer is part of a long-term strategy to boost retail sales and grow cash business.
With competitive bidding now a reality in nine MSAs across the country, retail continues to be a hot topic as evidenced by intense interest during November's Medtrade. Greatorex spoke at the Atlanta trade show, where he spread his belief that Medicare must be 20 percent or less of the payer mix for home medical equipment companies to be successful.
Founded in 1988, today about a fourth of Black Bear's income comes from retail-only sales, and the intent is to get that number even higher. With that in mind, Greatorex added an additional 2,200 square feet to his Portland store, bringing the total to more than 11,000. The Portland location is part of a trifecta of establishments that also includes stores in Bangor (7,000 square feet) and Greenland, N.H. (1,800 square feet).
Having adequate space is great, but selection is the key, according to Greatorex. His company sells a range of retail products from lift chairs to bath safety. In addition to familiar items that address incontinence, urological and ostomy needs, 5 percent of revenues come from sales and installation of accessibility products such as modular ramps and even ceiling lifts for private residences and hospitals.
All of it has helped retail sales, but good thinking requires a willingness to try new things. In that spirit, Greatorex recently invested in two new retail lines: Z-Coil shoes and a Sleep & Wellness Center mattress line. Whether you call it a pain management department or a wellness division, the premise is based on people's consistent willingness to pay for products that ease pain, Greatorex says.
Going for Growth
At $200 to $300 a pair, the Z-Coil footwear represents a niche business that requires focused marketing. The manufacturer touts a 40 to 55 percent joint impact reduction, and Greatorex has heard several anecdotes that back up those claims.
"The shoes are helpful for people who experience foot, ankle, knee or hip pain," says Greatorex, a past president of the New England Medical Equipment Dealers Association (NEMED). "We are looking to market them in businesses where employees are on their feet all day — places such as local hospitals, post offices and manufacturing plants. It is a funky product line because the shoes are unique looking.
"These items are strictly retail, and it is exciting for us because we are opening up a brand new page," Greatorex continues. "These are technologies that have never been in this market before, and the best way to sell them is out- side promotion."
Chiropractors and physician-run pain management clinics are ripe for marketing, especially when it comes to the mattress line, but Greatorex warns that it requires a soft touch. "Physician-run entities are not interested in recommending a private-pay product for anybody, so you must be careful how you word your pitch to a pain clinic," he cautions.
"You might say, 'Doctor would you allow us to leave some information about this mattress or shoe in your waiting room?' If someone asks him about sleeping, he may make them aware of Black Bear Medical's health-and-wellness mattress and the specialty shoes. That is all you can ask."
Considering all the mattress retailers out there, it might seem a risky proposition to add such a product. Greatorex acknowledges the risk, but he says that regional protections from the manufacturer are one way to prevent cannibalistic competition. Like the shoes, the mattresses are expensive ($3,500 to $4,000 at the high end) and represent a highly specialized niche. The mattress system comes with a financing program, and the products are clinically designed to treat certain conditions such as fibromyalgia or back pain.
"These are products for which you must go out and create the traffic," says Greatorex. "We also have manufacturers that are going to protect us, because we don't want to develop a market only to have a store open up down the street that has the same thing. These manufacturers also do not allow somebody to put these products online and sell them at 10 percent over cost. Both the shoes and the mattresses require training, fitting and some expertise to do it right."
Greatorex is currently doing some media advertising for the "funny looking" shoes, and in the first quarter of the year he expects to be actively pursuing corporate accounts.
"We are probably going to join an industrial trade organization and exhibit with the shoes at their shows," says Greatorex. "All you have to do is get people who have foot problems to try them and you see from the look on their face that this is way better than what they were using. People will find a way to pay for pain relief."
While always taking care to keep Medicare below 20 percent, Greatorex relies on Medicaid payments for a third of his revenue, and private insurance accounts for the rest. About 75 percent of the business used to be devoted to complex rehab — a subset of equipment exempted from competitive bidding. Rehab volume remains strong, but that number is now down to a steady 50 percent.
Changing up the product mix is not to be taken lightly, but for most providers it comes down to growth. When you stop seeing it, it is time to make changes, Greatorex notes.
The good news is that you don't always need to find new customers, because needs change for the ones you already have. After hitting the million-dollar mark for HME retail sales in 2004, average retail sales in the large Portland store have risen to $1.2 million per year, and Greatorex says Black Bear Medical did it by leveraging existing customers.
It all comes back to those much-hyped baby boomers who are willing to pay. For example, Greatorex points out, "One in six people is going to be buying a mattress every year. You can capture a fairly small percentage of that market and still do quite well. As for the shoes, when someone gets hooked on those you get a recurring customer."
Greatorex saw the two items at Medtrade, and he believes the trade show is a great way to see and touch a lot of new items that could lead to revenue opportunities.
"Two products from Philips also caught our eye," he says. "One is their enhanced lifeline product and the other is a pill organizer, which is essentially a machine where you can load many doses of pills for a loved one. The machine comes on and tells them when it is time to take the medication. They have to go hit a button, and the pills pop out and it is all recorded. You can even go online and see if someone has taken the medication or not."
Tips from a Retail Guru
Jim Greatorex has been in the HME industry for 29 years and has always worked for a company with a retail component. It's no different at 23-year-old Black Bear Medical, where Greatorex says there have been "plenty of successes and many errors" over the years as he has learned what works and what doesn't, what products move and how to train sales reps.
"Sometimes this business isn't much fun anymore," Greatorex admits. "But talking about retail is always positive. We don't have to talk about all the other stuff in the industry. This is something that businesses can control, and nobody is going to come in and tell you what to charge."
Here are some of his tips for beginning retailers:
- Don't be afraid to ask people to pay for things.
- Stop delivering everything! Your philosophy should about bringing people into the store.
- Live, eat and breathe advance beneficiary notices (ABNs).
- Market to your existing clients. HME customers buy things from other suppliers, why not from you?
- View HME retail as a destination business.
- Choose a location compatible with retail, but that doesn't necessarily have to be on Main Street.
- Take advantage of some of the great deals available in today's commercial real estate market. Seek out a low rent and negotiate.
- Incorporate all services into your retail.
- Have secondary staff available for "the rush."
- Consider the supply business a natural complement to better retail.
Good Idea to Get Involved
More than two years ago, Jim Greatorex worked hard to help enact H.R. 6331, better known as the legislation that postponed competitive bidding. Although the dreaded program actually started this month in nine cities across the country, the founder of Black Bear Medical believes providers should continue to educate lawmakers in Washington, D.C., about the effects of the program.
While Maine is not caught up in the program, Black Bear's New Hampshire store will be ensnared as part of the Boston competitive bidding area in Round 2. "We do some bent metal, beds and some consumer power, so we will be affected," says Greatorex. "If those prices from Round 1 became a reality, we would have to consolidate and trim 15 percent of our workforce. Then we would have to decide [whether] we can still provide those products at a quality and service level that meets everybody's needs, including our bottom line."
Greatorex regularly preaches product diversification, and that focus will be more important than ever when and if Round 2 hits. At this point, he believes, quite possibly the only way to stop it may be a system-wide failure.
"It doesn't appear like we are going to be able to stop competitive bidding this time, but I never say never," says Greatorex. "This program is flawed. Sometimes the industry has cried wolf in the past, but in this particular case the government has gone way beyond what is realistic. I think it is ultimately going to lead to a lot of chaos with the consumer left holding the bag."
