HME Expansion: Comfort and Independence Pays
- By Lunzeta Brackens
- Aug 01, 2008
It is the everyday liberties of life that people take for granted: shopping, climbing stairs, going out to restaurants or even sleeping soundly. But it isn’t until age or disease set in that people realize how much they miss these activities. That’s where HME providers come in.
DME dealers are well positioned — now more than ever — to help patients take their lives back, or at the very least, help them to lead the most independent lives that they possibly can. Equally important, selling items that help consumers enjoy a better quality of life represents a solid strategy for cushioning the many financial setbacks that providers are facing in the current funding landscape.
Simply put, comfort, convenience and independence translate into big business. When looking to expand business in an industry filled with cuts and competition, providers should examine the home access, auto access and sleep markets. Doing so, could turn a blasé business into a bustling center of opportunity.The Building Blocks of Home Accessibility
Products such as stair lifts and porch lifts are natural extensions to a rehab or mobility dealer’s product line. In fact, one of the major sellers at Bruno Independent Living Aids Inc. is stair lifts. Stair lifts are followed closely by porch lifts, says Bill Page, product manager of the home accessibility division of Bruno.
“Stair lifts are great products for dealers, purely that cash flow part of the business,” Page says. “It’s a very simple installation and it’s just a quick cash turnaround type of product.”
When in this segment of the market, DMEs should always think of grab bars, hoyer lifts and other DME that will help patients to better negotiate their homes, says Wallace Weeks, founder and president of DME consulting firm Weeks Group. Customers using power mobility devices are the same ones who would want home and auto access products. Diabetic and incontinence supplies also may be beneficial for this type of DME customer, Weeks continues. Designing a Home That’s Within Reach
When it comes to helping patients make their homes more accessible, the National Association of Home Builders (NAHB) offers a program for dealers to become Certified Aging in Place Specialists, says Frank Westby, manager of business development at EZ-ACCESS, a division of Homecare Products Inc. The program alone is a critical resource.
“I think the more knowledge a provider or DME dealer has about what is required to safely and comfortably age at home, the more value they will bring to their client,” Westby says.
“The other part of it is to make sure that they understand what the license and code requirements are because these products do fall under some code and license requirements that a typical DME may not be familiar with,” Page says.
Providing home access services also might require carpentry or electrical related skills, Weeks says. This is where the NAHB specialization can help. Companies that install elevators in homes may need a general contractor license or may need to employ a general contractor to do part of the work. Building licenses and permits may be required.
Gary Schwartz, director of sales at Harmar Mobility, agrees that home access involves more than grab bars and lifts. Some dealers, he says, are working with general contractors to install more specialized products, such as dumb-waiters, which act as mini-elevators to take food prepared in the kitchen up to the second story of the home.
Schwartz says he’s finding that many of the aging baby boomers want to stay in their homes and are having more accessibility products installed. “They’re starting to put them in their homes instead of buying new homes and that’s what the dealers are picking up on for access products,” he says.
For instance, a vertical lift may retail for about $5,000, but if a customer had to install an elevator, it would cost about $20,000. So, you’re looking at a cheaper cost, Schwartz says.
“That’s one of the strong things we have going in our industry right now: There are very affordable options,” Page says. “If it’s just a matter of putting a wheelchair lift or porch lift in, it’s going to be a lot more affordable than a lot of other options.”
Rehab dealers typically sell items that are all reimbursable because they deal with Medicare, Medicaid and insurance companies, Schwartz says. But it’s also important that they jump on board with selling items that can make them money without depending solely on reimbursement. Many patient lifts and other accessible items are not reimbursable by Medicare, which is a good thing in Schwartz’s eyes. This means that the dealer gets to pick up a cash sale.
“The big thing now for the mobility and the rehab dealer is cash sales because Medicare has had so many cuts that cash sales are a good option to have to support your business,” Schwartz says.
Westby, who says that dealers also can pick up a few additional cash sales from ramps and wheelchair accessories, believes businesses should strive to be one-stop shops for clients: “Even before the excessively high cost of fuel, we usually preferred to get all we could at one spot instead of running around looking for the one thing the last place didn’t offer.”
Aside from the products that can be installed in a home to make life easier, Weeks says there’s another level of success that some dealers may be able to attain. Particularly in the larger metropolitan areas, there is some potential for specializing in mother-in-law suites and furnishing them with lifting devices, transfer devices, doorways and proper toileting.
“I think there’s room for people to specialize in that, which would be an all-cash business,” he says. “It requires all the knowledge of our industry and marries it with remodeling, which is not a whole lot different than the home access market.”
But before employing a line expansion, there are a couple of key considerations that you’ll want to keep in mind: identify and quantify the market size; identify referral sources; and identify the rivals you’ll have to face in the marketplace.
“No line of expansion should be considered without considering all three of those elements,” Weeks says. “It’s a matter of can we sell it? Do we want to sell it? Do we have the skill set, and do we have the desire? If there is a market and somebody doesn’t have the skill set and the desire, it doesn’t matter that the market is there.”
