Business Goals for 2008

From Operations to Accreditation to Cost Control, Get Started Now on 2008 Business Plans

What are your management goals for 2008?

Is accreditation your big project? Have you made a secret New Year’s resolution to investigate your true operating costs? Are you looking for ways to streamline your operations so you can maximize your financial and human resources?

This year will make history, with the start of the first round of competitive bidding and its expansion to an additional 70 metropolitan statistical areas. Federal and state budgets are tight, threatened funding cuts loom, coverage criteria are under scrutiny… the time to create and implement wise business strategies is now.

In all our issues this year, HME Business will identify and investigate the top management and operational challenges facing HME providers today. We’ll look at different business strategies and call on experts and industry insiders to give their opinions — all with the goal of helping you determine what the “hot spots” are in your own business and how to officially relieve the pressure for better business outcomes.

So what are your business resolutions for the New Year? Here, we give three suggestions — food for thought as you plan your 2008 strategy.

New Year’s Resolution: Get Costs Under Control

Step 1: Learn Your Activity-Based Costing

In the world of HME operations, there is the cost of the actual product — what you’re paying the vendor for that portable oxygen concentrator, power wheelchair with elevating seat and center-of-gravity tilt, or portable 8-foot ramp. And then there are those “other” costs, the less-tangible activities that add to the cost of the item, but are harder to identify and quantify.

Operations experts call this “activity-based costing,” and it’s the “entire” cost of that POC, power chair or ramp. Activity-based costing theories were first developed in the 1980s, when business scholars such as Robert Kaplan started theorizing that a manufacturer could get a more accurate idea of its true costs if it started assigning overhead costs to particular products and services within the company, rather than just keeping all the overhead costs more vaguely centralized.

The idea is that if you keep costs centralized — if you don’t break down exactly which activity, division or department is spending your funds and why — it’s tough to determine how much each activity is costing you. So for instance, maybe you think a certain standard manual chair is a great deal because it costs less than most of the other models with similar functionalities and features. But what you don’t know is that your service department is constantly fielding customer complaints about and therefore making repairs on that chair’s footplates.

If you knew how many technician hours and replacement footplates that particular model of chair is costing you per month, would you continue to order it? What if you knew that in addition to those problems, your customer service assistant has to call all over the industry to find replacement parts? Because service departments have so many intangible costs, such as repeated trips out to visit customers and make equipment adjustments or repairs, it’s important to know their activity-based costing — but the same is true for every other department in your business.

For a tutorial on the basics of activity-based costing, visit the University of Pittsburgh Web site — — for a presentation by Nancy Roztocki. Member service organizations also help suppliers to calculate and understand activity-based costing: Try The MED Group ( or The VGM Group (

New Year’s Resolution:

Maintain Medicare Billing Privileges… & Grow Your Business in the Process

Step 1: Get on the Road to Accreditation

When CMS’ accreditation plans were first announced, many DME suppliers thought it was a program only competitive bidding participants needed to worry about.

Word has since spread that all DMEPOS suppliers who bill Medicare Part B will have to be accredited, but many suppliers still found it easy to procrastinate because CMS had not yet given deadlines.

Now that the deadline has been officially announced (see Sidebar), it’s time to implement your accreditation plans.

So how do you get started?

You’ll need to choose an organization to do the accrediting, based in part on the DMEPOS categories in which you participate. CMS has approved 10 organizations to accredit DME businesses, but some of the organizations are quite specialized, especially in the orthotics/prosthetics realm. In this article, we list CMS’ approved accrediting organizations for a variety of DME categories.

After checking the product categories, you may still have multiple accrediting body choices. So how do you go about finding a good match?

An accrediting organization can do much more than just preserve your professional ability to bill Medicare. It can also act as a partner to help you run your business more efficiently and effectively. So as you’re choosing an accrediting organization to work with, be sure to ask the following:

•    Is this accrediting organization a good fit for my business? Be sure the accrediting body has plenty of experience in your areas of expertise and can meet the particular needs of your business. If you specialize in high-end rehab, for instance, does the accrediting body have that kind of experience?

•    What is the accrediting body’s main goal? Does it match your main goal? If you want to use accreditation as a long-term business tool that will help you to identify areas of your business that need work so you can grow, then you’ll need an accrediting body that can help you move toward that goal. So ask the accrediting body, “What’s most important to you, as an accrediting organization?” Make sure the accrediting body you pick is capable of helping you to achieve business goals beyond the mere ability to bill Medicare Part B.

•    How much is this going to cost? In addition to the fee you’ll pay the accrediting organization, ask if you’ll incur other costs to complete the process. For example, will you have to hire outside consultants to conduct any of the background work? What will the total cost of accreditation be?

•    What does my money buy? What specific work, services and materials are included in your accreditation fee? Will there be extra or optional costs? If so, how much and for what types of services?

•    What other suppliers have you accredited? Ask for, and check, references. Ask especially if the accrediting body has worked with suppliers similar to you in product/technology focus, business size, location, number of offices, etc.

•    How long will the entire accreditation process take? Be sure to ask for a “start-to-finish” time estimate, and whether you will need to do additional work, fact-finding, etc., before or after the actual accreditation process.

And if you need more information on CMS’ quality standards and accreditation regulations, try visiting

This article originally appeared in the January 2008 issue of HME Business.

HME Business Podcast