Tools of the Auto Access Industry
Both home and auto access have the potential for good cash sales opportunities, Weeks explains. However, you may need to pick up a few new skills or hire employees who have expertise in the following areas: welding, machine tooling and electrical (specific to automotive electrical issues), he adds. It simply depends on how deeply involved you plan to get.
A key way to rake in an extra buck or two is by selling vehicle lifts, says Andrew Bayer, product manager of the automotive division of Bruno. In order to make the extra money, DMEs must be smart. Bayer, who was a DME dealer for several years, says providers needn’t let customers walk out of the door without asking what their additional needs are. It is when that question is asked that consumers tend to communicate that they are unable to get in and out of the house without using an unsafe wooden ramp or that they’re unable to take mobility devices with them because they’re unable to lift them out of the car.
In order for customers to capture their independence, they’re going to have to make some additional lifestyle changes, which may involve a personal mobility device or adapting a vehicle to accommodate their personal mobility device, Bayer says. That’s where the dealer steps in.
One area that people seem to overlook is the struggle that individuals have getting in and out of vehicles. Bayer, whose father has had four strokes, has seen it time and time again. He says his father couldn’t get into the car without falling into it. Adding a swivel seat to his vehicle, he says, made a world of difference.
“That door seal is where people hurt themselves every day,” Bayer says, explaining that all one has to do is go to the nearest grocery store and watch how people with canes and walkers struggle to get out of their cars.
“That’s a huge problem every day for thousands of people,” Bayer says. “So the DME needs to look at the whole picture. They need to recognize ‘Hey, there’s a couple thousand more dollars that we can sell for cash.’”
Money is even being made available from car companies to assist consumers with mobility devices when someone buys a brand-new vehicle, Bayer adds. A car company gives buyers up to one year to install a piece of equipment that they’ll need to assist them. And if the equipment is $1,000 or less, it is virtually free.
“If you want good customer satisfaction, you sell them a scooter and then you sell them a nice economically priced hoist for their car, and it might be free if it’s $1,000,” he says. “But if it happens to be $1,500, no problem; the customer, for independence, will pay the extra out of pocket.”
With competitive bidding and pricing getting more difficult, now is the time for DME dealers to put on their sales hats. Bayer says when selling a customer a power wheelchair or scooter, it’s important that in the same breath, providers tell them about other transportation solutions.
Go the Distance with Extra Training and Education
It may be that the dealer needs additional training to become a better seller. This is something that Bruno can help with. Bruno offers monthly training schools, which train the DME on how to install equipment properly and how to present equipment to the customer.
“We train them on how to promote their new-found cash business, and we certify the person attending the training,” he says.
But if a person doesn’t want to get involved with installation, he or she can be educated on how to partner with other experts. Bayer says he’s noticed that many providers don’t do a lot of promoting because they’re used to the phones ringing. However, a provider might not always be in the best location, have the right show room or the best point-of-sales material. Therefore, providers must gain expertise on promoting total accessibility.
Providers also must pitch products in a way that will come across as assisting a customer’s lifestyle and not as items that are for those who are disabled, as many elderly people do not view themselves that way.
Another area in which DMEs need to improve is by having their employees cross-trained. Even if it isn’t an employee’s specific area of expertise, he or she needs to be well trained enough to ask the right questions and point the customer in the right direction until a sales representative is able to help.
“The DME is seeing the customer first,” Bayer says. “So, they have the opportunity to add incremental sales and improve their bottom line, not at 20 percent but at a 40-percent profit margin. It’s profitable for them and very little additional education.”
Dealers will see their margins increase by simply allowing customers to finance or rent items, Bayer says. Westby agrees that ramp rental programs open up several markets that otherwise wouldn’t apply.
There’s also money to be made in selling used and refurbished products. For example, if some customers can’t afford to pay $2,000 for a hoist, they may be able to pay $1,000 for it. Dealers could spend an hour refurbishing a used hoist, resell it “and make better margins on the used piece than they did on the new one,” Bayer says. “But that takes a certain level of expertise — you have to spend money on training.”
Change the Way Consumer’s Sleep
When exploring expansion opportunities in the sleep industry, providers should start by looking at simple solutions to common problems. Gary Hudson and son Mark Hudson, who serve as president and vice president of Hudson Medical, offer more than 80 therapeutic pillows, including the Snore-No-More, the Ache-No-More and the Hot & Cold Therapeutic Gelly-Roll. In addition to those, there are pillows for back, side and stomach sleepers as well as magnetic pillows. The company also has created a sleep wedge for acid reflux, a CPAP pillow and pillow-top pad support surfaces.
“Basically dealers who specialize in providing sleep therapy like CPAP and BiPAP are already providing a product that is typically covered by insurance,” Mark Hudson says. Since providers already have these customers when they come into the store, as dealers, their thinking should be: What else can I provide them? Dealers need to not only be able to provide products that meet the solution to the customer’s breathing problem, but also provide ancillary items — the comfort items.
“The first thing is the dealer needs to be educated,” says Mark Hudson. “Make sure you know what to provide and what’s clinically necessary, and then two, what else can be provided to enhance comfort and also to enhance the bottom line.”
“In the pillow area, if someone is providing the therapy, you can see how many different ways the dealer can incorporate cash sales, and there’s a bit of marketing behind it,” Gary Hudson says. “There’s also meeting a need.”
Today’s patients are more educated than they were in the past and they’re looking for products that enhance the way they feel, says Kelly Riley, director of The MED Group’s National Respiratory Network. And it may be with something as simple as a sleep pillow, she adds.
“We have patients that are very mobile and young,” Riley says. “Those are going to be the kind of customers that are going to be buying battery packs, converters and a second unit for cash to leave at their second home. And if you understand the science and the whole disease process, you can promote that and talk the talk from a disease management point of view, especially if you know and recognize that you do have a customer who is fortunate enough to have some disposable cash.”
For some providers, expansion may simply involve adding a few sleep support products. For others, it could mean branching off into a new segment of the market. Bob Messenger, product manager of sleep products at Invacare, says expansion opportunities for some sleep providers are right around the corner with home diagnostics.
“If you find yourself in one of the MSAs where competitive bidding is about to go live, you potentially have been locked out now from a lot of other business,” he says. “With sleep, even though you may not have won the Medicare sleep bid, you still have the opportunity to pursue 85 percent of the market, which is the non-Medicare portion.”
Although the humidifier is a purchased item and the CPAP is a rent-to-purchase item, there is ongoing revenue that can be generated through replacement parts. The mask and supply tubing can be replaced every three months, while the cushion can be replaced every month, Messenger adds.
“It’s reimbursable,” he says. “But you’re basically talking about people that by and large have jobs and have the financial wherewithal to be able to pay their 20 percent co-pay. It’s a product line that really does represent significant improvement in people’s lifestyles. Those patients that are compliant with sleep therapy don’t mind paying the extra bucks to reap the benefits of therapy.”
Before getting involved in this segment of the industry, sleep on it. There are a number of traditional rehab providers that have tried to expand into sleep. But as with anything else, Messenger says, you have to bring people with some expertise on board who can focus on the respiratory side of the business.
It would behoove providers to evaluate their territories to determine who else is offering the same type of services that they will be, suggests Sharon Baer, manager of medical education with Respironics’ marketing department. Providers will want to think about what it is that differentiates their business from the competition, she adds.
After identifying that sleep is an area that they want to pursue, it is then time to develop a sleep plan, Baer says. Building upon existing relationships is imperative. Dealers should check with the manufacturers that supply their current equipment to see if that same manufacturer can offer bundle pricing on other equipment, she adds.
It also would be a good idea for providers to identify sleep patients by looking at common issues associated with sleep. For instance, home care companies that sell diabetic supplies should consider talking to their diabetic patients about obstructive sleep apnea because those two types of diseases commonly fall together. Look at your current base population of patients, Baer recommends, they may have a certain disease process that will allow providers to evaluate other patients that might have sleep issues as well.
“It’s not a slam dunk,” Baer says. “There’s definitely work associated with it, but at the same time, there’s definitely a long-term benefit.”
The bottom line is if anyone’s going to get involved in sleep medicine or sleep therapy, they’re going to have to do their homework, Riley says.
“They’re going to have to invest in tools that are going to promote clinical as well as business excellence,” Riley says. “Quite candidly, our industry does not need any more providers that simply want to move blowers in boxes.”
If providers want to succeed in this business, then they need to offer solid, reliable products and partner with a manufacturer that is already well respected in this market. If you partner with someone who does not have a good reputation, you won’t survive because it’s simply too competitive and the stakes are too high, Riley adds.
“There are some key manufacturers that have stepped up to the plate to promote sleep awareness and disease management programs,” Riley says. “They are showing their dedication to the entire disease management process, and those are the people that I feel we need as an industry to support and embrace. By doing so, you will establish yourself as credible.”
Points to Take Away:
• Four solid expansion opportunities are auto access, home access, sleep and urology. In these four niches, providers deliver expertise that patients need, while tapping into cash sales opportunities that sidestep today’s tough funding landscape.
• When it comes to home access, think about patient living arrangements and all the related products that can serve them. Patients who need a stair lift might also benefit from a dumb-waiter, for instance. Partner with construction and other firms so that you can make reliable references to patients who might need remodeling.
• Auto access can require a good deal of very specific skill sets, but you don’t necessarily have to get as deeply involved as a hardcore vehicle conversion provider. Vehicle lifts and swivel chairs are some less complex offerings with considerably lower costs of entry for the provider, and these devices could help grow businesses.
• Training is key for more complex services such as home or auto access. Some employees might need specific training, while others might need cross training to understand a patient’s full spectrum of needs.
• The sleep market offers a range of entry points from providing simple solutions such as pillows, to more complex items such as CPAPs, but the first thing to do is get educated. Sleep is an attractive expansion opportunity, but is by no means a slam dunk. Do your homework.
• Incontinence products represent a solid strategy for luring patients away from traditional retails with limited product supply and none of the expertise and wide range of offerings that a provider can deliver.
This article originally appeared in the August 2008 issue of HME Business.